China's Singles' Day is pushing offline

But Singles’ Day is growing up. The recent popularity among Chinese shoppers of premium Japanese diapers - as well as items like Australian beef, homegrown hairy crabs, entertainment and even real estate - shows the extent to which both the demographic target as well as the product offerings have broadened.
 
On Monday, Alibaba’s platform set a Singles’ Day record of $38.3 billion in sales in 24 hours, up 26 per cent from 2018. That figure already dwarfs similar one-day national shopping sprees like Black Friday and Cyber Monday in America but it captures only a slice of the overall action in China, as JD.com and many other online and offline retailers offer their own Singles’ Day promotions. Increasingly, continued success of this ecommerce extravaganza is being driven by pushing into overseas markets, and by bridging the gap between online and offline customer engagement. Investors tracking Chinese consumption should take note.

Online/offline integration is increasing

The Japanese diaper makers are among sellers who have recognized the growing importance of integration between online and offline sales in China. This year, 40 per cent of Alibaba’s customers purchased international brands on Singles Day: Japan was top among foreign countries selling to Chinese consumers, and premium diaper brand Moony and its rival Kao, which also makes personal care items, were among top-selling Japanese brands. Moony is one of the brands that teamed up with Alibaba in its ‘Smart Nursery Rooms’ campaign at physical shopping malls, providing parents a place to change diapers and mothers a private space to breastfeed – all furnished with vending machines offering baby goods.
 
Brands like L’Oréal and clothing retailer UNIQLO are bridging the gap between online and offline in China with augmented reality try-on mirrors that connect to customers’ profiles so they can save the items they like and try them on later in person at traditional brick-and-mortar shops.
 
UNIQLO has also identified the product lines that sell best in stores but not as well online, and offered Singles’ Day coupons with ‘lower in-store prices’ to consumers who put these products in their carts but hadn’t bought them yet.
 
Customers at Alibaba’s Hema chain of offline supermarkets can buy coupons to pick up goods ordered online from local stores or have them delivered to their homes. Shoppers who head to a Hema shop in person can easily get more information online about the items on display, including recipes, by scanning the QR code.
 
Traditional offline retailers also increasingly use Singles’ Day to acquire new customers through Alibaba’s Taobao app, which pushes out real-time recommendations, coupons and specials from nearby businesses to people using the mobile app. Many of these sellers also use Taobao’s live-streaming platform to broadcast information on their goods and services.

Targeting consumers in lower-tier cities

Success breeds challenges of its own. China’s ecommerce penetration rate is among the world’s highest, largely because its offline retail sector was relatively underdeveloped compared to Western peers. That made it easier for internet companies to build online platforms from scratch, as they did not have to disrupt pre-existing competitors to draw customers to something new. But the easy wins have all been won, and the sector needs to look elsewhere for growth.
 
In past years, Singles’ Day’s marketing emphasis was on China’s top-tier cities, whose inhabitants are more Internet-savvy. But now companies are aggressively pursuing consumers in lower-tier cities with incentives such as lower price points, products aimed more squarely at the mass market and, as noted, through greater online/offline integration. While the pace of growth is slowing in top-tier cities, such is not the case in some rural areas and smaller cities, where lower living costs can mean proportionately more disposable income for consumers.
 
The promotional campaigns in lower-tier cities largely mirror the same online/offline tie-ups seen in higher-tier cities, but they can take personalisation a step further, as shoppers are fed different information and goods recommendations based on their historical behavior. More campaigns in lower-tier cities lured shoppers with straight-forward cash rewards: for example, an Alibaba initiative called ‘Tao coins’ offers customer coins for accomplishing some simple tasks, and the coins can be redeemed for goods and services both online and offline.
 
The Singles’ Day moniker comes from the four single ones that make up the date Nov. 11, or 11/11 - and it fits snugly in the retail lull between China’s Golden Week holiday in October and the Christmas and Gregorian New Year season. But that date also presents a specific challenge to Singles’ Day’s expansion in American and European countries, where the 11th hour of the 11th day of the 11th month marks the solemn anniversary of the end of the first First World War in 1918. For now, though, China’s latest sales figures show that the direction of domestic retail growth may be evolving, but the opportunities are far from saturated.