With the end of the 2024 June 18th Shopping Festival on June 20th, the performance of major e-commerce platforms has come to a test.

Goldman Sachs analysts Ronald Keung and others stated that during the month-long shopping festival, Taobao, JD, and PDD, the three major e-commerce platforms in China, all had relatively high levels of discount and most of the commodity prices were similar. All three platforms pay more attention to the consumer experience.

Goldman Sachs estimates that the total GMV of the industry this year is expected to achieve low double-digit growth compared to the previous year. However, due to returns and canceled orders, net GMV (the final actual transaction amount) is expected to only have a mid-to-high single-digit growth rate.

The extended duration of the shopping festival has resulted in more dispersed sales.

What makes this year's June 18th Shopping Festival special is that many platforms have canceled the pre-sale phase and launched promotion activities as early as May 20th. According to Goldman Sachs, due to the early launch and longer duration, the Shopping Festival this year lacks the previous explosiveness where orders concentrated on one particular day.

The analysts wrote in the report that unlike in previous years, this year's June 18th Shopping Festival has three sales peaks: May 20th, June 1st, and June 18th. The earlier promotion activities also caused less-than-previous-year e-commerce sales figures on the first week of June. The early-starting promotion also led to a 13% YoY increase in China's online retail sales in May, higher than April's 9.6%.

From the perspective of express delivery volume, the national parcel volume increased by about 20% YoY from May 20th to June 16th, which is slightly lower than the growth rate of 3-4 months:

We observed strong growth in parcel volume during the week of May 20th, but we also observed a consecutive three-week decline in parcel volume, and express delivery outlets reported a smaller peak demand compared to previous years, so the pressure was relatively small.

Goldman Sachs points out that the early promotion of the Shopping Festival reflects that e-commerce platforms pay more attention to user experience:

The cancellation of the pre-sale period by major platforms aims to simplify holiday arrangements and allow consumers to enjoy more timely shopping and fulfillment experiences, thereby improving user experience. Compared with the past, the pre-sale period mainly helped merchants test SKU and prepare corresponding inventory, but we see that e-commerce platforms are increasingly prioritizing users.

Douyin e-commerce GMV growth slowed down, and the penetration rate of live-streaming e-commerce tended to mature.

From the perspective of GMV, traditional e-commerce platforms represented by Taobao and JD are gradually standing firm in the face of the impact from Douyin e-commerce and PDD.

According to Goldman Sachs estimates, Taobao's total GMV achieved double-digit YoY growth during the June 18th Shopping Festival, while JD reported a new high in GMV during this period (Goldman Sachs predicts YoY growth in single digits).

By comparison, although Douyin e-commerce maintained a growth rate of over 20%, its growth rate has begun to decline, and the GMV of top-tier live streaming hosts has also experienced a decline YoY.

Goldman Sachs also mentioned that PDD's GMV may achieve a growth rate of 15-20% during the June 18th Shopping Festival. However, unlike its competitors, PDD has always attached more importance to maintaining everyday low prices rather than specific promotional events.

In addition, Goldman Sachs stated that according to data from third-party institution Syntun, the growth rate of GMV from live streaming has further dropped to 12% (compared to 28% last year), and Goldman Sachs believes that this is because the penetration rate of live-streaming e-commerce has reached a relatively mature level.

Goldman Sachs estimated that during the June 18th Shopping Festival, major e-commerce platforms increased their subsidy efforts. For example, JD announced an additional 10 billion yuan in user subsidies on June 15th, and Taobao followed by announcing an additional 10 billion yuan in "surprise red envelopes". Goldman Sachs observed that the price gap between Taobao/JD and PDD is narrowing, and most of the commodity prices on the three platforms are basically the same on June 18th.

We believe that the increase in user subsidies by Taobao/JD in the final stage of the June 18th Shopping Festival reflects their efforts to promote growth and seize market share. According to our price comparison, we have noticed that the price gap between Taobao/JD and PDD has been continuously narrowing over the past year. On June 18th, the prices of multiple SKUs on Taobao/JD were basically the same as PDD.

Looking ahead, with the prices of Taobao/Tmall, JD, and PDD gradually converging, we believe that service quality and user experience will become the differentiating factors for consumers to make purchasing decisions.

In addition, Goldman Sachs also observed that in addition to general promotions, Taobao 88Vip/JD Plus members also received additional coupons, which is expected to drive growth in high-ARPU users.

Return rates for 618 have generally increased, and some women's clothing merchants have reported return rates as high as 80%.

A user-first strategy also means that e-commerce platforms have become more lenient with their return policies. Some merchants, especially women's clothing merchants, have reported return rates as high as 80% during the 618 shopping festival. Goldman Sachs believes this could further widen the gap between GMV and actual revenue.

Analysts believe that the increase in return rates may be due to the following factors:

(1) More favorable return policies, starting from April 2024, 88VIP users can enjoy unlimited free returns. And the initial refund-only policy introduced by PDD has been widely adopted by other e-commerce platforms.

(2) Consumers are increasingly focused on the value of goods and tend to return unsatisfactory products;

(3) Convenient and timely logistics fulfillment experiences make returns easier. We believe this will also promote the growth of GMV, because the company's definition of GMV is usually based on total GMV (including returns/canceled orders), so the gap between revenue and GMV growth still needs to be a key focus.

Ad technology upgrades bring long-term monetization potential.

Advertising technology upgrades are also a highlight of this year's 618 promotion.

Alibaba's advertising platform, Ali Mama, promoted full-site marketing features to more merchants during 618. PDD also launched a new traffic distribution mechanism, giving discounted merchants up to 9 times more traffic weight. Analysts expect these ad tech upgrades to gradually take effect in the next 6-12 months, bringing more monetization opportunities to the platform:

According to our conversations with merchants, we understand that Alibaba's full-site marketing, which has been in trial operation since April 2024, has gradually been promoted to more merchants. However, we expect there to still be a gap between Alibaba's GMV and CMR (customer management revenue) in June, as ad tech/algorithm upgrades may require time to perfect in order to fully play a role/and be adopted by more Taobao merchants in the next 6-12 months.

We still expect Alibaba's monetization potential to appear in the second half of the 2025 fiscal year. For PDD, we expect its advertising products to continue to penetrate and further launch full-site marketing and standardized marketing tools.

Looking ahead, although the GMV of e-commerce in June may be affected by the pre-promotion, and the growth rate may slow down, Goldman Sachs analysts believe that the recent pullback of e-commerce stocks largely reflects these concerns. They are bullish on the opportunities in the e-commerce industry for the second half of the year, and expect industry performance to improve under the base effect, profit inflection point, ad tech potential, and operational leverage.