The Mother of All Singles' Days

11.11 or Singles' 'Day' 2018 officially launched last week, with about 500,000 items available for pre-order on Tmall. The world's biggest shopping festival has long been a yardstick for Chinese consumer sentiment and spending, and this year it will be watched particularly closely. Sales over the 24-hour period will provide some indication of the impact that slowing GDP and the Trade War is having on consumption - the sector that Beijing hopes will keep the economy chugging along. This year will mark the 10th anniversary of 11.11 and will be Jack Ma's last before he 'retires', so there are plenty of reasons Alibaba will be wanting to blow last year's $25.3 billion in gross merchandise volume out of the water.

Each 11.11 festival is a display of Alibaba's might, and a signal of its areas of focus for the year ahead. 2014 was all about getting consumers to shop on their mobiles, 2015 drove international products through cross border commerce, 2016 was about blending entertainment with shopping, and 2017 took New Retail and offline integration to a new level. This year will demonstrate the depth of Alibaba across China's online and offline worlds.

Fancy some caffeine to keep you awake as you find the deals? Starbucks will be delivering discounted coffee through Alibaba's Ele.me. Or how about a bite to eat, some beauty treatment or a spot of karaoke to provide a break from shopping on your smartphone? 150,000 of Alibaba's Koubei merchant partners will be offing half price fare. This Singles' Day will be the first time Alibaba has exhibited full might (almost) of Alibaba's bricks and mortar investments.

The 11.11 promotions and festivities will be very present on Alibaba's supermarket chain Hema, its hypermart operator RT-Mart, Intime malls and home improvements chain Easyhome which will all be showcasing New Retail. 200,000 mom-and-pop stores using Alibaba’s LST will provide online sales promotions and augmented reality-based red packets. Partners such as L'Oreal and Hasbro are coming to the party online and in stores.

At the heart of 11.11, Tmall will engage 180,000 Chinese and global brands. Tmall Global will provide 3,700 categories of imported goods from 75 countries and regions. And beyond China, Alibaba's Lazada will aim to make Singles' Day as much as an event in Singapore, Malaysia, Thailand, Indonesia, the Philippines and Vietnam, helped along by Google and Line joining together to promote the event. Altogether, Alibaba hopes to break the billion order mark on November 11. Given last year's orders grew from 657 million to 812 million, and the many new dimensions in 2018, we think this could be conservative.

One of the interesting dynamics for Singles' Day this year is Pinduoduo entering the mix. Singles' Day was built around special deals, which no one does better than the Pin. It also has a stronghold in lower tier cities which have been more challenging to reach over previous Singles' Days. There are reports of Tmall pressuring some brands to choose between its platform and Pinduoduo, so clearly Alibaba feels they will make an impact. One thing for sure is that it will make the day even more interesting.

For our readers who are participating in Singles' Day, we wish you all the best in building awareness, launching new products or whatever else you are planning to achieve. We hope you are using it as a Trojan Horse to build more sustainable engagement with consumers.

In other news, China Skinny is proud to again be working with Austcham Shanghai and Westpac on the second annual Australian-China Business Sentiment Survey. The previous survey gave rich insights into the health, opportunities and challenges in the Australia-China economic relationship, provided a valuable benchmarking tool for all organisations working with China and strengthened the Chamber's advocacy efforts to advance Australia-China business relations. Any readers representing Australian organisations connected to China please spend 10-15 minutes to complete the survey - we'll all be better for it! Take the survey here.

Here are this week's news and highlights for China:

Digital China

Alibaba Pledges ‘Largest Ever’ Singles’ Day as Shopping Festival Marks 10th Anniversary, Goes International: Alibaba expects to achieve a record 1 billion orders in 24 hours as it pulls together its entire retail ecosystem in China and overseas, including Lazada in Southeast Asia.

2018 Single’s Day War Started; Pinduoduo Joined as a Major Player: Tmall has reportedly pressured brands to choose between Tmall and Pinduoduo for their Single’s Day promotion. Some brands are asked to delete their products, or even deleting their Pinduoduo stores.

Chinese Consumers Favour Local Brands as Phone Sales Slide 11.7%: Mobile phone sales in China in September were 39 million, 11.7% down from a year ago. Demand has been weak during most of the year, with the exception of a modest uptick in May. Local brands account for more than 80% of sales.

Ciao, Italia! New Tmall Pavilion Spotlights Italian Products: Alibaba has struck a first-of-its-kind deal with the Italian government to promote Italian products and culture in China through Alibaba's ecommerce platforms. Unlike other country pavilions, this will be the first time an overseas government will finance and work closely with Alibaba to support its homegrown brands and products. The pavilion hosts 88 stores from over 100 Italian companies, spanning categories including fashion and cosmetics, home and design and food and wine.

