Of great import
Singles Day reflects significant shift in consumer behavior
Shopping gala shows growing love affair with foreign goods
In the past decade, Nov 11 has undergone a dramatic transformation from being just another date on the calendar to becoming the world’s largest single-day discount shopping festival.
Also known as Singles Day, it debuted in 2009 as an online antidote to the sentimentality surrounding the Western Valentine’s Day. It takes its name from the way the date is written numerically as 1111, which resembles “bare branches,” a Chinese expression for the unattached.
As this year’s shopping gala progressed, milestones from previous years fell one by one.
It was no surprise that Alibaba, which created the extravaganza to spur low-season online sales, broke its own record by clocking up sales worth 213.5 billion yuan ($30.8 billion) in just 24 hours, up by 27 percent year-on-year.
The number of parcels generated on the day exceeded 1 billion for the first time, in line with estimates from Alibaba’s chairman, Jack Ma.
But beyond its huge scale, the gala reflects a paradigm shift in consumer behavior, as more shoppers look to imported goods, which they view as being of higher quality -- even though they cost more -- and some of which are even designed exclusively for the Chinese market.
For instance, it took just over six hours for cross-border online transactions to reach last year’s full-day record on Tmall Global, Alibaba’s dedicated portal for such purchases.
While not disclosing the final sales figure, the company said more than 40 percent of items were bought from international brands. Beauty products from Japanese cosmetics specialist Kao and hairdryers from Dyson, which is headquartered in Britain, were among those that saw sales worth 10 million yuan in the first hour of trading during this year’s shopping spree.
Cross-border sales were also brisk on other e-commerce platforms. Those on NetEase Kaola, the crossborder portal owned by internet company NetEase, surpassed last year’s total in just 78 minutes.
Overseas products from the Amazon Global Store, which covers top destinations among Chinese customers for cross-border shopping and is owned by United States tech giant Amazon, achieved double-digit growth.
Xu Lei, chief marketing officer of JD and CEO of JD Mall, which saw the amount of imported fresh food sold double compared with last year, said, “There has been a noticeable shift in China toward quality over price, which we see in the growing numbers of consumers who are willing to pay more for branded and imported goods.”
Before Nov 11, consultancy Oliver Wyman had projected that imported goods would be those most in demand at this year’s festival. In a survey released just ahead of Singles Day, it found that 57 percent of customers surveyed said they intended to buy overseas goods, and such sales would constitute one-third of overall spending for the festival.
New growth engine
The buying spree has helped to ease any concerns over a slowing economy, as consumption takes center stage in powering the nation’s economic engine. According to the National Bureau of Statistics, the contribution of consumption spending to GDP growth reached 78.5 percent in the first half of this year.
The overall size of the nation’s online retail sector reached 7.18 trillion yuan last year, a year-on-year rise of nearly 32.2 percent. This figure is projected to exceed 18 trillion yuan by 2025, with the online proportion of retail sales of consumer goods forecast to hit 25 percent, the bureau said.
Meanwhile, the retail import penetration rate of China’s cross-border e-commerce sector (consumers buying goods through cross-border e-commerce platforms as a proportion of online consumers) rose from just 1.6 percent in 2014 to 10.2 percent last year, according to research by consultancy Deloitte, the China Chamber of International Commerce and Alibaba’s research arm.
Buying imported goods online has become more commonplace, as new users’ average spending per transaction and the average number of product categories bought increases, the study found.
For example, the average number of product categories bought by firsttime users in 2014 was 1.6, but by last year this had risen to four, while average spending per transaction last year rose to 2.5 times that in 2014.
This trend is a vote of confidence for companies such as Chemist Warehouse, an Australian online pharmacy. According to Nancy Jian Fei Fei, its Greater China CEO, it was the only company with origins in Australia and New Zealand to achieve sales of 100 million yuan on Tmall Global on Nov 11 this year. “Our popularity is in part thanks to the growing disposable income of Chinese consumers and their changing mindset on healthcare,” Jian said. “Also, our brand awareness has been further strengthened as more foreign manufacturers devote more resources to marketing efforts in China.”
Wang Ying, 34, a company clerk in Shanghai, bought two bottles of vitamins from Chemist Warehouse during Singles Day this year and enjoyed a discount of 25 percent.
