Looking Back on Lessons From China's Singles Day

By virtue of scale, China is an unrivalled market and has been for some time. Yet, only when initial sales figures streamed into public consciousness for this same event last year did the world really sit up and take notice of China’s prowess and consumer spending power.

China is, and has been, incredibly dynamic, forward-thinking (far more than many other markets), and brimming with innovations and entrepreneurialism to embrace the wants of the increasingly savvy product buyer.

The 2014 edition of 11.11 saw sales dwarf 2013, with RMB 57 billion spent on T-MALL alone compared with RMB 36 billion on the same property in the previous year. Placed into relative perspective, RMB 9 billion worth of transactions were spent on Cyber Monday in the United States in 2013; Chinese consumers spent diversely, from detergent (200,000 bottles) to cars (50,000 units) with Alibaba.

Specifically, the growing confluence of offline and online retail reveals the very practical trait about Chinese consumers: 11.11 takes full advantage of the offers e-commerce provides, in the form of convenience, accessibility and, importantly, price (with its favorable return policies).

The challenge for many brands, then, continues to be how to properly integrate digital into the business management process, and even lead, from both branding and retailing perspectives. 

China’s Use of Mobile Hits the World Stage 

No country in the world has seen such a dramatic uptake in smart phone usage and, with it, has driven multitasking and convenience. More than 40 percent of Singles Day purchases were made on mobile devices this year, with a similar proportion reported on JD.com according to ZenithOptimedia Performics.

JD.com’s recently released financial data highlights mobile-fulfilled orders accounted for approximately 29.6 percent of total orders in the third quarter of 2014, a 534 percent year-on-year increase.

The meaning is obvious: what may not available in the physical world can be compensated for in the virtual world and not only from home, but now from the office, restaurant, bus, subway, or cinema.

Mobile is a critical avenue for brands to build beyond the eastern coastline and into the China heartland, especially as growth of online usage on smart phone outpaces “traditional” PC. 

The Battle for E-Retailing Logistics and Infrastructure Domination Continues Unabated 

Alibaba and JD.com are the main head-to-head competitors, but more players are joining the game with differentiated positioning.

In a CTR survey interview immediately after this year’s Singles Day, consumers indicated a broad spectrum of locations where specific category purchases were made, from food retailers Yihaodian and Sfbest to electronics retailers Suning and GOME, as well as personal care-minded retailers like Jumei and Lefeng. Fashion specific sites included VIP.com and just-for-bags site Mbaobao.

The evidence of the competitive e-retail landscape is particularly clear for the lower tier markets. Though China’s economic growth is “stalling” at seven percent, the opportunity to tap into less charted territories continues unabated.

Accessing the lower-tier customer is not straightforward, however, with the required preparation for the sheer scale and volume an incredible resource drain. Immense logistical nightmares have been created and, potentially, leading to impatient and unhappy customers. To combat this, logistics staff worked heavily overtime during the 11.11 season. Alibaba claims more than 1 million courier personnel were employed by domestic logistics firms to speed parcel delivery.

Though the top three ranking sales markets were the usual upper tier suspects of Guangdong, Beijing, and Shanghai, the gap is closing, with Jiangsu and Sichuan particularly strong. These particular markets are generally stronger because of logistics and distribution infrastructures in place: as a note of long-term interest, JD.com logistics are all owned and operated by the company, which may give it a longer-term edge compared with Alibaba, who do not.

As upper-tier markets become increasingly saturated, focus on the lower-tier markets will only continue to grow. With the emphasis on continued category growth, brands will continue to seek out new users. According to consumer sales panel Kantar Worldpanel, for the group of top FMCG companies, 80 percent of new buyers come from lower tiers – providing some pause for thought. 

Chinese Brands Leverage E-Commerce and Are Leveraged Via E-Commerce

The top five selling brands for almost all categories were made up almost exclusively of Chinese brands; particularly telling considering the ferocity of competition from international players.

China’s consumers are growing increasingly savvy and local brands are growing with them in both credibility and availability. The implications here are many-fold, but the important conclusion is the market order is visibly changing as China looks to drive economic policy to become more internally driven.

China is indeed coming of age and the competitive battle is beginning to shift from category growth to penetration: eyeing earlier opportunities, a fair few local brands had chosen strategies to build from the lower tiers up, rather than the opposite of starting from the higher tiers down as subjected by a predominance of international brands.

Now the continued shift – partially dictated by the benefits of online purchasing – means local and international brands are coming closer to meeting face-to-face and head on in competition.

How can international brands manage this shift appropriately, especially in markets where local brands have stronger pre-existing networks for product distribution?

Chinese brands are fast catching up in brand, product and marketing savvy, and customer service. Emphasizing proper, distinct, product, and communication credentials are now evermore crucial, to differentiate in the increasingly competitive space. The signal of quality that puts international brands at a premium is less visible as the market becomes more cluttered with lower-cost local competition just as able to produce quality and market that quality persuasively.

In summary, the magnitude of 11.11 points to the increasing need for brands to manage business, branding, communication, and media strategy with finesse and flexibility; this is especially so in the digital and e-commerce space.

Crucially, the picture for the future is increasingly mobile and m-commerce and, therefore, application of this into the marketing and retailing plan a must. Additionally, how to manage the complexities of offline, digital, and mobile, the differences in China market cultures and the fast-moving pace is one that now requires greater, deeper, systematic strategic thinking.

A “one-size-fits-all” approach is no longer sufficient for a market as complex as China and tailored digital communication and retail plans are needed to manage the supply and demand for each market.

Finally, a big business challenge continues to be how long-term brand-building can be established alongside a heavy discount-oriented event like 11.11, where massive revenue can be generated, but one that also teaches consumers to wait and purchase. This consumer “priming,” in the longer term, potentially erodes future business equity value. A practical budgeting of marketing and media investment on both promotional events and continuous brand building ought to be considered for success.