Lessons from Singles Day 2018 in China

’11.11’, also known as Singles Day is a popular holiday for young Chinese consumers to celebrate the status of being single. In 2009, China’s super-tech giant Alibaba chose Singles Day to organise large-scale online promotion activities. Afterwards, Alibaba developed Singles Day into the world’s largest 24-hour online shopping festival in terms of gross merchandise value (GMV). According to statistics released by Alibaba, Singles Day total GMV through Alibaba’s business-to-consumer shopping platform Tmall surged from USD 7.5m in 2009 to USD 30.8bn in 2018, hitting another record on its ten-year anniversary.

The scale and reach of 2018’s ’11.11’ is unprecedented, with 29 Alibaba business units participating. Alibaba put a big focus on its ‘new retail’ this year, which aims to connect the online business with its offline business. In addition to its online business Tmall, key participants in this event therefore also included its new retail stores like Hema and RT-mart, its newly-acquired online-to-offline food delivery platform ele.me and local service provider Koubei. All of those efforts made 2018’s ’11.11’ the most-inclusive and probably the most influential shopping gala globally.

Singles Day used to be a price-driven promotional event, with brands/merchants mainly focused on low prices. This situation has undergone significant changes in recent years, shifting more towards quality consumption. Although China is facing a trade war and slower economic growth, a consumption upgrade was clearly noticeable on Singles Day. This trend is mainly reflected through increased purchases of high-quality, personalised and diversified products. According to Aliresearch, an increasing trend to buy ‘beauty’ (e.g. cosmetics and clothing), ‘health’ (e.g. healthcare, nutrition, and food products) and ‘family’ (home appliances and household products) products, indicates China’s rising middle class’ pursuit of high-quality lifestyle products.

In line with this trend, over 40% consumers shopped during Singles Day have bought international brands. In the meantime, imported brands from cross-border platforms like Tmall Global have also witnessed increased share. According to Aliresearch, the number of Tmall Global consumers grew tenfold and the proportion of total e-commerce sales that were imported increased from 1.6% to 10.2% from 2014 to 2017.

According to data released by Alibaba and Rabobank estimations, 2017 year total packaged food and beverage sales accounted for 4%-5% of total Tmall platform sales. Given its comparatively smaller base, the growth potential for food and beverage will remain strong.

In the food and beverage sector, local brands performed well on Singles Day. Three Squirrels led ’11.11’ food and beverage sales, with Tmall platform and total online sales (also including JD and other online platforms) on Singles Day amounting to CNY 450m and CNY 682m respectively. Its total online sales grew by 30.5% compared with year 2017.

Apparently, ’11.11’ shows the consumption power of Chinese consumers. The increasing number of brands offering high-quality and personalised products is also a good indication that the ’11.11’ shopping festival has moved from being a price war to a focus on quality consumption. Sales from imported brands have been on the rise, represented by the popularity of cross-border purchases during the Singles Day event.

The ongoing popularity of cross-border import sales creates opportunities for imported foreign brands. This is especially the case in sectors where local players don’t have a strong competitive advantage, such as mom and baby related foods, health and nutritional foods, according to the Aliresearch survey. For international brands or retailers, cross-border platforms like Tmall Global can act as a premier testing ground.

For some sectors, like health and nutrition foods, China still lags behind when compared with developed countries/regions like Australia, the US and EU, in terms of R&D, product innovation and quality. As such, consumers prefer to buy imported brands through cross-border platforms. This indicates that local food companies can possibly consider sourcing or acquiring strategically-relevant overseas brands within the health and nutritional foods sector, to seek future growth.