Singles Day 2021: Slower growth, more sense

Deng Shuang, a Shanghai mother of a six-year-old, stayed up past midnight Nov. 10 just so she could snag an RMB 90 ($14.11) discount limited to customers who paid before 1:00 am on Nov. 11. But there were many fewer impulse buys for her on this Singles Day. “This year, I only buy stuff that’s useful,” she said.

Ding Zhe, a Shanghainese engineer, said he’s never been caught up in the Singles Day shopping frenzy. But he almost doubled his budget to RMB 1,800 this year. “My increased spending is not due to rising spending enthusiasm, but a result of real consumption demand,” he explained.

Singles Day is still a big deal, but people were less obsessed with the shopping event this year, at least as indicated by sales trends. Total sales still grew, but the growth rate was much slower, back to the tempered trajectory before the 2020 surge fueled by the pandemic.  

Also known as Double 11, the Singles Day holiday was started by college students as a cheeky meme to mock their singlehood. Alibaba turned the day into an online shopping festival in 2009. More than a decade later, it’s China’s largest shopping extravaganza and stretches over 11 days. Alibaba alone booked RMB 498.2 billion ($74.1 billion) gross merchandise value (GMV) during its Singles Day promotion last year, dwarfing Black Friday’s $9 billion GMV take in the US for the same year.

Skyrocketing sales were almost the only thing e-commerce platforms cared about for most of the history of Singles Day. But this year, they have more important matters at stake. 

Chinese e-commerce giants are seeking to prioritize broader and longer-term goals toward common prosperity and sustainability, themes that align with Beijing’s drive to reshape China’s economy. On top of that, retailers are also looking sideways for sustainable growth and profitability instead of winning top-line growth during the shopping season at all costs.

Alibaba’s chief marketing officer, Chris Tung, described the shift as a “coming-of-age moment” for the festival to take more “social responsibilities.”

All the changes point to a quieter 2021, but what’s more important is how the e-commerce titan will keep the retail ball rolling in the face of regulatory headwinds, fierce competition from rivals, and waning enthusiasm from retailers and buyers alike.

Alibaba’s slowest GMV growth ever

It was a lackluster year for Alibaba’s Singles Day event in terms of sales growth. The creator of the shopping event generated RMB 540.3 billion ($84.5 billion) in GMV during the 11-day promotion that started Nov. 1. That figure represents 8% growth from the RMB 498.2 billion GMV last year—a steep fall from the 26% year-on-year growth recorded in 2020. It is the first time in the past decade that Alibaba has recorded single-digit growth for Singles Day. Yet that figure wasn’t surprising, since it is basically consistent with the slower 13% year-on-year GMV growth rate for the financial year ended in March this year. 

Alibaba Vice President Yang Guang emphasized the “social responsibilities” of the festival in a Friday statement, calling this year’s festival a “meaningful milestone” as part of the company’s commitment towards building a sustainable future.

JD.com, however, reported a faster growth rate in Singles Day GMV than Alibaba. The online retailer recorded RMB 349.1 billion in GMV during the event, an increase of 28% on the company’s 2020 figure for the period, compared with 33% year-on-year growth in last year. 

As usual, Pinduoduo didn’t release any Singles Day sales figures. According to Douyin, livestream sessions on the platform attracted 39.5 billion viewers, and a total of 577 merchants achieved more than RMB 10 million GMV during its 16-day promotion from Oct. 27 to Nov. 11.

Nov. 11, the date which was the source of the festival, has become less important in generating sales ever since Alibaba, the largest player in the game, extended shopping windows last year.

China’s overall e-commerce sales across platforms for Nov. 11 dropped for the second year in a row to RMB 314.6 billion. That’s 6% down from RMB 332.87 billion recorded last year, according to data from China-based data services company Syntun.

Alibaba’s Tmall accounted for 57% of the total GMV on the day, followed by JD’s 27.6%, and Pinduoduo’s 6.4%, the report shows. 

Competing for fickle customers

Competition among platforms remains fierce and customer loyalty continues to decline. Over half of consumers surveyed by Bain & Company this year said they would buy from three or more platforms during Singles’ Day.

Tech companies encouraged spending with bigger discounts, quicker delivery, and more social services this year. 

