Text | Shen Minggao
Chairman of Caixin think tank Monita
Online consumption is changing traditional consumption habits, stimulating new consumption formats, and is subverting the traditional consumption research model. The JD Tianhao China Consumer Online Index has three characteristics: first, the growth fluctuation of online consumption is synchronized with the total retail sales of consumer goods, but the growth rate is significantly faster; Second, the index is released at the beginning of each month, ahead of existing consumption data; Third, the consumer industry is more segmented, and it is easier to portray the dynamics of micro-consumption structure and reveal new consumption trends.
Driven by promotions, there are generally seasonal peaks in online consumption, such as the Spring Festival, 618, Double 11, and the school season, reflecting that online consumers have greater price elasticity, and price reduction promotions can stimulate consumption. From the perspective of major categories, the price elasticity of clothing, shoes and bags, household appliances, home decoration, alcohol, etc. is greater, and the effect of online price reduction promotion is obvious.
Among the industries with a better online sales index in November 2015 than in the same period of the previous year, home appliances, office equipment and mobile digital performed similar to November this year, i.e. peak season promotions drove sustainable growth in online consumption.
In general, among the 12 primary consumer industries, the online consumption advantages of office equipment, computers, mobile phones, digital and sports outdoors are relatively obvious, and their growth may be significantly better than similar products in the total retail sales of consumer goods, and alcohol prices have rebounded after falling. Online sales of these goods are likely to stimulate consumption and lead to increments.
Among the 64 sub-sectors, the 13 sub-sectors with the best performance in online consumption are, in descending order: smart devices, dairy products, platinum, air conditioning, beer, diamonds, beverages, personal care, servers, refrigerators, furniture, kitchen and bathroom and office supplies. There are 5 sub-sectors that are both in the primary sector with rising sales prices and in the top 1/5 of the sales index, ranked by their performance relative to the primary industry: smart devices, air conditioners, personal care, servers and refrigerators.
Online sales data also shed light on structural consumption trends. The growth of new consumption formats is better than that of traditional consumer goods or necessities; The two-child policy promotes related consumption, but it is still in its infancy.
Since 2014, China’s traditional industries have entered a period of accelerated differentiation and adjustment. When export- and investment-driven growth peaks and falls, consumption will gradually replace it as the main driver of domestic growth, and the resilience and sustainability of consumption growth will determine how fast and far China’s future economic growth can go. First of all, the increase in residents’ income and consumption upgrading are the main forces for the development of the consumer industry; Second, the two-child policy, urbanization and the opening up of the service industry are all reshaping China’s consumption industry to varying degrees; Finally, the rise of the Internet has challenged traditional consumption habits and models, replaced offline consumption online, promoted new consumption formats, and broadened new consumption development space.
Caixin Think Tank cooperates with JD Finance and Tianhao Capital to leverage the advantages of “research + data” to reveal new trends in the consumer industry through mining and analysis of online consumption data. Online consumption has accumulated a large amount of data, reducing the cost and quality of consumer information dissemination, and also providing us with a new perspective to grasp the pulse of the consumer market.
The analysis of this paper is based on the “JD Tianhao China Consumer Online Index”, and the online consumption data comes from JD.com and Tmall.com, which contain a total of 12 first-level industries and can be subdivided into 64 sub-industries.
• Mobile phone digital (5 categories): mobile phones, cameras, smart devices, headphones/headsets, audio;
• Computers (6 categories): desktops, tablets, servers, computer accessories, storage devices, notebooks;
•Household appliances (9 categories): kitchen and bathroom appliances, TVs, washing machines, air conditioners, freezers/ice bars, refrigerators, household appliances, kitchen appliances, personal health care;
• Jewelry (6 categories): platinum, gold, watches, diamonds, jadeite jade, fashion accessories;
• Personal care makeup (4 categories): personal care, shampoo and hair care, body skin care, perfume and makeup;
• Office equipment (3 categories): office instruments, office supplies, printers;
• Home decoration (4 categories): kitchen and bathroom, furniture, home textiles, lamps;
• Alcohol (5 categories): beer, foreign wine, liquor, wine, rice wine;
• Food and beverage (5 categories): snack food, dairy products, tea, condiments, beverages;
•Maternal and child health care (4 categories): infant toys, maternal and child products, nutrition and health, health care equipment;
•Sports outdoor (5 categories): sporting goods, fitness equipment, outdoor equipment, sportswear, sports shoes and bags;
• Clothing and shoes (8 categories): underwear, functional bags, women’s clothing, women’s shoes, men’s/women’s bags, men’s clothing, men’s shoes, children’s shoes and children’s shoes.
