International Department of the CPC Central Committee       BEIJING REVIEW
NOVEMBER 2019       MONTHLY
Not Getting Old
By Li Xiaoyang 
A screen in Alibaba Group's media center in Hangzhou, Zhejiang Province in east China, shows that its e-commerce platform Tmall's sales hit 100 billion yuan ($14.27 billion) in one hour, three minutes and 59 seconds on November 11 (XINHUA)

At 3 a.m. on November 11, Jin He, a teacher in his 20s based in the southwestern municipality of Chongqing, finished paying for all the goods in his shopping carts on Tmall, the digital marketplace of Chinese e-commerce giant Alibaba Group, and another e-commerce platform JD.com. For him, waiting for flash sales that start at midnight on the annual 11/11 online shopping festival has become a ritual since 2012.

Jin spent about 8,000 yuan ($1,142) on Tmall and 2,000 yuan ($285) on JD.com this year, buying products ranging from clothes to household appliances. According to him, about a third of these commodities were pre-ordered during promotional activities starting in late October.

"The prices offered for the event were really good with big discounts, and the delivery was fast," he told Beijing Review, adding that shopping on November 11 last year saved him a lot on house decor.

Like Jin, many consumers' enthusiasm for the 11/11 activities this year remained vibrant as the consumer festival entered its second decade. Initiated by Alibaba on November 11, 2009, it has become one of the largest online shopping sprees worldwide. Similar to the U.S. Black Friday and Cyber Monday events, the gala is widely joined by buyers and sellers at home and abroad.

This year, Tmall set a new record as its sales hit 10 billion yuan ($1.43 billion) just 96 seconds after midnight, down from 125 seconds in 2018. Compared to more than eight hours last year, the platform took one hour, 26 minutes and seven seconds to reach 120.7 billion yuan ($17.2 billion) in transaction volume, exceeding 2016 total sales.

During the 24-hour event, Chinese consumers spent 268.4 billion yuan ($38.4 billion) on Tmall, 54.9 billion yuan ($7.8 billion) more than last year. Latecomers in the promotional frenzy such as JD.com and Suning.com also reported strong sales growth.

According to Alibaba Chairman and CEO Daniel Zhang, new consumption based on digital modes has distinguished this year's event from previous editions, allowing sellers to better meet customers' demands. "It is more than a shopping festival, it is also an occasion for brands to develop and interact with consumers," he said.

Continuing to soar

From a sales promotion campaign of Alibaba to a nationwide shopping festival, the 11/11 bonanza has enabled consumers to enjoy discounts and brought great profits to e-commerce platforms and online stores.

With sales in 2009 totaling about 52 million yuan ($7.4 million), Tmall reported 213.5 billion yuan ($30.4 billion) worth of transactions in 2018, which surpassed Black Friday and Cyber Monday combined.

This year was again a magnet for both consumers and sellers. Along with domestic businesses, more than 22,000 overseas brands from 200 countries and regions participated, providing about 1 million new products and attracting more than 500 million consumers, according to Alibaba.

More buyers placed early orders to get further discounts. More than 64 brands made over 100 million yuan ($14.3 million) in gross merchandise volume during the pre-order phase on Tmall starting on October 21, which was twice the number of brands compared to last year.

The U.S. skincare brand Estee Lauder had sales of nearly 500 million yuan ($71.3 million) within 25 minutes after its pre-order started, exceeding its full-day sales for last November 11.

As Tmall broke sales records, JD.com and Suning.com, both strong in household appliance sales, also reaped huge profits.

JD.com reported its accumulated sales from November 1 until November 11 were 204.4 billion yuan ($29.19 billion). Its sales of air conditioners exceeded 100 million yuan ($14.3 million) within 20 seconds after midnight on November 11. In addition, more than 10,000 65-inch televisions were sold within eight seconds, according to the company.

Suning.com said its orders within the first hour of November 11 increased 89 percent compared to the same period last year, with sales of intelligent digital products increasing 288 percent.

Consumer enthusiasm was largely generated by limited-time offers on online marketplaces. For example, on November 8, which was JD Member's Day, the company provided great discounts for its JD Plus members.

