Ad sales in China are pointing to a soft recovery for the consumer

by | Jun 11, 2023 | Financial

People dine out at a restaurant in Beijing on May 26, 2023.Jade Gao | Afp | Getty ImagesBEIJING — Businesses in China are spending cautiously on advertising this year as local consumption isn’t expected to bounce back for a while yet.Marketing revenue rose in the first three months of 2023 for several Chinese internet giants — but not Alibaba, the largest of them all by dollar value. That’s on a year-on-year basis.related investing news 14 hours agoHeading into the 618 shopping festival this month, brands remain cautious.”For 618, generally of course brands will be trying, but compared to before it’s a bit more tired,” said Ashley Dudarenok, founder of ChoZan, a China marketing consultancy.”We know it takes exactly the same amount of money to bring the customer into your shop today versus 2021, but the customer is going to spend about 30% less in your shop,” she said.In the first quarter, the median disposable income of urban residents in China was officially 12,175 Chinese yuan ($1,739), up 3.9% from a year ago. Education, health care and travel were the top three categories for planned spending, a central bank survey found.”The general consensus in the industry is that 2024 is going to be the year of growth and rebound,” Dudarenok said. “2023, let’s just get out of the downturn, stay connected with the platforms, with the customer,” she said.Dudarenok noted that ad agencies are also spending just to experiment with search engines. Baidu and Microsoft’s Bing have both been working with new generative artificial intelligence technology.A focus on affordabilitySluggish economic growth and uncertainty about future income have weighed on Chinese consumer spending since the Covid-19 pandemic. In the absence of national stimulus checks, retail sales have rebounded moderately in the first four months of this year. Figures for May are due out June 15.This year, consumers in China are looking to buy better quality products — and get more value for their money, said Dave Xie, principal at consultancy Oliver Wyman focusing on China’s retail sector.He pointed out that by promoting product functionality and affordability around the 618 shopping festival, domestic cosmetics brands have expanded their market share versus international brands.When asked Tuesday about the outlook for the Chinese consumer this year, a JD Retail representative said growth may be bumpy. Companies are also seeing different results by platform, as online shopping trends shift. Brands are keen to spend more on ByteDance’s Douyin, likely taking away from ad spending on Alibaba’s Taobao and Tmall e-commerce platforms, Oliver Wyman’s Xie said.ByteDance isn’t publicly listed and doesn’t frequently disclose detailed numbers.Among major U.S.-listed Chinese internet platforms, Pinduoduo saw the biggest year-o …

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