First, from offline to online: the promotion effect is more obvious
Over the past three decades, China’s economic growth momentum has been constantly switching. Exports and investment, once the twin engines of China’s economic growth, have changed dramatically. The global financial crisis ended the era of high export growth, and China’s exports have now been negative last year and the first half of this year, and yuan-denominated exports fell 1% year-on-year from January to August this year. In the context of economic deglobalization initiated by Brexit, exports are unlikely to survive in the short term, and with the size of China’s economy, the era of export-driven growth is gone. It is a fact that the growth rate of investment has slowed down, and since the beginning of this year, its growth rate has been lower than the growth of consumption represented by the total retail sales of consumer goods. From 2005 to 2015, fixed asset investment grew by an average of 20.3% per year, faster than the average annual growth rate of retail sales of consumer goods of 16%. From January to August this year, the growth rate of investment has slowed to 8.1%, which is lower than the 10.3% increase in total retail sales of consumer goods in the same period (Chart 1). In terms of total retail sales of consumer goods, rural consumption has grown slightly faster than urban consumption since 2013, indicating that rural consumption strength is also improving (Chart 2).
In recent years, offline consumption has gradually moved online, and the proportion of online consumption in the retail sales of consumer goods in the entire society has gradually increased. According to data from the National Bureau of Statistics, from January to August 2015, the national online retail sales reached 2.2 trillion yuan, a year-on-year increase of 36.5%. In the first eight months of this year, the national online retail sales increased by 26.7% year-on-year to 3 trillion yuan, although the growth rate was much slower than the same period last year, but still 16.4 percentage points faster than the total retail sales of consumer goods in the same period this year. From January to August this year, online retail sales accounted for 14.3% of the total retail sales of consumer goods, an increase of 2.6 percentage points from a year ago (Chart 3). From the perspective of online retail structure, physical goods are the mainstay, accounting for 11.6% of total retail sales of consumer goods from 9.8% in the first eight months of last year to 11.6% this year (Chart 4).
Online consumption has gradually entered the lives of ordinary people, changing traditional consumption habits and adding new consumption experiences. Compared with the total amount of social retail goods, JD Tianhao China Consumer Online Index reflects three characteristics:
• First of all, online consumption has a high growth, but among all major commodities, online retail sales are consistent with the direction of changes in the growth rate of sales of similar goods in the total retail sales of consumer goods, which indicates that this data better reflects the overall consumption growth trend. The seasonal bottom of almost all online sales indices is higher than in previous years, showing the vitality of online consumption. Different from the total retail sales of consumer goods, online consumption is dominated by urban consumer groups, and the demand for consumption upgrading is strong.
Second, the online consumption index is released at the beginning of each month, leading most consumption data. In July this year, the online sales index generally declined, or the seasonal decline after the 618 promotion, while online consumption stabilized in August, which was basically consistent with the rebound of the growth rate of total retail sales of consumer goods in that month, reflecting the leading nature of the index.
Third, the online consumption index can deeply depict the consumption dynamics and trends of sub-industries. Online consumption generally has peaks in June, November and Spring Festival, which is a consumption cycle artificially created by major e-commerce companies in recent years, and also reflects the greater price elasticity of online consumers, that is, price reduction promotions can stimulate consumption, and the analysis related to it reflects the advantages of online consumption data. From the perspective of major categories, the price elasticity of traditional consumer goods such as clothing, shoes and bags, household appliances, home decoration, and alcohol is large, and the effect of price reduction promotion is better.
