Slowing Singles Day growth in China a sign of stiffer competition, says OC&C

22 November 2018

Chinese shopping bonanza Singles Day has again smashed sales records this year but at slower growth. Still, there were some notable features of this year’s event.

While registering another record haul, China’s Singles Day this year witnessed slowing growth. But a dampened local economy and unfolding trade war aren’t the only explanations according to OC&C Strategy Consultants partner Pascal Martin, as Alibaba’s signature sale faces growing competition from other promotional events and e-commerce entrants offering year-round super-low prices. 

Marking its ten-year anniversary, Chinese online retail giant Alibaba’s 24-hour Singles Day event for 2018 pulled in more than US$30 billion worth of sales (or Gross Merchandise Volume) – up from just over $25 billion last year and more than doubling the 2015 figure of $14.3 billion. Still, despite growth of 27 percent, the rate has slowed from last year’s 39 percent and the 60 percent recorded in 2015.

A slowing Chinese economy and evolving China/US trade war likely contributed to the more cautious Chinese consumer sentiment, but Pascal Martin of OC&C Strategy Consultants in Hong Kong believes there may be several other factors at play – such as increased competition from similar big sales events and low-price e-commerce challengers, as well as waning general public interest.

Speaking with CNBC, Martin contended that more so than broader economic factors, competing promotional events such as Alibaba rival’s annual 6.18 sale, which this year generated over $25 billion in online and offline sales across 18 days in June (up 40 percent on 2017), were beginning to have an impact. “Singles Day used to be the one and only event in China, but remember it’s been going on for ten years now,” Martin said in an interview.Three remarkable features of record-breaking Singles Day 2018Indeed, Martin states his belief that “the consumer is holding strong” but simply has more choices, with the experienced retail sector consultant further citing the local rise of events surrounding the western Valentine’s Day, Christmas and New Years, along with the Chinese New Year celebrations. In addition, the Chinese consumer has more options as to where they can shop, including the super-low-cost ecommerce site Pinduoduo.

“Alibaba with the Singles Day event was really very powerful with the prices and discounts they were offering,” said Martin. “But you have new platform Pinduoduo, which has been able to assemble 350 million customers in just three years, and they are providing the market with some prices that are absolutely impossible to beat. And so I think the Singles Day event is just facing more competition from other events and specialist sites.”

Evolving event

Still, in a further discussion with retail-focused media site InsideRetail, Martin highlight three notable features of this year’s Singles Day, namely; Alibaba’s New Retail ecosystem, which melds online and offline channels – “For example, Tmall’s 3000+ convenience stores, Hema and RT Mart supermarkets, Suning and Auchan, were all part of the event. Altogether 200,000 brick and mortar stores joined the party”; globalisation, with for example Alibaba owned Southeast Asian site Lazarda taking part in the event, and; diversification, such as with event sales moving beyond just consumer goods to include products such as videos, music, tickets and travel.

Martin adds that Singles Day will also have to continue evolving and expand the scope of the event to maintain its momentum; “11.11 (the date of Singles Day) has become much more than a commercial fair, it is now a major annual milestone in China’s cultural calendar. To keep the event fresh and exciting, Alibaba will need to continue to surprise Chinese consumers with entertainment and festivals around the event. This year, the double 11 gala event featured Miranda Kerr, Mariah Carey and Cirque Du Soleil, but no current big stars. Is this enough to continue to excite consumers, particularly younger generations?”

Recently, OC&C bolstered its Consumer practice ranks with the addition of local retail and consumer expert Adam Xu as a Partner based in Shanghai.

Excessive technology can be counter-productive in new retail, says S.POINT

05 April 2019

Technological advancements have in recent years opened the door to ‘new retail’ – but an overreliance on technology can be counter-productive for retailers, argues Steven Jiang, Managing Partner of Shanghai-based innovation consultancy S.POINT.

Moving beyond just a buzz-word, the ‘new retail’ business model has outright boomed in recent years, most notably driven by Chinese e-commerce giant Alibaba. Striving for the seamless integration of offline and online shopping channels, together with a mesh of big data, logistics, marketing and distribution, the emergence of new retail has been undoubtedly enabled by rapidly evolving intelligent technologies.

But, as Steven Jiang, Managing Partner and Vice President of Shanghai-based product innovation consultancy S.POINT notes, not all enterprises have the strong technological genes of Alibaba. Jiang contends as such that enterprises in the new retail space can have a tendency to over-rely on technology, with its excessive application and misapprehension of the space producing effects counter to intentions.

“Developers with a misunderstanding of new retail are over-dependent on technology and believe that technology changes and solves everything, which is an extreme obsession with technology,” states Jiang. Rather, new retailers should as a starting point consider scenarios across the shopping and buying life-cycle and the combination of human and technological elements to create a seamless customer experience.Excessive technology can be counter-productive in new retail, says S.Point“New retail should pay particular attention to the sense of balance to connect technology with customers to create a better experience – as the application of excessive technology leaves no room for the development of the relationship with customers,” says Jiang. “The key lies in the insight into customer scenarios, and only by understanding and extending scenarios for their consumers can organisations have the chance of winning new retail opportunities.”

An MBA graduate from the MIT Sloan School of Management and former consumer and industrial goods consultant with Booz & Company, Jiang was a founding member of the China Industrial Design Institute and now serves as Managing Director for S.Point, a 1997-founded Chinese consultancy and Cordence Worldwide member with offerings in consumer research, product definition & design, product delivery, go-to-market strategy, and innovation capacity building among other provisions.

With respect to his contentions on new retail, Jiang points to the modern self-serving vending machines that have emerged in the past few years, which are very advanced in terms of technology but haven’t been entirely successful – separated as they are from consumer scenarios. “Consumers will not approach technology proactively,” he says. “Only when technology is made close to customers’ needs can it find its market.”

Noting that the center of shopping has shifted from the merchandise in traditional retail to customers in new retail, Jiang concludes: “Enterprises hoping to grasp new retail should understand traditional retail from the heart – i.e. consumers see the product first, then recognise the brand, and compare prices in the end. If consumers cannot see the product or understand the product it will be very difficult to push sales . . . the key to new retail lies in creating new and more scenarios to increase the value of the merchandise.”