Singles’ Day testifies to the power of e-commerce

By Geoffrey Murray Source:Global Times Published: 2013-11-10 21:23:01

Illustration: Chen Xia/GT

Illustration: Chen Xia/GT



 China celebrates Singles' Day today, no doubt providing another chance for the booming e-commerce industry to set another global sales record.

Nanjing college students first coined the phrase in the 1990s as an excuse for bachelors to celebrate their non-married status based on the numerals 11/11 ("four singles"). However, it wasn't until 2009 that this occasion became synonymous with online consumption, when the e-commerce firm Alibaba seized the opportunity to offer substantial discounts to celebrate.

It experienced such an overflow of online traffic that the event became a Chinese "tradition." Last year, shopping platform Taobao under Alibaba earned 19.1 billion yuan ($3.07 billion) from its one-day sales promotion.

Its success is echoed by the US "Cyber Monday," falling on the day after the Thanksgiving weekend, when online Christmas shopping begins and merchants have their busiest sales day of the year. Yet, last year, that only totaled $1.25 billion, so China may fairly claim the biggest e-commerce day on record.

Given the explosive growth of the Internet, it's not surprising to find China has the world's largest number of e-shoppers (193 million compared to US's 170 million, according to an estimate by the Boston Consulting Group).

Although Chinese online buying currently lags behind that of the US and Japan, predictions are that it will take the lead by 2015 with estimated annual sales of well over $300 billion. By then, over half of personal consumption purchases are expected to come from online sources. And before the end of the decade, China's annual per capita spending through this means will come close to the US level of $1,000.

The source of the popularity of Singles' Day remains a subject of debate. Some analysts suggest that, unlike other gift-giving occasions in the year like the Spring Festival, there may be few competing expenses like travel and expensive banquets, so there's more cash for the gift.

Yet, amid all the online shopping frenzy, there are some concerns as to the genuineness of the alleged "discounts" on offer. Media outlets and consumer research groups in various countries claim retailers play tricks, one popular method being to stealthily raise product prices before announcing a dramatic markdown at sales time.

However, a Chinese friend of mine who has worked at a senior level in e-commerce for a number of years insists that does not reflect reality here. Her argument: Chinese online shoppers carry out in-depth price comparisons over a prolonged period before making any purchase; they would quickly notice any strange behavior and sound the alarm through various social media.

That sounds reasonable, as the average Chinese is undoubtedly a canny shopper. And this is something Western online sales companies, licking their lips at the prospect of penetrating the Chinese market, have to remember.

So far, e-commerce has proven to be a tough market to crack for foreign companies, one reason being the huge amount of work needed to adapt Western technology to Chinese needs.

In the consumer-to-consumer sector, eBay, for example, spent $400 million a decade ago to acquire a local Chinese firm, eachnet.com. The venture initially went well, although within five years, its market share had dwindled to almost nothing as Taobao, founded in 2003, quickly rose to dominance.

Meanwhile, in the business-to-consumer market, Amazon entered China in 2004 by acquiring Joyo.com for $75 million. It met fierce competition from dangdang.com, and more recently Tmall, which now controls over half of the market.

Chinese companies struggling to succeed in the cutthroat e-commerce market have had to commit vast resources to the battle. For Singles' Day, they will have been frantically preparing for a long time, monitoring rivals' prices and determining the items that are going to be hot sellers.

And then there are the complexities of delivery in China, given the vast distances involved in reaching customers. For Singles' Day last year, delivery companies had 800,000 employees working on the day before, including 65,000 temporary workers hired just for the occasion, according to newspaper reports citing industry sources.

One of the biggest, Shanghai YTO Express (Logistics) Co Ltd, said it would have 30,000 vehicles on the road to cope with having to expand its daily handling capacity by half to six million packages for the day.

It is indeed a very touch market to penetrate.

The author is a lecturer with China Foreign Affairs University. bizopinion@globaltimes.com.cn



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