Alibaba bets big on singles day.
The State Administration for Industry and Commerce (SAIC) believe that 40 per cent of products bought online in China are fake or of bad quality, the Financial Times has reported. Beijing – Jack Ma is taking Alibaba Group Holding on the road to Beijing as he looks to reverse the company’s $55 billion plunge in market value this year.HONG KONG — China’s shoppers will have even more online bargains to choose from when J Sainsbury and Macy’s add to the foreign retailers bolstering Wednesday’s Singles’ Day offerings.
China’s biggest e-commerce emporium is moving the base for its annual Singles’ Day shopathon to the former Olympic aquatics center in the capital, and it’s bringing “American Idol” finalist Adam Lambert along for entertainment. By 2013, Alibaba’s Tmall, AliExpress, and Taobao sites pulled in a total of $5.8 billion, swelling to $9.34 billion last year with 42.6 percent of all purchases being made by phones and tablets.
The event sees the country’s biggest e-commerce giants battle it out for billions of dollars in sales, with a record US$9 billion generated by e-commerce company Alibaba last year, which started the massive online mark-down to generate sales. “Every year starting a week ago to get ready for Singles’ Day we basically clear out the entire office and it’s just nothing but warehousing and packing and picking,” said Jeni Saeyang, CEO, Eco&more. “(It’s) complete, complete manic ‘Shuang Shiyi’ action going on.” An additional factor for consideration is TMall, a platform for buyers which offers promotions and benefits towards buyers, and Jeni says puts pressure on suppliers to provide discounts, but allows them to reap rewards. “It’s very stressful, (even though) for us it’s a good way (to get business),” said Jeni. “Even though the margins are not very high, you get so many new customers, (and) if half of them like our products and (are) repeat customers, it’s a good thing for us.” However, it’s not all about supply. With additional merchandise and the growing popularity of e-commerce in China, this year’s event could defy an economic slowdown to eclipse the record 57.1-billion yuan ($9bn) spent in 24 hours last year, Barclays, Bocom International Holdings and BNP Paribas SA said. “We’ve seen major retailers and brands in Europe as well as in North America really start to focus on this moment,” said Brian Buchwald, co-founder and CEO of Bomoda, a consumer research company in New York. To begin delivering 760m parcels expected to be ordered during a 24-hour orgy of spending that is described as the world’s greatest online shopping fiesta. Shifting from its Hangzhou home to the heart of Chinese power shows Alibaba’s ambitions to maintain growth, penetrate the northern region where rival JD.com is based and answer the government’s call for “national champions” in technology. No longer just price-sensitive, customers now are less willing to buy something just because it’s cheap. “First I’ll see whether it’s something I need.
Started as an e-commerce event by Alibaba in 2009, Singles’ Day is seen by retailers as a way of targeting younger consumers, who are becoming increasingly reliant on the internet to buy everything from home-delivered pizzas to lingerie. Singles’ Day – or Double Eleven, as most Chinese call it in reference to the day on which it falls – was reputedly started on 11 November 1993 by singleton students who were seeking an excuse to buy themselves presents.
We will have over 40,000 merchants offering around 6 million products, logistics companies lining up to deliver Alibaba’s orders on time, and a fancy gala tomorrow night in Beijing. It began as an anti-Valentine’s Day holiday when a group of university students started to celebrate being single in the nineties, which is also why it’s set on November 11 each year (or one-one-one-one). Even amid a slowing economy, Alibaba estimates that 1.7 million deliverymen, 400 000 vehicles and 200 airplanes will be deployed to handle packages holding everything from iPhones to underwear. “The move is symbolically significant because it indicates that Alibaba, by moving to the capital, is China’s indisputable e-commerce leader,” said Cyrus Mewawalla, managing director of London-based CM Research. “Politically, it might be a tacit acknowledgment that Alibaba, a national champion, now has to be closer to China’s authorities and more in tune with the government’s strategic interests.” Going to the political, economic and media hub comes after Alibaba’s roller-coaster first year as a public company.
For foreign retailers, November 11 is an opportunity to gauge brand awareness in the absence of physical stores — reducing their risk amid slower growth in sales of fast-moving consumer goods such as household and personal care products. “More companies will enter China via online first to ‘dip their toes in the water’ and test the market,” Mr Buchwald said in an interview. “The obvious preference for digital entry over physical retail is the minimisation of costs.” The value of online retail in China is forecast to hit 10-trillion yuan ($1.6-trillion) by 2020, up from 2.9-trillion yuan last year, according to a study by Bain & Co and Alibaba released on Monday. Today it is a Chinese institution, creating work for hundreds of thousands of green-uniformed postal workers and vast sums of money for Alibaba, the retail giant credited with turning the day into a commercial phenomenon.
