Dissecting the Data from 2021 Singles' Day
Singles' Day wrapped up last week, clocking a whopping $139 billion worth of goods sold just on Alibaba and JD platforms. The two platform's combined year-on-year growth of 15.5% growth was much lower than previous years', but still impressive given the odds stacked against it.
Beijing's crackdown on big tech companies as part of its common prosperity drive, coupled with China's 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.
Along the same theme, 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 addition cargo space in over 1,350 flights, 150 trucks, and 210 ships to ensure swift delivery of cross border purchases. Nevertheless, with supply constraints hurting businesses worldwide, numerous brands tiered-back promotions, on top of the many who are evolving their strategies beyond excessive discounting.
If it wasn't tough enough already, there were nationwide warnings about parcels coming contaminated with the virus, not long before the big promotions on 11/11.
So with all of that in mind, the 15.5% growth is not to be sniffed at. Yet, reading below the headline numbers, there are some interesting data points which are a microcosm of the China market beyond the festival.
Arguably the most impactful growth drivers are consumers from lower-tier consumers. This year's Singles' Day was the first which saw shoppers from 'smaller' cities outnumber those from tier 1 and 2 cities. A significant share of JD's 28% growth can be attributed to consumers from lower tier cities which accounted for 77% of shoppers. Similarly, 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 still love buying foreign goods. Major categories were largely dominated by well-marketed foreign brands.
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. Alibaba is facing more competition than ever from other platforms, as illustrated by its shrinking share relative to JD, as well as Douyin, Kuaishou, Suning, VIP and Pinduoduo in the increasingly fragmented market. Over half of consumers were planning to shop on three or more platforms this Singles' Day according to a Bain survey.
A total of 290,000 merchants were competing for mindshare during this year's festival just on Alibaba platforms, 70,000 of whom were taking part for the first time. 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.
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