The online sales and total retail sales of consumer goods discussed in this section are indices relative to the base period. In Charts 5 to 10, in order to make the online retail sales of various industries more visually comparable with the total retail sales of consumer goods, we present the sales indices of the two on the left and right axes. From the absolute values of the two, it can be seen that the growth rate of online retail sales of primary industries relative to the base period (total value of January and February 2014 = 100) is much faster than the growth of total retail sales of consumer goods, indicating that online sales are increasingly replacing traditional offline sales, although the substitution speed and mode of substitution vary from industry to industry.
Food and beverage industry: The food and beverage online sales index, based on January and February 2014, has always been more than three times the sales index of similar goods in the total retail sales of consumer goods. Affected by e-commerce promotions, online food and beverage sales will have two peaks of “Double 11” and Spring Festival every year, but the Spring Festival effect is more obvious than “Double 11”, and this year’s 618 promotion has greatly increased the index. Due to the small amount of single transaction of food and beverages and the high frequency of occurrence, the improvement of transaction costs brought by online shopping is more significant for food and beverages with a high degree of standardization.
Alcohol products: The seasonal characteristics of online sales of alcohol products are more pronounced. For most months of the year, online sales of alcohol do not differ much from the sales index of similar goods in the total retail sales of consumer goods, sometimes even lower than the latter. However, in November and before the Spring Festival, the online retail sales index suddenly exceeds the retail sales of consumer goods by a large margin. This indicates that alcohol consumption has a high price elasticity and strong seasonal demand. In addition, the online retail sales of alcoholic beverages will drop sharply in March each year, indicating that the demand for alcoholic beverages has decreased significantly after the Spring Festival, and that alcohol products enter the off-season after purchasing ahead of time during the Spring Festival. However, vertically, the trough of online alcohol consumption seems to have passed, and the bottom of the sales index has risen from 39.9 in April last year to 48.9 in April this year.
Clothing and footwear bags: Online sales of clothing shoes and bags are far ahead of similar products in the total retail sales of consumer goods in most months, and there is only a single peak of “Double Eleven” every year, and the Spring Festival effect is not significant. And the industry’s online sales have fluctuated, hitting a seasonal trough in February each year, with the sales index falling back to a level similar to the total retail sales of consumer goods. This reflects that people have basically completed the purchase of new clothes, shoes and bags before the Spring Festival, and in February, which is the Spring Festival, the new consumer demand for such goods will decrease.
Household appliances: The increase in the online sales index of household appliances is much higher than that of similar goods in the total retail sales of consumer goods, and it shows a “double-peak” trend, that is, it reaches a peak in June and the Spring Festival every year, and the peak in June this year has even covered November last year. The June peak is dominated by air conditioners and refrigerators, which are among the best online sales in all sub-sectors every year in June due to the approaching hot heat.
Mobile phone digital: Mobile phone digital is the housekeeping product of Jingdong Mall. The online sales index is 1.5-2 times that of its peers in total retail sales of consumer goods, which is quite robust relative to mature products. More importantly, the seasonal characteristics of the online sales index of mobile phone digital products are not obvious, and they have always maintained an upward momentum. The double peak of the online sales index of mobile phone digital goods is in June and November every year, of which the peak in June is the result of the JD 618 promotion, and the Double 11 promotion pushes up the sales performance in November.
Furniture and home improvement: The trend of single peak and single bottom of online sales of this type of product is obvious, with the peak in November and the trough in February. Benefiting from the rebound of the real estate industry this year, the furniture and home improvement online retail index has risen from 176.2 in August last year to 213.2 this year, and the bottom of the index around February has risen significantly, from 53.9 in February last year to 61.5 in February this year. As the growth rate of total online retail and retail sales of consumer goods tends to lag behind the real estate sales cycle, the index is expected to have room to rise in the coming months.
For subsequent articles, please refer to “
New Online Consumption Trends: A Boom in Adjustment
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