HANGZHOU, China Singles’ Day, a twist on Valentine’s Day, started in China in the 1990s as an obscure holiday but has snowballed into a consumer phenomenon thanks largely to Alibaba Group Holding Ltd., founded by Jack Ma and which runs China’s largest online marketplace.
Singles’ Day is celebrated on Nov. 11 because the date 11/11 is reminiscent of “bare branches,” the Chinese expression for bachelors and spinsters. In 2009, Alibaba sparked the flame that turned it into what it is today a massive marketing event selling everything from electronics and clothing to cosmetics and food at big discounts. It sells through Tmall, AliExpress and Taobao Marketplace platforms, and through merchants’ brick-and-mortar stores. Here are five points that illustrate just how big the phenomenon is:
Analysts expect sales to surge to a new record. Last year, Alibaba sold more than $1 billion worth of products in the first three minutes of the sales. Total sales on Singles’ Day zoomed up to 57.1 billion yuan ($9 billion) within 24 hours, or four times bigger than the US’s Cyber Monday, named after the rise in online retail sales the Monday after Thanksgiving. Forty- three percent of transactions were done on mobile devices.
More than 1 million products were placed on sale last year, according to Comscore. Customers this year will be able to choose from more than 6 million products from around 40,000 merchants and 30,000 brands. Consumers are expected to spend an average of 1,761 yuan ($277) per person, up 22 percent year on year, according to a Nielsen survey of more than 1,000 Chinese Internet users.
Alibaba estimates that 1.7 million deliverymen, 400,000 delivery vehicles, 5,000 warehouses and 200 airplanes will be deployed by its partners to handle the deliveries. China Post, the country’s postal service, estimates that 760 million packages will be shipped by various Chinese e-shopping sites to customers on the day. That s up significantly from 540 million packages produced last year, according to a post office quote by Alibaba’s news site Alizila. Retailers will be offering more perks such as free refunds and delivery when using online-to- offline channels, according to Bloomberg Intelligence.
Singles’ Day has become more globalized. Alibaba says Costco Wholesale Corp., LG Electronics Inc., Walt Disney Co., Fisher-Price Inc., Lego AS, Metro AG and J Sainsbury PLC will be among the global brands participating this year. Apple Inc., Calvin Klein Inc., Macy’s Inc. and Burberry Group PLC have participated in recent years. Major retailers and brands are using Singles’ Day as an opportunity to introduce themselves to the Chinese consumer, said Brian Buchwald, chief executive officer of New York-based consumer intelligence company Bomoda.
Offline brands involved in Singles’ Day promotions include Shanghai Jahwa United Co. Ltd., Suning Commerce Group Ltd., Intime Retail Group Co. Ltd., Estee Lauder Companies Inc. and BAIC Motor Corp. Ltd., according to a Barclays PLC note on Nov. 4.
Alibaba is adding some star power to the event, with a guest list that includes U.S. singer Adam Lambert and Chinese film director Feng Xiaogang, known for his top-grossing comedy films. Celebrities from Taiwan and China including pop singer Jolin Tsai, actress Vicki Zhao, Mandopop singers Jane Zhang and Amber Kuo, and boy band TFBOYS were also invited to a Nov. 10 gala ahead of the sales rush, according to a Barclays report.
By Anjali Kapoor, Michael Tighe, Alyssa McDonald.
Holland s APG in warehouse JV China s fast-growing logistics sector got 2 shots in the arm last week, first when leading e-commerce company Alibaba made a major new offshore investment and then when a major foreign fund formed a domestic warehousing joint venture. The pair of investments are part of a flurry of new developments being driven by e-commerce, which is fueling huge demand for behind-the-scenes services like order fulfillment and product deliveries. E-commerce is an emerging area where China has the potential to become a global leader due to its later economic development compared with the west, where traditional brick-and-mortar retailing still dominates.
To ensure its leading position, China should work hard to promote parallel development of a strong logistics sector to complement e-commerce. It can do that through economic incentives, and also by giving domestic and foreign capital the flexibility to invest in the space without government interference. China s e-commerce sector has grown by more than 50 percent annually over each of the last few years, and is expected be worth some 3.3 trillion yuan ($530 billion) in annual sales by 2015.
To facilitate the efficient flow of this huge volume of goods, some analysts estimate the nation s logistics sector could need as much as $2.5 trillion in new investment over the next 15 years. Alibaba has been on a major buying binge over the last year, and made one of its biggest international investments last week with its purchase of a stake in Singapore Post (Singapore: SPOST), one of the city state s leading logistics firms. ( previous post 1 ) Alibaba paid $250 million for 10 percent of the company, giving it access to new resources and paving the way for potential moves into Singapore and nearby Southeast Asian nations as it tries to go global. The investment was part of a bigger commitment announced by Alibaba last year, which will see the company spend a massive 100 billion yuan ($16 billion) over the next few years to build up its logistics networks.
That commitment was especially important for Alibaba due to its business model that relies on individual merchants that open stores on its platforms. Many of those store operators have limited geographical reach and resources for quick product fulfillment and delivery services, meaning their future survival could depend on logistical assistance from the wealthy Alibaba. Shortly after Alibaba s announcement, Dutch pension fund APG Asset Management announced separately it would invest $650 million in a major new tie up with e-Shang , a start-up logistics firm backed by US private equity giant Warburg Pincus . ( English article 2 ) Under that deal, APG paid $650 million for 20 percent of e-Shang, and the pair set up a joint venture to operate logistics warehouses around China.
The e-Shang investment is just the latest in a steady string of China-based warehouse building projects by major companies looking to cash in on the nation s e-commerce boom. Last year US private equity giant Carlyle teamed up with another US partner and a Shanghai-based firm in a $400 million joint venture to build and operate up to 17 warehouses providing logistics services. Global delivery giant UPS (NYSE: UPS) also announced a plan around the same time to add 2 massive new warehouses to its China network to expand its capabilities.
Most of China s other major e-commerce players are also spending heavily in the area, with JD.com (Nasdaq: JD) and Amazon China (Nasdaq: AMZN) both engaged in major warehouse building plans to improve their product deliveries. While the warehousing sector is gaining momentum, the product delivery space has been slower to welcome foreign participation and is still highly fragmented. That fragmentation leads not only to stiff competition and quality issues but also real dangers.
The issue made headlines in several recent cases last year, including one where one person died and 7 others were sickened due to mislabeling of a hazardous product. For years Beijing excluded foreign companies from offering domestic delivery services in China, though it relented in late 2012 and allowed UPS and FedEx (NYSE: FDX) to provide such services. Still, the market remains difficult for foreign firms, and last year saw Dutch delivery giant TNT Express leave the market due to intense competition.
Despite the occasional setbacks, the overall trends are broadly positive, which is giving both domestic and foreign investors the confidence to pour billions of dollars into new investments. Beijing should do its best to continue dismantling barriers and promoting development of new facilities and services to ensure the sector s healthy development. Such support could ultimately produce a world-class logistics sector that could become a global leader to complement China s rising prowess in e-commerce.
Bottom line: China s logistics industry could see a multibillion-dollar spending spree on new investment over the next 5 years if Beijing plays an active role to encourage the sector s development.
Related posts: References ^ previous post (www.youngchinabiz.com) ^ English article (www.reuters.com)