ZCYD Newsletter - China | Retail | Consumer

Marco

China Economic Data for 2023 Released

In 2023, China's economic performance showed signs of recovery and improvement. The GDP reached 12.60582 trillion yuan, with a growth rate of 5.2% compared to the previous year when measured at constant prices. ? The value-added output of the primary industry was 8.9755 trillion yuan, growing by 4.1% and contributing 5.9% to the overall economic growth. ? The value-added output of the secondary industry was 48.2589 trillion yuan, growing by 4.7% and contributing 33.9% to the overall economic growth. ? The value-added output of the tertiary industry was 68.8238 trillion yuan, growing by 5.8% and contributing 60.2% to the overall economic growth. During this period, consumption in China continued to rebound. In 2023, the per capita disposable income of residents nationwide was 39,218 yuan, representing a nominal increase of 6.3% compared to the previous year. After accounting for price factors, the real increase was 6.1%. In terms of per capita consumption expenditure, it reached 26,796 yuan, showing a nominal increase of 9.2% compared to the previous year, or a real increase of 9.0% after adjusting for price factors. The total retail sales of consumer goods in 2023 reached 47.1495 trillion yuan, representing a growth rate of 7.2% compared to the previous year. Excluding automotive sales, the retail sales of consumer goods amounted to 42.2881 trillion yuan, growing by 7.3%. Specifically, the retail sales of commodities reached 41.8605 trillion yuan, growing by 5.8%, while the revenue from catering services reached 5.2890 trillion yuan, growing by 20.4%.

China's Population Enters a New Chapter in 2023: Birth Rate Drops to 9.02 Million, Natural Growth Rate Turns Negative

On January 17th, the National Bureau of Statistics announced that the number of newborns in China in 2023 was 9.02 million, 540,000 less than in 2022, reaching the lowest level since 1949. This figure indicates a significant negative growth trend in China's natural population growth rate, which stands at -1.48‰.

E-Commerce / Digital

Meituan Fell Below IPO Price, Market Value Plunges Overnight

On January 17th, Meituan's stock price shares plummeted by 6.97% in Hong Kong, closing at HKD 68.75 per share, falling below the IPO price of HKD 69 per share, hitting a new four-year low. The current total market value is HKD 394.7 billion, a decrease of over 80% compared to the peak period when it reached HKD 2.6 trillion.

Since the beginning of 2024, Meituan's stock price has fallen by more than 15% within just 12 trading days. Facing the decline in stock price, Meituan has recently initiated a large-scale buyback. On January 10th, Meituan announced its first repurchase since going public, repurchasing nearly HKD 400 million in a single day. The amount of repurchases made recently is equivalent to a quarter of the planned USD 1 billion buyback plan, but its impact on supporting the stock price is not apparent.

Former Meituan Senior Vice President Joins JD.com, May Take Over Dada Group

On the evening of January 19th, it was announced that former Meituan Vice President Guo Qing has joined JD.com as a consultant, focusing on instant retail and robotics business. It is reported that since the end of December last year, Guo Qing has been in intensive communication with senior management of Dada Group, requesting that Dada fully benchmark Meituan Flash Buy and discuss the future five-year development plan for JD.com's instant retail business. Guo Qing, known internally as "Old K" at Meituan, joined the company in 2014 and has been responsible for Meituan's accommodation, ticket vacation, and homestay businesses. In 2020, Guo Qing was selected into Meituan's highest decision-making team. In November 2021, Guo Qing joined Xianglu Technology and became a co-founder and CEO.

GMV of Douyin Mall Increased by 277% Last Year

On the 15th of January, Douyin e-commerce released its summary for 2023. In the past year, Douyin's shelf scene business has grown rapidly, with a year-on-year increase of 277% in GMV, and the number of creators with accumulated GMV exceeding CNY 100,000 has exceeded 600,000. In addition, Douyin e-commerce assisted in selling agricultural specialties totaling 4.73 billion orders in 2023, an 83% growth in the number of agricultural goods sellers compared to the previous year, with over 24,000 sellers achieving annual sales of over one million yuan.

Bilibili Accelerates Personnel Changes to Deal with Profit Pressure

On January 15th, Bilibili updated its list of members on the Business Execution Committee. The core management team, including Chairman and CEO Chen Rui, President Xu Yi, COO Li Ni, and CFO Fan Xin, remained unchanged. However, there have been personnel changes in departments such as live broadcasting, the commercial mid-office platform, the main site business center, Moe Party, and the marketing center, with several former department heads leaving. In recent years, Bilibili has undergone multiple organizational restructuring, with the common theme of enhancing commercialization capabilities and strengthening the platform's advantageous monetization businesses.

Xiaohongshu Becomes the Note-Taking and Live-Sharing Platform for CCTV Spring Festival Gala in 2024

On January 19th, China Media Group, together with Xiaohongshu, officially announced that Xiaohongshu is becoming the note-taking and live-sharing platform for China Media Group's "2024 Spring Festival Gala." Watching the Spring Festival Gala on New Year's Eve has become a shared emotional connection for everyone. On New Year's Eve, the Spring Festival Gala production team and Xiaohongshu will jointly create a live broadcast called "Our Spring Festival Gala". Viewers can immerse themselves in the behind-the-scenes stories of the Spring Festival Gala through the "Spring Festival Gala" account on Xiaohongshu. The audience can also discover and purchase the products seen on the Spring Festival Gala stage in the "Our Spring Festival Gala" live stream, satisfying the demand to bring Spring Festival Gala-inspired items into their own lives.

