Online land of milk and honey

Annual shopping extravaganza delivers $14.3 billion and records to Alibaba

China's e-commerce industry set another jaw-dropping sales record on Singles Day, the world's biggest online shopping event, with Alibaba reporting that about 91.2 billion yuan ($14.3 billion; 13.3 billion euros) was spent on Nov 11.

The e-commerce giant, which accounts for 8 percent of retail sales in China, said the Nov 11 sales figure was 60 percent higher than the 57.1 billion yuan it took on the same day last year.

Smartphones were among the best-selling items on Alibaba's online platforms this year, with 3.13 million units sold in 24 hours.

The company, headquartered in Hangzhou, Zhejiang province, says it will apply to Guinness World Records to be recognized for record sales in eight categories, including apples, cars, honey, milk and television sets.

Jack Ma, Alibaba's executive chairman says Nov 11 represents only a small part of the huge potential for domestic demand in China. Hundreds of thousands of businesses benefit from the day, not just Internet companies.

"China has a middle-class population of 300 million. We believe there will be 500 million within the next 15 years, which would bring huge demand for high-quality products, thus boosting economic growth," he says.

This huge demand presents opportunities not just for China but for the world as well, he adds.

The annual one-day shopping festival that Alibaba initiated six years ago has turned into a multibillion-dollar online celebration of Chinese buying power, with online retailers slashing prices on products and online shoppers treating themselves to myriad discounted goods.

As China's economy has entered what has been called a new normal phase over the past few years, the country's leaders have repeatedly underlined the importance of consumption in driving growth.

Retail sales rose 11 percent year-on-year last month, the fastest gain this year, standing in contrast to the slowing economy.

Cao Lei, director of the China E-Commerce Research Center in Hangzhou, says the sales performance of major players during the Nov 11 online shopping festival exceeded expectations.

"It is clear that with some creativity, domestic demand can be boosted. Nov 11 has proved itself to be an effective way of stimulating consumption."

A celebrity gala Alibaba held on Nov 10 served as a perfect warm-up to attract attention to the sales event, Cao says.

Alibaba and its biggest e-commerce rival in China, JD.com, both held star-studded events, broadcast on TV and over the Internet. In some cases, shoppers were able to win discount coupons simply by shaking their mobile devices.

Zhang Yong, chief executive of Alibaba, says many of the celebrities who performed at its gala were endorsers of brands sold through his e-commerce platform.

"It is a very effective way of raising the profile of brands," he says.

In the 15 minutes or so that it took Taiwan singer Jolin Tsai to sing three songs, sales of the brand she endorses surged on the online platform Tmall.

With Alibaba, JD.com well and truly cashed in on the Singles Day euphoria, beating its sales record of last year before midday. It says that it received 32 million orders during the day, 130 percent more than last year. It did not disclose its sales figures.

About 70 percent of Alibaba's and JD.com's orders were placed through mobile channels such as smartphones and tablets.

Zhang of Alibaba says his company had foreseen that a huge number of shoppers would place orders using mobile devices.

"So we have put a lot into making shopping easy for people. We've found that a rapidly growing number of visits to our website are made in peak travel hours when people are heading to work."

By analyzing the locations of mobile phone users when they make their purchases, Alibaba recommends different kinds of items to shoppers, which Zhang says was also an important reason for the success of Nov 11.

"China is a big country. In North China it is winter, but in the south people are still wearing T-shirts. By offering different items to different people based on their location and their shopping history we can increase sales."

Nicholas Kontopoulos, global head of fast-growth markets and marketing innovation at SAP Hybris, says that as income levels and Internet penetration continue to grow throughout China and technology continues to develop, e-commerce can only flourish.

Jean Zhang, an analyst with market research company Gartner Inc, looks at things differently.

"The amazing sales figures reflect people overextending themselves in their spending. Many online shoppers will use the 24 hours to buy stuff they have needed for months, and once Nov 11 has passed, sales figures will drop."

It is immaterial whether or not e-commerce players have high sales figures on Nov 11, she says.

"The most important thing is whether or not vendors can make money from it. I reckon a lot don't because of the cutthroat discounts they offer."

Even as the media have waxed lyrical about Nov 11 and the bumper record sales figures that seem to have become routine each year, the thousands of shopping malls and department stores throughout China have been placed under increasing pressure.

On Nov 4, Commerce Ministry spokesman Shen Danyang said online shopping was an ever increasing danger to retailers, and some stores were being forced to close or cancel property leases.

By the end of June, nine major retailers, including Dalian Wanda, Parkson and Marks & Spencer, had shut at least 25 stores in Beijing, Shanghai, Guangzhou and other cities, Xinhua News Agency reported on Nov 12.

Many of the brick-and-mortar retailers have started to expand their presence online to make up for the slump in physical shopping.

Alibaba teamed up with 180,000 brick-and-mortar stores in 330 cities across China for the Nov 11 event, offering shoppers a more integrated and interactive shopping experience with their mobile phones online or in stores.

The physical stores integrate with Alibaba's membership and product management, logistics and delivery service systems.

For example, customers buying home appliances online were able to have their items delivered in as little as two hours from the nearest retail store taking part in the Nov 11 event.

They were also able to try on clothes at nearby shopping malls and buy items by smartphone at Nov 11 sale prices, via Alibaba's Tmall platform.

Suning Commerce Group, an electronic chain store headquartered in Nanjing, Jiangsu province, appeared to have done well out of its online-to-offline partnership with Alibaba.

The group says its orders on Nov 11 were triple those made last year.

Internet shoppers had ordered 37,000 health products from the United States by 11 am, says Sun Weimin, vice-chairman of Suning.

By 6 pm, customers also had ordered 220,000 Xiaomi smartphones, 380,000 boxes of Durex condoms and nearly the same number of mobile power chargers, Suning Group says.

Zhao Huanxin contributed to this story.

mengjing@chinadaily.com.cn

( China Daily Africa Weekly 11/13/2015 page1)