China - Online Shopping Sales Shattering Records

China - Online Shopping Sales Shattering Records
China's e-commerce love affair breaks records on 'Single's Day'

It only took until lunchtime on China's main shopping holiday for consumers there to click their way to a new record for e-commerce sales in a single day.

Monday in China (FXI) was 'Single's day' (11/11), a day that e-commerce companies have turned into the world's biggest day for online shopping by offering a steady stream of promotions and deep discounts.  A final tally for the day is not yet available, but early sales data point to the fast growth of online shopping in China, which is poised soon to overtake the U.S. as the world's largest market for online sales.

[November 11 is also known as Singles Day in China. If you look at the date, 11.11, it looks like lonely sticks. The Chinese name for Singles day is 光棍节. It literally means “Bachelor’s Holiday”. 光棍 = bachelors and 节 = festival/holiday.]

By 1:04 pm on Monday, sales on Alibaba, the nation's largest e-commerce group, reached Rmb19.1 billion ($3.1 billion) - equivalent to all it had sold on last year's Single's day and about double what was sold last year on the U.S. Cyber Monday following Thanksgiving.

[Alibaba is currently looking into a US IPO of its shares]

"Crazy", wrote the People's Daily, the official newspaper of the ruling Communist party, on its Weibo (SINA) microblog account.  The day has also drawn the attention and commendation of China's leadership as the nation attempts to rebalance its economy from one driven by investment to one driven by consumption. Premier Li Keqiang recently praised Alibaba's founder, Jack Ma, for creating a day for consumption, according to a report in Chinese state media.  "11.11 isn't about numbers, it's about fostering a healthier consumer environment," Mr. Ma said on Monday, according to the company's Twitter feed.

The continued rapid growth of e-commerce in China contrasts with slowing online sales growth across much of western Europe and the U.S.  This year, revenue from online sales in China was between $190 billion-$210 billion, a close second to the U.S. market, worth $220 billion-$230 billion, according to research by McKinsey, and China's market is growing much faster.

China's market is still growing "by leaps and bounds" faster than the rest of the world, including the U.S., McKinsey says.  China's market had compound annual growth of 120 per cent between 2003 and 2011, compared with 17 per cent growth in the US over that time period.  McKinsey forecasts that China's market could reach $420 billion-$650 billion by 2020.

Part of the reason China's e-commerce market is growing so quickly, analysts say, is that internet access itself still has room to grow.  Only 31 per cent of households now have broadband internet, and 21 per cent have mobile broadband, says Paul McKenzie of brokerage CLSA.  With the recent growth in affordable smartphones, that percentage is poised to grow.  Consumers in China's vast number of small cities also have a limited array of goods on sale in shops in their hometowns, particularly when it comes to foreign brands.

Alibaba, although the largest player in Single's day, which it first helped popularize as a day for shopping, is not the only one.  One of its rivals, Jingdong, said its sales between 8am and noon were equivalent to its normal full day sales tally. The company has not made public exact figures, but Gloria Li, a spokeswoman, said throughout the day it has been selling the equivalent of one computer per second, with sneakers also proving popular.

Other shops and brands also said that their sales had jumped. Xiaomi, a popular smartphone brand known for its savvy with internet marketing, said sales on its shop on Alibaba's Tmall marketplace had hit $65 million by 7:22am.  One popular brand of women's clothing, Taiwan-based Mayuki, said its revenue through its shop on Alibaba's Taobao is set to be about triple its revenue last month.
"We're pretty happy with it," said Kuo Yi-ling, the retailer's chief operating officer.

Not everyone, however, was so content with the amount of goods bought and sold on the day.  "Taobao [part of Alibaba] has held Single's day for four years, and I've bought a lot on three of them," wrote one user of China's popular microblog. "Seems I'm destined to be single."

Courtesy of Sarah Mishkin with Zhao Tianqi, Financial Times