Alibaba, JD.com results underscore the slowdown in Chinese consumer demand

Core Insights - The quarterly results of Alibaba and JD.com highlight a slowdown in China's consumer market, with retailers facing challenges in attracting value-conscious customers [1][2] - Major U.S. consumer brands have reported decreased demand from China, indicating increased competition from local players [1] - Alibaba's revenue from merchant commissions and advertising grew by only 1% year-on-year, a decline from 5% in the previous quarter, while direct sales fell by 9% [1][2] Alibaba - Alibaba's Taobao and Tmall e-commerce business experienced "high single-digit" online GMV growth, with total group revenue declining by 1% year-on-year [5] - The company reported a 10% year-on-year drop in profits due to a decrease in the valuation of its affiliate Ant Group, leading to an impairment charge [2] - Alibaba's shares rose by 5% in afternoon trading following the earnings report [7] JD.com - JD.com reported a decline in average order value year-on-year, attributed to soft consumer spending [2] - The company is known for its higher-priced products and next-day delivery, which may be affected by the current market conditions [2] Market Trends - China's retail sales rose by 2.7% year-on-year in July, a slight improvement from 2% in June, but still lower than historical growth rates [3] - The real estate market slump and uncertainty about future income are negatively impacting consumer sentiment [4] - Consumers are increasingly seeking value-for-money products, intensifying competition among e-commerce platforms [6] Competitive Landscape - Alibaba and JD.com are facing tough competition from PDD Holdings' Pinduoduo and ByteDance's Douyin, which offer heavily discounted products [6] - Nomura analysts noted that Douyin's e-commerce growth has slowed, leading to a potential easing of pressure on merchants to sell at low prices, which could improve profit margins for the industry [7] Investment Activity - Notable investor Michael Burry has made China internet stocks a significant part of his holdings in the last quarter [8]