A single minded approach to online sales in China

A single minded approach to online sales in China

Alibaba has just celebrated yet another record Singles Day – the shopping festival held on November 11, which is already overshadowing similar events such as Black Friday in the U.S. With gross merchandise volume (GMV) figures exceeding $9.3 billion by the end of the day, the e-commerce giant broke 10 billion yuan ($1.63 billion) in sales in the first 40 minutes of trading. By comparison, last year’s sales for both Black Friday and Cyber Monday in the U.S. came to $2.9 billion in total.

There’s no doubt that Alibaba is achieving its aim of making a difference to the Chinese economy. Shoppers keen to take advantage of the 50 percent discounts and extraordinary bargains are more than happy to get involved in the shopping frenzy, particularly via mobile. But does one day’s world-beating sales festival come at too high a price for the other 364, when it’s back to business as usual?

High Sales, Low Margin 

There’s growing concern that retailers depending on Singles Day for 15 percent or more of their annual online sales are cutting margins to such an extent that they actually make a loss.

They’re shipping a lot of product but the slashed prices coupled with costs involved in meeting demand via operations, extra staffing, marketing, and logistics, not to mention the sales commission charged by Alibaba, are having a knock-on effect on their bottom lines, which sometimes struggle to recover for the rest of the year.

Brand Benefits

However, retailers planning for the long term know that short-term sales are not the only business concern. Singles Day presents a unique opportunity to reach millions of people who are ready, willing, and able to buy, and that kind of exposure, particularly for brands looking to establish themselves in a new territory, can be worth the knock to profits.

While there’s no inherent loyalty on the part of Singles Day shoppers – they’re really just looking for a bargain – there is a hunger for new brands and products, particularly coming from the West. And it seems that this hunger is going global – this year, for the first time, Alibaba extended Singles Day outside China, through its English-language platform AliExpress.

At the end of November 11, 217 different markets had taken part – Hong Kong was the biggest after China, followed by Russia and the U.S.

Mobile Moves Merchandise

Of course, as Singles Day’s key territory is also the world’s largest smartphone market, mobile is a significant driver for its enormous reach. This year, orders placed via mobile hit 42.6 percent – double the figure for 2013.

Recognizing the potential of mobile as a medium for revenue, Alibaba has made a concerted effort to up its game in this area, with 146 million monthly active users of its Taobao and Tmall apps combined, its own version of the hugely popular WeChat, controlling interests in China’s biggest mobile browser UCWeb and, most recently, its own mobile platform Ma Shang Tao, which provides payment and other services to brands and merchants.

So what does the future hold for Singles Day and the brands who take part in this “make or break” festival? While the novelty factor is still strong (the big bargains and massive sales didn’t really take off until 2011) and bargain-hunters have their fingers poised over the “buy” button at midnight on November 11 to get the best deals as soon as they go live, there’s a feeling that the frenzied nature of the day may well die down over time. With more sensible discounts and the option of offering better deals to more loyal customers, there’s every possibility that it will become the “festival” it has always wanted to be, from the brands’ as well as the buyers’ perspectives.

Elisa Harca is the regional director of Red Ant Asia.

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