JD.com Launches Express Delivery Service with WeChat Mini-Program: JD is expanding its portfolio to take on SF Express, YTO Express, and ZTO Express and Alibaba by offering individual consumers an express delivery service. This will take advantage of JD's extensive logistics network including 500 warehouses across China. In related news, the White House has announced its intent to withdraw the US from a 144-year old international postal alliance, which subsidises postage from 'developing' countries allowing them to build their economies through trade. China accounts for 60% of all packages shipped to the US - mainly through cross border commerce. The subsidies make it 40-70% cheaper to send a small package from China than sending from one US location to another.

Chinese Consumers

China's Q3 GDP Growth Slowest Since 2009, On Track for Government Targets: China's GDP grew at 6.5% year on year for the third quarter, below expectations of 6.6%, although economists expect China’s full-year growth to come in at 6.6% this year - comfortably meeting the government’s 6.5% target. September retail sales grew at 9.2%, above expectations of 9.0%.

The Trade War’s Latest Casualties: China’s Coddles Cats and Dogs: American pet food brands have become collateral damage in the trade war seeing China’s choosy pet owners become increasingly nervous about the scarcity of their favourite foreign brands for Fido and Mittens. Pet spending in China has surged more than eightfold since 2010 to about $25 billion a year.

Food & Beverage

Mondelez Catching Up With Competitors in China’s Ecommerce Space: Although Mondelez only started selling on China’s ecommerce platforms in 2016, it holds the highest market share for cookies on Tmall with 12%. Its market share for gum is 32% and chocolate 14% – only behind Mars. Across all brands, cereal, rice/pasta, and dairy are among the best preforming food categories online with 18%, 17%, and 15% market penetration respectively. On the other hand, processed meat, edible oils, and ready meals enjoyed a relatively small ecommerce penetration at 4%, 3%, and 1% respectively.

Alibaba Uncorks $290 Million Deal with Stake Purchase in Wine E-tailer 1919.cn: Alibaba has invested domestic wine and spirits importer and retailer 1919.cn to tap into resurgent demand for imported wine in China.

Chinese Tourists

Chinese Tourists Shop Less While Abroad, but That’s Not a Bad Thing for Global Brands: 12% of travellers said shopping their main motivation for going overseas this year according to Ctrip, in line with overall trends which saw just 33% of Chinese tourists interested in shopping in 2017 and 68% in 2016. This is attributed to greater availability of international goods in China through general trade and cross border commerce, but also maturing travellers. Alipay’s cross-border payments have increased 30% YoY to reach an average of ¥1,979 ($286), with lower tier cities significantly growing. Over Golden Week, Fuzhou, Hangzhou, and Wuhan increased spending by 70%, 50%, and 31%, respectively.

Mafengwo Accused of Faking 85% of All User-Generated Content: Over 18 million user comments and blog articles among the total 21 million “original” content pieces on travel blogging site Mafengwo are reportedly fake or plagiarised from rivals. A total of 7,454 fake user accounts were found.

How Alibaba-Backed Shiji Is Expanding Its Tech Sales to Hotels Outside of China:Shiji, the hospitality tech giant of China, has been expanding its global push since Alibaba acquired a 13.07% stake for $486 million in February. In China, Shiji has over 60% market share for enterprise software services among upscale and international hotels and luxury retailers. About 13,000 Chinese hotels use Shiji-networked systems, including many global brands. Outside of China, about 47,000 properties use products or services from Shiji Group. More than 100,000 hotels worldwide connect to Shiji’s inventory distribution system. Alibaba's data catchment is growing globally!

Fashion

Nike Store to Target Younger Consumers: Nike has opened its first global flagship store - dubbed the "House of Innovation" - in Shanghai targeting digital-savvy younger Chinese consumers with its digital integration, innovations and personalized services. The store features its latest localized collection themed with Shanghai elements, which is linked to the upcoming Shanghai Marathon in November. Online-and-offline integration is key in the store's retailing experience, which ties in with Nike's WeChat Mini-program.

Environment

JD.com Green Planet-Sustainable Week: JD has kicked off its second Green Planet-Sustainable Week this month to build awareness around sustainable consumption while developing its ongoing efforts to reduce consumption-related waste. Key initiatives include offering eco-friendly, reusable shopping bags; collecting clothing using its in-house logistics network; and gathering appliances to be recycled.

That’s the Skinny for the week! See previous newsletters here. Contact China Skinny for marketing strategy, research and digital advice and implementation.