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A Singular Sales Spectacle
Singles' Day poses a shift in e-commerce development in China
By Li Nan | NO. 47 NOVEMBER 24, 2016

Staff pack items ordered by shoppers in an automatic smart warehouse owned by the Alibaba-affiliated Cainiao Logistics in Guangzhou, capital of south China's Guangdong Province, on November 11 (XINHUA)

Pocketbooks exploded once again on November 11, China's Singles' Day. Despite the fact that the festival celebrates single people, it has now become one of the world's largest online shopping extravaganzas. Shi Yang, a manager at a private firm in Beijing, spent more than 6,000 yuan ($873)—equivalent to his wife's monthly salary—on that day.

"I placed orders on my cellphone while watching the televised Singles' Day gala on the eve of the day. And my wife kept her eyes glued to online shopping websites and pre-loaded more than 40 items into her cart one month before the event's midnight start," said the 33-year-old.

They were not alone—this year, millions took advantage of the annual shopping spree which was created by the e-commerce giant Alibaba. In less than five minutes, $1 billion was spent in Alibaba's online marketplaces, mainly Tmall.com and Taobao.com. Twenty-four hours later, Alibaba reported a new sales record, 120.7 billion yuan ($17.8 billion), up 32 percent year on year.

How did this shopping phenomenon come about? Singles' Day, also referred to as Double Eleven, originally began as an informal holiday in the 1990s celebrated by Chinese singletons. The date November 11 was chosen because it's made up of four 1's, resembling bare branches—a Chinese term for those not in a relationship. Regardless of its original meaning, Alibaba turned it into an online discounts festival in 2009.

With Alibaba's gross merchandise volume (GMV) surging year by year each November 11, the day has become increasingly prominent on the calendars of retailers. Other Chinese online retailers such as JD.com and Suning.com have also adopted the idea, vying for a greater slice of profit from the festival.

During this year's event, online sales in China totaled a record-breaking 177.04 billion yuan ($25.8 billion), surging nearly 44 percent year on year, according to Beijing-based e-commerce data provider Syntun.

"Sales on the Double Eleven show us the huge domestic demand in China," said Alibaba's Chairman Jack Ma at the end of the televised Singles' Day gala.

Ma claimed that three new economic growth drivers—consumer spending, services and high-end technology—would effectively optimize the Chinese economy. China, which has traditionally relied on exports and investment to fuel its growth, is now attempting to shift toward growing consumption as its economy enters a new phase of decelerated GDP growth.

Bian Yongzu, a researcher with the Chongyang Institute for Financial Studies at Renmin University of China, echoed Ma's views.

The Singles' Day shows the significant power of domestic spending, claimed Bian in an interview with China News Service. He added that the rapid development of China's e-commerce not only helps restructure the country's economy, but also accelerates development of Internet technologies and high-end services.

Alibaba's Chairman Jack Ma delivers a speech at the televised Singles' Day gala in Shenzhen, South China's Guangdong Province, on November 11 (XINHUA)

New trends

This year's Singles' Day broke the mold in terms of new trends created, from the new geographic locations that companies expanded into, to the purchasing devices used, and the promotional tactics explored. Concerns, however, are mounting over problems occured during the shopping frenzy, such as deceptive discounts, questionable product quality, too much pressure on the logistics system and the inconvenience of concentrating several months' shopping needs on one day.

This year's Singles' Day shopping festival began migrating out of China as Alibaba made its first attempt to promote the event globally.

"We want to make Singles' Day a global festival," said Ma. According to Alibaba, 235 countries and regions engaged in cross-border transactions during the sales period. Furthermore, 11,000 overseas brands participated in the event, accounting for 37 percent of sales. Adidas, Apple, Nike, Pampers, Philips, Siemens and Uniqlo were among the best-selling brands in their categories.

The Singles' Day concept was not limited within the country. According to Daniel Zhang, Chief Executive of Alibaba, the company seeks to eventually spread Singles' Day to Southeast Asia and the rest of the world.

"Jack Ma has said he wants 50 percent of Alibaba's revenue to be international. It is a strategic goal, but it also reflects slowing domestic growth. Jeffrey Towson, a professor of investment at Peking University's Guanghua School of Management, told Beijing Review.

But he also warns that Alibaba's going global won't be plain sailing. "Competing with Amazon for U.S. consumers is very different than competing with it for Chinese consumers," said Towson. He expects the tech giant to expand internationally primarily through acquisition.

Mobile commerce (m-commerce) is another trend fueling the growth of the Singles' Day event. According to Alibaba, 82 percent of its sales came from mobile devices, compared with 68 percent in 2015.

