Singles Day: An e-commerce retail phenomenon that mirrors China’s growth
In the world of e-commerce, China’s Singles Day - or to use its formal name, 11.11 Global Shopping Festival - will be by a distance the largest shopping event of the year. What started as a self-gifting day for single people as a rebuff to Valentine’s day was transformed by Alibaba Group into a commercial phenomenon that presents opportunities to retailers and service companies looking to tap new markets or expand their footprint.
This 11 November will be the eleventh 11.11 shopping festival. It will be televised across China, Southeast Asia, Africa and North America, making it a more global event than ever before, reflecting its growing commercial impact worldwide.
Last year, the festival’s gross merchandise volume (GMV) reached US$30.8bn within 24 hours for Alibaba alone. The top five countries selling to China by GMV were Japan, United States, South Korea, Australia and Germany, with 237 brands exceeding sales of CNY100m (US$14.5m). In contrast, the combined online revenues of US retail’s biggest shopping holiday last year around Thanksgiving including Black Friday and Cyber Monday totalled US$24.2 bn.
Each year since its inception in 2008, the festival has seen remarkable double-digit growth – last year, GMV was up 27% from 2017 – thanks largely to China’s rapidly growing middle class and increased disposable income.
Intelligence logistics and new retail play key part in Singles Day growth
Chinese consumers enjoy a user experience that has improved each year and now draws on sophisticated data analytics, artificial intelligence (AI) and robotics to drive the back-end of Singles Day – making recommendations, order processing, payments, logistics and delivery. Now more than 95% of orders are handled by chatbots and AI.
Delivery times for fresh food or a cup of coffee can be less that 30 minutes, while deliveries of more mainstream packages complete within a few a days. Last year, logistics company Cainiao handled over a billion packages during the festival, of which 100m were delivered in about 2.5 days. Cainiao appears to be edging nearer to its target of 24 hours for anywhere in China and 72 hours for anywhere in the world.
Beyond this, the concept of “new retail” is taking off. New retail enables offline-to-online, or O2O, shopping and also uses bricks-and-mortar retail for local warehousing and distribution of goods. O2O allows a shopper to choose a product in a shop and order it online, by scanning a quick response (QR) code in the shop.
Using big data analysis of buying patterns and consumption trends, it’s possible to predict demand in different locations and stock accordingly. When orders come through, delivery times are therefore substantially shorter. The new retail concept is important for foreign companies when planning for Singles Day; the technology behind it will help them to have stock in the right place at the right time.
China hinterland illustrates need for e-commerce
Venture into the Chinese hinterland and it’s easy to see why e-commerce has taken off. Towns and villages throughout the country typically lack any sort of shopping experience. This is changing discernibly in the small cities, which are enjoying strong growth and an influx of wealth, but in remoter areas, there’s little available. Access to brands and a wide range of products, from luxury goods to foods, is now possible via smartphone. A whole new market has opened up.
So what do Chinese consumers want? A recent Ministry of Commerce survey showed that 80% of respondents had purchased foreign goods at least once and that almost a quarter (24.1%) plan to increase spending on imported products. Demand for foreign goods is high.
Strong brands with a reputation for quality or from countries with perceived strengths in particular areas – for example, Japan for cosmetics, Germany for engineering, Australia and New Zealand for agriculture and food products – have a head-start when entering the China market.
Where’s the downside?
China is experiencing a slower economic growth, something that’s very noticeable on the ground, if not in the data. China’s third quarter GDP growth was 6% year-on-year, its weakest in 27 years. And while retail sales remained fairly robust, the shadow of the trade war with the US and local peer-to-peer lending issues are also hurting sentiment. In many parts of China, GDP growth of 6% could feel like recession.
The GMV figure is widely seen as a barometer for China’s economy. Should slower growth be reflected in reduced GMV growth on Singles Day, it could trigger a broader market sell-off, with technology and retail stocks, particularly luxury goods retailers, potentially hardest hit. Yet the reality is that Singles Day is unlikely to be able to keep up such high percentage growth indefinitely – it would be difficult to be sustainable.
Last year Alibaba distributed goods to more than 200 countries during the Singles Day period. The festival is moving from being for Chinese people at home and abroad to being for a wider international group of shoppers. This is evident from the translation tools available to help people who don’t speak Chinese to get involved, and the expanded television audience this year. This will reduce the dependence on Chinese consumers, while seeing the event continue to grow.