Consumers in China, the world's largest e-commerce market, have shifted to buying more goods from domestic brands in the country's annual midyear online shopping festival amid the escalating trade war with the US.
Chinese home appliance brands Supor from Hangzhou, Shenzhen-listed Midea Group and Joyoung from Jinan, in Shandong province, saw their combined sales increase fourfold during this week's 618 shopping festival, compared with a year ago, according to popular group-buying platform Pinduoduo.
State-owned dairy products company Yili Group and Honor, a smartphone unit under Huawei Technologies, were among the home-grown brands that sold more than 100 million yuan each on Alibaba Group Holding's Tmall platform in the shopping event. About 60 per cent of brands that reached that sales milestone were Chinese brands, up from 55 per cent last year.
Sales of domestic smartphone brands rose 71 per cent year on year during the festival, according to online shopping mall operator Fenqile.
E-commerce firm JD.com, which initiated the 618 campaign about 15 years ago, estimated that sales of distilled Chinese liquor Mao-tai doubled from a year ago, while those of Hangzhou-based scissors maker Zhang Xiaoquan grew 160 per cent year on year.
"There was a surge in demand for imported goods among Chinese consumers over the past several years, driven by rising income," said Carol Fung, a vice-president at JD.com, in a media briefing ahead of the shopping festival this week.
"But now consumers are getting smarter, and Chinese brands are catching up in terms of product quality and service."
Such demand will help Beijing's move to shift the economy to domestic consumption-driven growth to counter falling exports and the country's biggest economic slowdown in nearly three decades, compounded by the trade war with the US. It would also support the nation's drive to build up indigenous brands, products and services that will reduce its reliance on Western imports.
The glowing results for domestic brands in this week's 618 shopping festival come as Washington and Beijing remain nowhere near to ending a trade war that began last year, when US President Donald Trump imposed higher tariffs on Chinese imports.
Chinese President Xi Jinping has said he hopes to address "fundamental China-US issues" in his meeting with Trump during the G20 summit in Osaka next week.
While there was some softening in consumer confidence in China because of the trade war and slowing macroeconomic growth, consumption on the mainland perked up again during shopping events like the 618 festival, according to Michael Norris, research and strategy manager at digital marketing firm AgencyChina in Shanghai.
The 618 shopping festival and the bigger annual Singles' Day retail extravaganza, which was started by Alibaba in 2009, now serve as a barometer of consumer spending and retail health in the world's second largest economy, where research firm eMarketer estimated that e-commerce sales reached US$1.53 trillion last year. New York-traded Alibaba is the parent company of the South China Morning Post.
Apart from quality improvements, domestic brands "have reasonable price points and are quick to adopt new ways to reach consumers in (China's) third-, fourth- and fifth-tier cities through flash sales, group buying and live-stream (sales)", AgencyChina's Norris said.
Lower-tier cities are expected to fuel two-thirds of national consumption increase from 2017 to 2030, according to estimates by Morgan Stanley.
The rising popularity for domestic brands during the 618 festival also echoes the findings from a Credit Suisse survey last year. It showed the percentage of Chinese consumers, aged 18 to 65, who said they would be willing to pay more for domestic sportswear brands rose to 19 per cent, up from 15 per cent in 2010.
Watch: Alibaba had the best Singles Day sales ever in 2018
China has seen the emergence of a number of strong domestic brands over the past three decades, including home appliance brand Haier, as well as smartphone makers like Huawei and Xiaomi.
Many domestic brands had initially struggled with quality issues and being labelled as "copycats". Food safety scandals also meant that consumers, especially those in first-tier cities, favoured imported goods because these were deemed to be safer and of better quality.
While more Chinese consumers have come together to support domestic brands, competition between the nation's major e-commerce players appear to have intensified in this week's 618 shopping festival.
Home appliances maker Galanz on Tuesday accused Tmall of blocking its search results on the platform, which adversely affected its sales during the festival, because of the Foshan-based company's earlier decision to work closely with Pinduoduo. Searching Galanz on the Alibaba platform appeared to have returned to normal on Wednesday.
Alibaba did not immediately respond to a request for comment.
Colin Huang, Pinduoduo founder and chief executive, has been calling for more open competition in China's e-commerce market. He has said the "forced exclusivity" in the market, in which brands have to pick an e-commerce platform to sell its goods, will hurt the industry in the long term.
That practice, however, is not expected to disappear anytime soon.
"For those working in the industry, it has long been accepted that search traffic and algorithms are open to manipulation," AgencyChina's Norris said. "As China's lower-tier consumers become more active e-commerce shoppers, it's anticipated that the battle for brand exclusivity may extend to Pinduoduo, which has momentum in key lower-tier markets."
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