E-commerce giant Alibaba saw an opportunity and started to offer deals on its online shopping platforms, using the day as an excuse for self-gifting and indulgence, in 2009. A record offering was followed by a record fall below the initial price, allegations the company wasn’t doing enough to fight counterfeits on its platforms, and the replacement of its chief executive officer. When Alibaba decided to launch an annual online sale on Singles’ Day 2009, just 27 merchants took part, slashing their prices for the duration of the 24-hour promotion. Morgan, for instance, expects Alibaba to deliver 75-80 billion yuan GMV tomorrow, a 36% increase year-on-year at the midpoint and below last year’s 63% growth rate. Yet Alibaba was able to post quarterly sales that climbed by almost a third after it boosted advertising targeting shoppers able to hold on to more of their money.
Ahold, the Dutch grocery chain, is marketing a baby lotion towel and Dutch honey waffles also at half price. “One is food safety, with products like baby food and baby milk,” Mr Allen said. “The second point is that they target more iconic products from their country of origin.” Macy’s in August announced a joint venture with Hong Kong-based Fung Retailing to open an online store on Tmall, with an aim of achieving $50m in e-commerce sales in China next year. But investors’ expectations are higher. “We believe investors are looking for 40% GMV growth this year,” or 80 billion yuan, noted Deutsche Bank‘s Alan Hellawell III.
While the American Apparel and Footwear Association wants to put Alibaba’s Ebay equivalent, Taobao, on the US government’s black list for fake products, the growth of the internet and e-commerce has increased the challenge for rights holders to protect their brands. The nation’s per capita disposable income rose 7.7 percent in the first nine months from a year earlier – after adjusting for inflation – outpacing the 6.9 percent rise in gross domestic product. The Cincinnati-based company has no immediate plan to open physical stores in China, though it may do so later based on the success of its online venture, it said at the time. Last year, the four day span from Thanksgiving through the weekend brought in an estimated $50.9 billion in combined online and in-store sales, according to the National Retail Federation.
With a forecast for retail volume growth to average 8.7% in the next two years, China is expected to overtake the US by 2018 to become the world’s biggest retail market, PwC LLP said in a report in February. Lu Zhenwang, an e-commerce analyst from Shanghai, said he expected a record 100 million people to take part in this year’s online shopping binge, the majority aged between 20 and 40. “[Shoppers come] from all parts of China: every province, every city and even every county town,” he said. Alibaba said it had established cooperative relationships with more than 1,000 major brand owners and several industry associations to enhance the effectiveness of the company’s take down procedures and anti-counterfeiting measures. Moving the event also allows Alibaba to take advantage of the capital’s media machine, said Jeff Hao, a Hong Kong-based analyst at China Merchants Securities Holdings.
They wanted better [results] this year so they started earlier, will last longer, will have a bigger impact and, of course, will make more transactions happen,” she said. So far this year, the company has announced 30 deals valued at more than $15 billion, buying stakes in off-line retailers, delivery companies and streaming media services. “By moving to Beijing, Alibaba will be able to work closely with a lot of the partners it bought stakes in,” said Michelle Ma, an analyst at Bloomberg Intelligence in Hong Kong. “As the tech center of China, Beijing holds a lot of talent.” China’s wealthy eastern coast and south have traditionally been the source of most online orders. “But the key change we have seen this year is that some rural areas are increasing their number of transactions very, very rapidly. Everybody is talking about rural e-commerce.” Alibaba says this year’s Double Eleven shopping spree is also going to be the most international yet. Chinese consumers associate quality and prestige with American and European brands, and both have very solid presence on 11/11 in response to strong consumer demand.” Jack Ma, Alibaba’s chairman and founder, said the event was more than “just the largest shopping day in the world”.
He said: “This festival is a thermometer for the Chinese economy.” Christopher Balding, a professor of finance and economics at Peking University’s HSBC Business School, said observers would look to Singles’ Day results for clues about the state of China’s overall economy. But he cautioned against reading too much into the outcome, particularly since those splashing their cash were likely to represent a younger, single, internet-savvy cross-section of Chinese society. “Everybody is looking for something they can hang their hat on that this is what is going on with the Chinese economy. The Hangzhou-based company has built an “11/11 command centre” in Beijing and will throw a glitzy gala at the city’s Olympic Water Cube stadium on Tuesday night to kick off proceedings. The US singer Adam Lambert and the Chinese actress Zhao Wei are among those expected to attend the festivities, which will be televised and streamed online. But Double Eleven celebrations are likely to please the country’s current rulers who are seeking to wean China’s economy off its addiction to state investment and exports, partly by encouraging consumers to spend, spend, spend.
China’s latest five-year economic plan, details of which emerged this week, outlines a goal of “a more sustainable and balanced way of development”, with annual growth targets of at least 6.5%. As millions of shoppers prepared to click their way to consumer happiness, the man, named only as Mr Cao, was left with nothing but bitterness and regret. “Our plan didn’t work out because my wife overspent online,” he complained.