One week after Singles’ Day (11.11), the figures for the annual shopping festival show that consumer confidence in China remains strong despite recent outbreaks of Covid-19 caused by the Delta variant, although public coverage was muted due to the ongoing ‘Common Prosperity’ campaign, writes Mark Tanner from The China Skinny
Singles’ Day 2021 wrapped up last week, clocking a whopping RMB 540.3 billion (£63 billion) of goods sold on Alibaba alone (the group that created the shopping festival in 2009). That made for year-on-year growth of 8.5%, much lower than last year’s 26% growth compared to 2019, but still impressive given the odds stacked against it. It is also worth noting that this year’s figures captured sales from 1-11 November, as what was once a 24-hour flash sale event has expanded into a multi-day shopping bonanza, including pre-sales stretching all the way back to October.
Beijing’s crackdown on big tech companies as part of its common prosperity drive, coupled with an increased focus on sustainability, meant that the shopping festival was without its usual razzmatazz. Instead of Alibaba’s usual star-studded gala with previous appearances from Taylor Swift, David Beckham and James Bond (Daniel Craig), the company held a very low-profile evening party without a live studio audience to celebrate the event.
Similarly, new regulations for China’s fintech industry – and the fact that just 13% of China’s young consumers are not in debt with some feeling a little shy in light of the latest Delta outbreaks – will have impacted Alibaba’s deferred payment system Huabei, and JD’s Baitiao. In previous years, at least half of sales on Singles’ Day have sold using the credit systems.
The importance of strong logistics was never more pertinent with the current global supply chain, logistics and customs clearance challenges. To minimise the impact, Alibaba’s logistics arm Cainiao pre-stocked over 300 million goods from 87 countries and regions in warehouses in China, on top of securing additional cargo space on over 1,350 flights, 150 trucks and 210 ships, to ensure swift delivery of cross-border purchases. As David Lloyd, general manager UK, Netherlands and Nordics at Alibaba, pointed out in an interview with the Evening Standard, “Whilst no-one is completely immune from these macro challenges impacting global retail right now, we are confident that the brands that sell with us are well-prepared and any potential consumer disruption will be minimised.”
If it wasn’t tough enough already, there were also nationwide warnings about parcels becoming contaminated with the virus, not long before the big promotions on 11/11.
So with all of that in mind, Alibaba’s 8.5% growth is not to be sniffed at. Yet, reading below the headline numbers, there are some interesting data points that are a microcosm of the China market beyond the festival.
Arguably the most impactful growth drivers are consumers from lower-tier cities. This year’s Singles’ Day was the first that saw shoppers from ‘smaller’ cities outnumber those from tier 1 and 2 cities. Spending from lower-tier cities on Alibaba platforms grew 25% on last year — much higher than the company’s overall 8% growth – indicating that spending by the more mature big-city consumers barely grew, if it did at all. The number of luxury goods buyers in smaller cities also grew by nearly 50% on Alibaba platforms. Among the 400 cities from where consumers bought luxury goods during the festival, the fastest-growing 30 locations were all lower-tier cities.
Although there is no question about the rise of domestic brands, Chinese consumers still love buying foreign goods. Major categories were largely dominated by well-marketed foreign brands. As Lloyd explained, “Demand for products from international brands, particularly from the UK, has remained resilient in the China market and in fact grown over the course of the past year. From health and wellness to beauty and food and beverage, Chinese consumers hold ‘Brand Britain’ in extremely high regard for its quality and heritage.”
The often-hyped elderly consumers, although not yet a driving force, did their bit to bolster numbers. A daily average of 1.1 million users browsed 11.11 offers using Alibaba’s new senior mode. Their favoured items included smartphones, down jackets and woollen coats.
Above all, Singles’ Day is representative of how competitive China has become. A total of 290,000 merchants were competing for mindshare during this year’s festival just on Alibaba platforms alone. According to Lloyd, last year more than 1,3000 British brands took part via Tmall Global, including The Body Shop, athleisure retailer Sweaty Betty, and Brentford-based Teapigs.
With the number of sellers increasing 32% in a pool of sales that rose 8%, the cost of acquisition has increased even further. This reinstates the importance of a smart Singles’ Day strategy which feeds into the bigger picture.