After the clock struck midnight on November 11, Tmall also provided customers with a preferential policy of 50 yuan ($7.1) off on 400 yuan ($57) worth of commodities, which was not limited to one store.

Sharpening edges

As competition among sellers and e-commerce giants becomes fiercer in terms of driving sales and retaining users, they have stepped up efforts to launch more products tailored to customers, improve services and expand promotions.

Technology is also essential to the success of the 11/11 festival. Alibaba's cloud system, launched in 2009, has played an increasingly important role in supporting the event. At its peak, 544,000 orders were created in a second on the platform this year, a figure 1,360 times higher than in 2009, according to Alibaba.

In addition, Cainiao Network, Alibaba's logistics arm, adopted intelligent technologies to reduce human labor and improve efficiency. To shorten the time of delivery, commodities were sent ahead of time to warehouses close to consumer addresses to ensure timely arrival. Meanwhile, JD.com launched the first 5G-based logistics park in China.

To stand out amid competition, e-commerce platforms are also trying to reach more customers. Since the rise of mobile payment has made an increasing number of Chinese customers turn to shopping on their smartphones, new battlefields have emerged.

Internet live streaming, as a direct way to reach millions of consumers, was a highlight of this year's promotional campaigns. By presenting products to viewers and making them feel closer to the seller, many influential vendors were able to sell their products within seconds.

Viyaaa, the top-selling live-streaming hostess on Alibaba's Taobao platform, presented a wide range of goods on her shows on November 11, attracting 13 million viewers.

Alibaba invested heavily on Internet celebrities to attract more potential customers to its Taobao app this year. Influencers on social media and video platforms were invited to help drive sales in various categories.

Supported by live streaming, the French cosmetics brand L'Oreal's pre-order volume increased 700 percent over last year. Its 17-hour broadcast on the first day of pre-order on Tmall attracted nearly 1 million views.

According to Jiang Fan, President of Tmall and Taobao, live streaming and installment loans drove up their sales this year. "It's the first year that live streaming was adopted as a major promotional approach for half of the merchants," he said.

As Alibaba's financial report showed, Internet live streaming boosted transactions by 100 billion yuan ($14.27 billion) for its 2019 fiscal year.

As Jiang suggested, the new live-streaming approach allows sellers to interact with customers and reach more people in small cities, towns and rural areas as well.

A key driving force of this year's 11/11 robust sales was consumers in China's small cities and towns, where annual consumption value is expected to triple to $6.9 trillion in 2030, said Jennifer Ye from PricewaterhouseCoopers China, a multinational professional services network.

According to JD.com, about 40 percent of its new users were from its mobile app Jingxi during this year's 11/11 campaign, which helps promote products through connecting with the social media platform WeChat. Among its users, over 70 percent were from small cities and towns.

According to the National Bureau of Statistics, China's online retail sales rose 16.8 percent year on year to 7.32 trillion yuan ($1.04 trillion) in the first three quarters of the year. During that period, online retail sales in rural areas totaled 1.2 trillion yuan ($171 billion), up 19.7 percent year on year.

Improvements ahead

"E-commerce platforms can help improve the commercial infrastructure of small cities and towns, as well as boost consumption upgrade," Li Yongjian, a research fellow with the National Academy of Economic Strategy at the Chinese Academy of Social Sciences, told 21st Century Business Herald.

The burgeoning sales of the 11/11 festival show the potential of China's consumption market as e-commerce becomes a key driver of the retail sector. But behind the frenzy are problems such as substandard products and poor services.

E-commerce merchants need to further improve services to provide customers with a better experience for sustainable growth, Sang Baichuan, a professor at Beijing-based University of International Business and Economics, told Beijing Review.

Whether the festival can be developed into a sustainable engine also remains a question, according to Xu Hongcai, Deputy Director of the Economic Policy Commission, China Association of Policy Science. Frequent shopping festivals are losing consumer appeal, he said, adding that the dazzling sales figures do not necessarily translate into strong purchasing power since some people may turn to a frugal lifestyle after the shopping spree.

"The key to boosting consumption is still improving people's income," Sang said.

Copyedited by Rebeca Toledo

Comments to lixiaoyang@bjreview.com

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