“The maturing cross-border e-commerce setup can circumvent a lot of consumer education work,” she said. “With the bonded warehouse in place, these imported goods can be delivered within just a couple of days to your doorstep.”
Husayn Remtulla, CEO of VIVA Naturals, a Canadian nutrients supplier, said, “Double 11 is similar to Black Friday (the shopping day held the day after Thanksgiving in the US) or even Amazon Prime Day (a one-day global event exclusively for Prime members), except the scale and magnitude dwarfs anything that happens here in North America.”
Remtulla’s company reaped gains from its first Nov 11 event last year, securing two months’ worth of sales in 24 hours.
“It really sets you up for the next year,” he said. “A successful Double 11 allows us to reinvest in the business, and to learn from our customers in China about what they love and what they are looking for.”
Cao Lei, director of the China E-Commerce Research Center, said the history of Nov 11 indicates that this year’s sales peak will be next year’s “new norm”.
“Brisk sales generated on Nov 11 have reflected the dynamism and resilience of the Chinese economy. The event itself is the best demonstration of the upgrade in consumption, branding, supply chain and even manufacturing,” he said.
Chu Yin, a professor at the University of International Relations in Beijing, said that in echoing the country’s opening-up policy and import strategy at a commercial level, the 2018 shopping gala was set to become a natural online extension of this month’s China International Import Expo, serving as a indicator of the latest global business practices.
Experience valued
According to the import consumption report led by Deloitte, those born after the 1990s constitute 45.2 percent of Chinese consumers who buy imported items online.
Unlike those who are older, the younger generation values experience over price and is likely to pursue niche products and brands, said Zhang Tianbing, Deloitte Asia Pacific consumer products and retail industry leader.
This requires brands to constantly evolve with changing customer preferences, and win over their hearts and wallets, Zhang said.
Joost Vlaanderen, president of Mondelez China, the company behind Oreo cookies, said Nov 11 has become a test bed for its “supply chain system, new products and even new ideas”.
Mondelez is among some 80 international brands that have begun to customize offerings and launch product co-creations tailored to the Chinese market.
Powering these efforts are data analytics and consumer insights offered by Tmall’s Innovation Center, which can help brands devise new strategies and channels.
For example, confectionery maker Mars teamed up with Alibaba to create a chili-infused Snickers bar aimed at satisfying Chinese demand for a tongue-tingling treat.
The decision to cash in on the growing popularity of the Chinese term for numbing and spicy, was based on consumer research by both companies to find a new flavor to bring to the market.
Wallace Du, head of both digital commerce at Mars and the company’s China Digital Innovation Center, said, “Leveraging the insights we got from the collaboration, we connected a flavor with our chocolate that is loved by 41 percent of Chinese consumers.”
From its online launch in August last year to mid-March, sales of spicy Snickers bars surpassed 9 million yuan, with 92 percent of consumers giving them positive reviews. The company said the bars had reached the yearly sales target within six months.
Jacques Penhirin, partner and head of the Greater China office at Oliver Wyman, said Chinese consumers are now more selective compared with a year ago and are keeping their spending in check as they search for more unique events or offerings.
“The days of breakneck growth seen by tapping new audiences in China cannot continue. Increasing per-head spending will become increasingly vital,” Penhirin said.
According to Wang Xiaofeng, senior analyst at US market research company Forrester, gross merchandise volume generated on Nov 11, although hitting another record high this year, will no longer be the focus as the event evolves from a purely discount one to a testing ground for new commerce initiatives and emerging technologies.
Such diversification is providing plenty of opportunities for emerging brands such as Ocean King, an Australian manufacturer of nutrients, skincare and honey products, to capture the huge consumption potential in smaller Chinese cities.
“Major international brands already have a strong presence in key cities like Beijing and Shanghai, making it difficult for us to penetrate, said Ocean King director William Ma.
On the other hand, less established brands might be better received by consumers in lower- tier cities and townships who are curious to embrace new products, and where operating and marketing costs tend to be lower.
Jason Yu, China general manager of shopper behavior specialist Kantar Worldpanel, said, “The vast population base and the unleashed consumption power from smaller cities, townships and rural areas are magnets for international brands.”