How Alibaba’s annual shopping festival is revolutionizing e-commerce139 views
Alibaba wants to change the world’s e-commerce landscape, using its Singles Day on November 11 as a springboard.
Alibaba’s Singles Day is revolutionizing the way hundreds of millions of Chinese consumers shop online, and the group’s founder is hoping this year’s event will do the same in global markets.
The world’s largest 24-hour online shop-a-thon kicks off at midnight on November 11. More than 30,000 brands will take part, offering heavy discounts, sales and other promotions.
Last year’s event, also known as 11.11, generated over US$9 billion in gross merchandise volume (GMV) – more than the combined value of the United States’ Black Friday and Cyber Monday.
For executive chairman and founder of Alibaba Group, Jack Ma, this is a day to test new ways of bringing businesses and consumers together from anywhere in the world.
“I never think of this as a day to sell products, this is a day we exchange ideas, this is the day we exchange innovation, invention and creation,” said Ma at the official launch of the event in October.
This year, Alibaba will be hoping to do that in several ways – from pushing an international agenda, to introducing new omni-channel and online-to-offline (O2O) elements, as well as offering additional financial products through its Alipay and Ant Financial Services Group.
Here’s a short video on the background to Alibaba’s Singles Day:
What trends and predictions can we expect at this year’s festival? This is what the experts had to say:
1. Going global
This year’s event has been renamed the 11.11 Global Shopping Festival for a reason. Globalization is at the cornerstone of Alibaba’s growth strategy, and using its international arms, hopes to reach more international buyers.
“This will be the first time people realize it’s not just a China phenomenon,” says Napoleon Biggs co-founder, Purecomm Omni-channel Retail.
“You now have all these Chinese-born brands and e-commerce companies looking at developing international websites and expanding globally. And rather than starting with a brand, they are starting as a product that is cheap, and these are big incentives in emerging markets,” says Biggs.
Infrastructure for delivery is not restricted to China either. Alibaba’s AliExpress is increasing its global footprint with a number of logistics partnerships, including Singapore Post earlier this year to access Southeast Asian markets.
International trade goes both ways. China’s middle class is expected to reach more than 500 million people in the next decade.
These consumers want authentic, high quality international products such as baby and maternity goods, apparel, cosmetics, electronics and home appliance goods, health and nutrition, groceries and fresh foods.
A Chinese government push to increase cross-border trade is making access to these premium goods easier for Chinese consumers. For international brands, it can mean in some cases, a less regulated channel to entry into the Chinese market.
Korea became the first country in May to have a country pavilion hosted on Alibaba’s Tmall Global site. Since then, a further 11 countries – the U.S., Australia, New Zealand, Switzerland, France, Britain, Spain, Singapore, Thailand, Malaysia and Turkey, have set up country-branded platforms on the site. These partnerships are part of a push to increase highly sought after foreign products into China. But they also give smaller brands a new marketing channel to reach the Chinese consumer.
Here’s what the homepage of the Australia Pavilion on Tmall looks like:
2. Online-to-offline / click and collect / omni-channel
Alibaba is pushing a big O2O agenda at this year’s event, signing up more than 1,000 retail brands, with 180,000 brick-and-mortar stores across 330 cities across China.
High profile retailers include Estée Lauder and Hong Kong-based jewelry chain Chow Tai Fook. These stores will be offering promotions to smartphone users in the form of rewards, discount e-coupons and click-and-collect options allowing consumers to buy online and pick up in-store.
Customers will also be able to make online payments through their smartphones for in-store purchases.
“Last year retail department stores lost out big to Singles Day. So now department stores are saying if the market place can do it, we can do it too,” says Biggs.
He says China really understands omni-channel marketing, citing Alibaba’s investment earlier this year into electronics retailer Suning and stakes in the Intime department store chain.
“Organizations have always treated digital as it’s own thing, now they are saying, let’s get more efficient at using online to get consumers into our stores,” he says.
Last year, more than 40 percent of 11.11 sales were made on a mobile. That is likely to be even higher this year. These omni-channel sales will also give merchants greater insights into customer demographics and shopping habits.
For the first time since its launch in 2009, Alibaba is moving the Singles Day action center – where it will run the event’s logisitcs and marketing – to Beijing’s National Aquatics Center rather than at its Hangzhou headquarters. This is where the country’s government and media sit, and should enhance exposure and hype, says Mark Tanner, managing director of insights-based marketing research agency, China Skinny.
From there it will host a gala show of celebrities to be broadcast by Hunan TV and live-streamed on PCs and mobile devices via apps and video site Youku Tudou. Viewers will be able to interact with segments by shaking their smartphones or scanning QR codes for Singles Day deals and coupons (including discounts on overseas travel and home appliances) once the Tmall or Taobao apps have been downloaded.
The partnership not only ads to the hype and increases awareness of Singles Day but will help the Alibaba brand reach new demographics. This includes audiences in rural demographics coming online for the first time and consumers in the over 35 group who are yet to make an e-commerce purchase.
4. Payment and financial services products
Alibaba has long had its own financial offerings, from its Alipay wallet to more recent product offerings similar to traditional microloans, bank cards and credit cards.
Singles Day is now moving from the role of teaching Chinese people how to shop online, to helping Chinese consumers develop more sophisticated attitudes to financed credit, says Jane Lin-Baden, chief executive officer (CEO), Isobar China group.
“In order to create these 11.11 large sales, [Alibaba] will use these internal financial systems to give out easier loans or financial credit to consumers,” she says.
It will be interesting to note the percentage growth in Chinese consumers who this Singles Day, take out a finance credit, not from a bank but from Alibaba, she adds.
Lin-Baden expects to see more third-party financial products to specifically support e-commerce sales entering the financial solutions market as a result of this year’s event.
What does this mean for brands?
“With more opportunities, there are more challenges,” says Tanner.
“Everyone is chasing that same consumer. Therefore you need good, sharp marketing,” he says.
For small brands Singles Day is a bigger challenge but can be an opportunity to build awareness.
“Some will look at investing the money as a write-off to get that awareness,” he says. For those prepared to spend on social media and search, traffic will increase.
For most brands though, both big and small, the event will squeeze profit margins and will come at a significant marketing expense. Many will have held inventory to ensure sufficient product on the day, which will be sold at heavily discounted prices.
Jonathan Lim, creative director, Grey Group Shanghai agrees.
“A lot of brands spend more money to earn more money – and so the smaller brands find that hard,” he says. But brands can capitalize from the many other sales days that have been developed around it, such as 12.12 in December which has a heavier O2O component and is better suited for small to medium sized businesses.