While the UK is counting down the days to a possible Brexit, in China all eyes are following Alibaba’s lead up to this year’s Single’s Day.  The November 11 online shopping festival, already the biggest in the world in terms of revenue generated on a single day, aims to beat the $30.8 billion in gross merchandise sales generated on T-mall and Taobao last year.

 
Behind the headlines, more analysts are questioning whether purchases made during mega shopping festivals are additional business or simply deferred purchases?   Further, if consumers are putting off some of their purchases in anticipation of better deals during these events, what is the cost to merchants?

 
During shopping festivals, platforms require that merchants offer discounts of around 30%, after all that’s what’s drives consumers to shop during these events.

 
While merchants prefer not to be quoted, most are less than enthusiastic about festivals like Singles Day.

 
This growing propensity to hold off purchasing until Singles Day prompted HSBC Malaysia to put out an advisory to its credit card holders to track prices in advance of the shopping festival to be sure that sale prices are actually a bargain. 

 

This growing propensity to hold off purchasing until Singles Day prompted HSBC Malaysia to put out an advisory to consumers.  It’s “11 Tips to Get the Most Out of 11.11” advises HSBC credit card holders to track prices in advance of the shopping festival to be sure that sale prices are actually a bargain.  In addition, they advise ‘reading the fine print’, ‘checking return policies’ and to consider whether they really need an item, even if it’s being offered at a discounted price.

 

 

Seeking Real Growth

To ensure continued growth for it’s platform, Alibaba has cleverly been growing its reach well beyond China.  That investment in new market development is starting to pay off as cross-border purchases are accounting for an increasingly larger percent of the Alibaba’s sales. 

 

Lazada (a susidiary of Alibaba) will be bringing Singles’ Day to Southeast Asia.   Aliexpress will allow consumers from the U.S. to Central Asia to get in on the sales event.

 

Still, online shopping accounts for a mere 12 percent of total retail sales in China, giving e-commerce platforms plenty of room for growth in China’s domestic market.

 

The success of Singles’ Day has had ripple effects beyond Alibaba’s own platforms.  Competing platforms, like JD.com, as well as physical retail, have all been lifted by the rising tide brought on by this mega shopping festival.

 

In recent years, Alibaba has been trying to include more offline retailers into the Singles’ Day event.  If enough retailers join in, this could result in a substantial boost for the entire retail sector.

 

The Suprising Winner

In the end, the real winners might just be physical retailers.  By offering a few ‘loss leader’ products as part of the festival,  they can draw customers into their stores, physical retailers then have the opportunity to sell shoppers other products that are not heavily discounted. 

 

Further, customers who purchased on Alibaba, Tmall, JD.com or the platforms during the festival and could opt to collect the goods in a physical store.   Considering the investment that China’s major e-commerce platforms are making in bricks n’ mortar retail, this would also benefit them as well.