Brand Dynamics

Three Squirrels' Revenue Continues to Grow

On the evening of January 15th, Three Squirrels released a performance forecast, projecting a net profit of 200 million to 220 million yuan for the fiscal year 2023, a year-on-year increase of 54.97% to 70.47%; the net profit after deducting non-recurring gains and losses is expected to be 100 million to 110 million yuan, with a year-on-year growth rate of 146.9% to 171.59%, showing impressive performance. The reason for the above performance change is attributed to the "high-end cost-effectiveness" strategy implemented by Three Squirrels since 2023, which has basically established a new foundation of "full product category, full channel." The main measures taken include actively promoting the optimization of the supply chain throughout the entire process in response to changes in the external market environment, implementing dual adjustments in category structure and channel structure, and achieving continuous and stable revenue growth since June, especially after the background shift of the annual goods festival in the fourth quarter, still achieving double-digit growth.

Hugo Boss Performs Well But Stock Prices Plummet

On Tuesday, luxury menswear group Hugo Boss, based in Germany, released its fourth-quarter performance report ending in December of last year. The group's sales soared by 13% to €1.177 billion, with strong growth in all brands and regions, and EBITDA rose by 17% to €121 million. In the full year of 2023, the group's sales rose by 18% to a record high of €4.197 billion, with EBITDA increasing by 22% to €410 million. By region, sales in Europe, the Middle East, and Africa rose by 7%, the American market grew by 18%, and the Asia-Pacific market surged by 33%.

However, surprisingly, Hugo Boss's stock price plummeted by 11% on Tuesday, the highest drop since March 2020, due to the fourth-quarter EBITDA not reaching analysts' average expectation of €129 million.

Cartier's Parent Company Reports 4% Sales Increase in Q3

The parent company of Cartier, Richemont Group, announced their financial results for the third quarter of the fiscal year 2024, ending in December, showing a 4% increase in sales to €5.6 billion. In terms of divisions, the jewelry division, including Cartier and Van Cleef & Arpels, saw sales rise by 12% to €3.952 billion; the watch division, including Jaeger-LeCoultre, reported a 3% increase in sales to €939 million; and the other division, consisting of fashion and accessories brands such as Chloé and Dunhill, saw a 1% decrease in sales to €702 million. It's worth noting that thanks to a 25% sales growth in the Chinese market, the Asia-Pacific region recorded a 13% increase in sales for Richemont Group.

Retail

CEO of Sephora China Leaving Position

On January 17th, Maggie Chan, the General Manager of Sephora Greater China, was reported to be leaving the position on January 19th. The successor has not been officially announced, and during the transition period, Alia Gogi, President of Sephora Asia, will directly oversee the business in Greater China.

Maggie Chan joined Sephora at the end of 2018. Prior to that, she held executive positions in various multinational business divisions at companies like Johnson & Johnson, Procter & Gamble, and Unilever for more than 20 years. Alia Gogi, who will temporarily manage the business in China, is also an old friend of the Chinese market. In 2011, Alia Gogi served as Senior Vice President of Merchandising for Sephora China, starting her Sephora career in China. She later moved to Singapore to manage Sephora Asia.

This year marks the 19th year of Sephora's journey in China, and it is about to embark on a new journey under new leadership.

US Department Store Giant Macy's to Lay off 2,350 Employees and Close 5 Stores

On January 18th, US retail industry giant Macy's announced that the company would lay off 2,350 employees and close 5 stores to streamline operations. This layoff accounts for 3.5% of the total number of employees.

Chris Grams, a spokesperson for the company, stated that this move would affect approximately 2,350 positions in company offices and frontline stores. Additionally, according to official notices issued to employees, the policy will officially take effect on January 26th.

Marketing Hotspots

Maotai and Luckin Coffee collaborate on "Dragon Year Chocolate" beverage

On January 22nd, the highly anticipated "Dragon Year Chocolate" beverage, a collaboration between Guizhou Maotai and Luckin Coffee, officially went on sale at a discounted price of 18 yuan per cup. The appearance of the "Dragon Year Chocolate" product is not particularly special, with the red cup logo indicating it is a chocolate latte.

Dragon Year gift boxes launched as Spring Festival approaches

As the Spring Festival approaches, many beauty brands have already started selling their limited edition Dragon Year gift boxes: MAC has created a high-end gift box called the "Dragon Year 12 Palace Grid" featuring 12 popular products, paying tribute to the red dragon. The gift box includes classic bullet lipsticks, a four-color eyeshadow palette, a six-color concealer palette, and a setting spray in purple. The overall red and gold-themed gift box exudes a festive atmosphere for the new year.

Caitang, the local cosmetics brand, takes inspiration from the saying "where there is a dragon, there is magic," incorporating a star product lineup including a three-color contour palette and a three-color blush palette, embellished with golden silk dancing dragons, conveying a traditional Chinese meaning.