Is love between two people the strongest force in the world? Apparently not, when it comes to e-commerce in China. Despite the existence of Valentine’s Day as a successful Hallmark holiday for couples, Singles Day, which celebrates the joys of being unattached, demonstrates that self-love might be the strongest form of love after all.
Celebrated annually on November 11, the Singles Day retail promotion was created by the Alibaba Group in 2009 and has evolved from an obscure day celebrating single people through retail therapy, to a much bigger e-commerce event. Just how colossal is this holiday? In 2015 Black Friday in the United States amassed a total of $2.74 billion online, while Cyber Monday online sales exceeded $3 billion, a 16% growth from 2014. Compare those numbers to Singles Day, which racked up $1 billion within the first eight minutes of sales during the holiday, and drove a record-breaking $14.3 billion over the course of 24 hours.
The difference between the numbers is staggering and Jonathan Hughes, president of GolinHarris describes it simply as, “in the U.S., e-commerce is the icing on the cake. In China, e-commerce is the cake.”
With generous discounts and red-tag sales motivating shoppers to drop a good chunk of change during Singles Day, what are the most popular items being sold? Does the holiday name “Singles Day” deter people from shopping on this day at all?
According to individual shoppers like Steven Zhang, “it’s just convenient for me to purchase all of this stuff on this day. The label doesn’t affect my decision because the price and needs are the key factors for me to buy things.” Since hearing about it for the first time on social media, Zhang has spent roughly 1,500 RMB (equivalent to about $220) on average every year on this day. Despite the larger purchases, however, Zhang casually mentions that it’s not really an event that he looks forward to.
On the contrary, Rachel Liu, a 32-year-old finance manager will purchase everything from wedding decorations to bed linens on this day and has spent an upwards of 20,000 to 30,000 RMB (equivalent to about $3,000 to $4,000.) “I think that it’s a little bit derogatory to categorize the holiday for singles, but Alibaba has really taken this opportunity and transformed it into a shopper’s paradise,” says Liu. With ample product and service promotional campaigns launched before the actual holiday, Chinese consumers weigh out options and typically make their purchasing decisions in advance of Singles Day. “Everyone looks forward to the double 11.”
"In the U.S., e-commerce is about 10 percent of retail spend—in China, it’s well over 20 percent."
According to sales records, the top selling product categories during this 24 hour shop-a-thon included women’s wear, men’s wear, mother and baby, big appliances and sport & outdoor. Alipay alone processed a total of 710 million payments and during peak traffic hours, processed more than 85,900 transactions per second.
“What’s interesting to me is the sheer scale of e-commerce in China,” continues Hughes, “in the U.S., e-commerce is about 10 percent of retail spend—in China, it’s well over 20 percent. Because e-commerce naturally skews toward the more affluent demographics, it shows that only half of China’s online—and for the premium and international brands, we actually get about 30 percent of our sales in China online.”
What can businesses learn about this day, besides the fact that Chinese consumers are eager to shop? For starters, prominent international brands are faring well in sales during this holiday as 33% of Chinese consumers bought items from global brands, with U.S. products in the lead. About 5,000 international brands across 25 countries doled out promotions to Chinese consumers, including newer brands that have less of a presence than Nike or Apple. Some retailers are even entertaining the idea of celebrating this holiday in the U.S. by offering discounts on this day to online shoppers.
“The emerging consumer group in China is very hungry for foreign products and services,” says Margaret Wong, founder and president of the California Center and the McWong Energy and Environmental Group, “the demographic between the ages 18 to 30 is especially interested in purchasing things overseas.” Seeing this trend, Wong created the California Center, which is a platform that aggregates and sells California products to China. In addition to small transactions being made on the platform, the California Center plans on launching an e-commerce mall at the end of the year, which will sell mostly fresh California food products to the emerging health conscious Chinese consumers.
“China’s e-commerce offers a trove of possibilities,” says Hughes. “It’s a completely different machine from the U.S., and companies need to understand everything from the cultural nuances to the distribution practices in order to have a smooth transition into reaching the Chinese consumer market.”
China’s domestic consumption is growing and Alibaba’s empire, which includes Taobao, Alipay and Tmall, is reaping the benefits. Nextport China estimates that online sales in China could reach $650 billion by 2020.
Credit Suisse’s Research Institute concludes that China’s population accounts for one fifth of the global population, holding almost 10 percent of global wealth, and has the largest middle class—109 million adults—to be exact. Because of their high preference of foreign and western products, cross-border e-commerce has also grown substantially, including Tmall’s switch in 2014 to allow international companies to open a virtual shop on their platform. Today, JD.com, China’s second largest e-commerce business has also followed suit to host international companies.
Finding a popular distribution platform where Chinese consumers can easily identify and access your products and services is crucial to beating competition. Investing advertising dollars on these platforms prior to big holidays, where Chinese consumers are more likely to pull out their wallets, should be part of an effective strategy.
“As a foreign company, everything you do is going to be online,” says Wong, “so you have to network and make sure you’re connected with the right distribution platforms.” Making sure that your product or service is prominently featured to the target consumer on the right platforms is paramount. Researching where your target Chinese consumer will be shopping and how much they spend on average on each platform is key to success, according to Wong. “It’s very important to spend money for the right market.” Furthermore, Wong asserts that, “adaptability is really important too, because China has a very different ecosystem. You’ve got to adapt to the Chinese market—be aware of the tax laws, labor laws and government decisions—all of these things that could affect your digital transactions.”
Combined with the Chinese consumers’ appetite for Western goods and services, today’s e-commerce potential in China for foreign companies is big. U.S. companies like Nordstrom, Saks Fifth Avenue and Neiman Marcus have partnered with Dealmoon.com to connect with and sell products on Singles Day to Chinese buyers. Even less famous brands such as U.S. home decoration company, InterDesign, has seen their sales on Tmall grow twentyfold on Singles Day. Given this fact, Wong boldly states that, “any company could consider going into China—it’s just all about analyzing the market and deciding how much effort, due diligence and global strategy you’re able to dedicate to winning over Chinese consumers.”
Hughes agrees and nods to say, “Chinese people are waking up every day wanting to buy things—now is a good a time as any to jump into the market.”