"M-commerce has exploded in China, ahead of the United States and the U. K.," stated KPMG International, an audit, tax and advisory services provider, on November 11. The survey found that nearly a quarter of China's consumers prefer to use mobile phones to make their online purchases, compared to 5.2 percent and 8.5 percent of consumers in the United States and globally, respectively.

The high-level of consumer confidence in the security of third-party payments partly explains the surge in m-commerce, said the survey.

Skyrocketing smartphone use in China is another reason for the development in m-commerce. Latest statistics released by the China Internet Network Information Center in June shows that 656 million Chinese access the Internet through smartphones, accounting for 92.5 percent of the country's netizens. Moreover, 160.72 million Chinese access the Internet only through their smartphones.

Chinese consumers favor mobile purchasing because of the ability to place orders anytime and anywhere.

"A smartphone enables me to purchase on the subway, on my sofa when watching TV, and even in bed before falling asleep," said Shi.

Smartphones also enabled people in rural areas to participate in the shopping festivities.

In addition to going global and mobile, the online shopping festival aims at better integration of online and offline sales.

"In the coming one to two decades, the biggest opportunity and challenge for e-commerce companies is to integrate online and offline sales, and to team up with traditional enterprises," said Ma at the Singles' Day gala.

Almost one third of Chinese consumers made online purchases after seeing the product in a brick-and-mortar store, the KPMG survey found.

Thus, "we continue to see a number of online platforms launching pop-up shops in malls or cooperating with physical stores to give buyers a real-world experience of their products," Jessie Qian, partner-in-charge of the consumer markets division of KPMG China, told Beijing Review.

Maoning E-Commerce, a joint online-to-offline (O2O) venture established by Alibaba and retailer-turned-ecommerce company Suning.com, will be the Internet conglomerate's next move to combine online and offline stores.

Additionally, on November 11, the Chinese Central Government highlighted the importance of O2O activity in a guideline aiming to improve physical retailers' innovation and transformation efforts. The guideline states that brick-and-mortar stores are encouraged to take advantage of information technologies to realize the integration of online and offline sales.

Virtual reality (VR) shopping experiences and augmented reality (AR) coupon-finding games were new concepts piloted by Alibaba to keep shoppers glued to the buy button during the shopping frenzy.

A new VR shopping platform named "Buy+" was launched by the e-commerce giant 10 days before Singles' Day. With either a VR headset or a 1-yuan ($0.15) cardboard-frame through which one can insert a smartphone, customers can "walk" around stores virtually, "pick up" items, and make purchases by staring at floating buttons.

Meanwhile, Alibaba rolled out a Pokémon GO-like AR game to encourage smartphone users to explore a virtual map and find Tmall's cat mascot both online and offline. Those who successfully captured the mascot were rewarded with "red packets" filled with extra discounts and coupons to be used on Singles' Day.

"VR will be the next-generation platform, and VR shopping will become an irresistible trend," said Chen Weiya, a teacher with the School of Software Engineering at Huazhong University of Science and Technology in an interview with Beijing-based Securities Daily.

But some worried that the lack of affordable hardware may result in a limited or sub-par VR shopping experience. And in view of the steep drop-off of Pokémon GO players months after its launch, Jack Chuang of OC&C Strategy Consultants warned that shoppers may soon be fed up of the novelty factor of coupon-finding.

Problems remain

As millions of Chinese waited till midnight for the Singles' Day discounts, some customers grew tired of it.

Lin Chaoyue, a 32-year-old civil servant living in Beijing and former online shopaholic, chose not to join in on the shopping bonanza this year.

Lin has stopped "cutting his hands"—a term referring to unreasonable online purchasing—due to some deceptive discounts.

According to some reports, a number of sellers allegedly cheated buyers by stealthily raising their prices before November 11, to offer "discounts" off their artificial markups during the sales event.

"Some online sellers should stop faking discounts and offer high-quality products with real discounts frequently, instead of only on that particular day," Lin told Beijing Review.

Some claim that the shopping bonanza has delayed and influenced spending in October and December, as shoppers save money with the sole intention of spending it on Singles' Day. This has the corollary effect of straining the country's logistics capabilities.

A total of 1.07 billion parcels await delivery after the shopping spree, according to Syntun data. "It's not an easy task," admitted Ma.

"Warehousing and shipping continues to lag behind online platforms in sophistication, especially in inland China which has limited infrastructure and massive distances. Even in places like Shanghai, delivery agents can be seen stacking and sorting packages on the sidewalk," Towson said.

Shi, the 33-year-old manager, also expressed his concerns.

"My wife and I stayed up fairly late on that day. It's quite tiring," Shi said. "Besides, we spent a lot because we've concentrated our spending needs on Singles' Day. Next year, I won't delay our spending needs. I'll buy things whenever I need them."

Copyedited by Bryan Michael Galvan

Comments to linan@bjreview.com

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