• Alibaba buyers get a RMB 30 discount for every RMB 200 spent at all its stores, compared with RMB 40 discount for every RMB 300 spent last year. 
• Alibaba and JD kicked off this year’s Singles Day promotion at 8:00 pm Nov. 10, four hours earlier than the traditional launch time. 
• Alibaba introduced a shopping cart sharing function, which allows users to check what their friends are buying during the event, thus adding more social elements to the shoppertainment experience. 
• JD.com rolled out the on-demand “Nearby” channel, offering fast one-hour delivery services of high-quality products from nearby stores.
• This is the first Singles Day for JD to support payment with China central bank’s digital currency, which was released in December last year. More than 100,000 consumers made 240,000 purchases on the platform during the 11-day festival, says the company.

National goals in retail language

From hefty fines to stricter market guidelines, tech giants have learned some hard lessons in the past year as Beijing abandoned its laissez-faire attitude in favor of tightened regulation of the sprawling growth of Chinese tech companies. 

It’s no secret that Chinese tech firms are scrambling to heed Beijing’s call for broader goals like common prosperity and sustainable growth by committing hundreds of billions RMB to charitable efforts. 

In the wake of changes in macro environments, e-commerce titans, especially Alibaba, are bearing the brunt of regulator wrath. So it made sense that Alibaba would use Singles Day, its most efficient marketing tool, to translate Beijing’s policy changes into retail language relevant to the mass consumers.

READ MORE: Insights | Why Chinese tech giants are becoming very generous

Singles Day promotion priorities reflected every major regulatory push from the state:

• Promoting green lifestyles: During this Singles Day, Alibaba’s Tmall featured a dedicated vertical to showcase energy-efficient and low-impact products, as well as issuing RMB100 million worth of “green” vouchers to incentivize shopping decisions that contribute to an environmentally-friendly lifestyle.
• Reducing carbon emissions during delivery: Alibaba’s logistics arm Cainiao Network introduced package recycling to reduce the carbon footprint. Similarly, JD also pledged to reduce packaging wastes, adding that the 2021 Singles day promotion will be the largest ever where renewable energy is being used. Last year, President Xi Jinping announced that China aims to achieve carbon neutrality by 2060.
• Supporting vulnerable populations: Alibaba’s Taobao app introduced an option for “senior mode” for senior citizens, answering the state’s call to bring the elderly online. Alibaba will make a RMB 1 donation for every successful social media share of its “Goods for Good” program, which enables merchants to make donations to senior citizens or left-behind children in remote areas.

Although the state is promoting the common prosperity concept and tech giants are spreading the word, experts expect the impacts of the common prosperity initiative will be long term. There will be a “very limited effect” on consumption in the short term, according to Liu Jing, professor of accounting and finance and associate dean at Cheung Kong Graduate School of Business (CKGSB) in Beijing. 

“My guess is that it will only hit the luxury sector if the overall economy stalls or if the government actively tries to tamp down luxury consumption. The demand for luxury goods is a natural sign of economic prosperity,” he said.

The question of what can replace GMV as the most direct indicator of e-commerce festival success has become more acute. “There are no intuitive replacements,” said Michael Norris, head of research and strategy at Agency China. 

“If I were an e-commerce platform, I’d direct analysts’ attention towards growth in average user spend during e-commerce festivals,” he said.

Merchants look at user fidelity

Along with a shift in focus by e-commerce platforms, merchants and brands are also seeking a new definition of Singles Day success—one that’s centered around long-term growth rather than big figures for one event.

Despite extended promotions, the magic of Singles Day is “fading away,” according to Sharry Wu, EY Greater China’s consulting business transformation leader. 

“Mid-to-small ‘new retail brands’ are at a disadvantage in resource competition, and Chinese consumers are also contemplating purchase decisions during 11.11 due to the concern of mendacious price drops and product service quality,” she said.

Brands are less attracted by major platforms like Taobao Tmall and JD due to the intense battle in volume prices, according to Wu. To compete for sales, e-commerce platforms and retailers should learn about their customers through data,” she added.

In addition to GMV and monthly active users, James Yang, a Bain & Company partner in the Greater China retail practice, suggests brands judge themselves against benchmarks such as net promoter scores (an index measures the willingness of customers to recommend a company’s products or services to others), customer retention, operating profit, and customer lifetime value. 

“Retailers should think beyond just Singles Day to invest in winning during a broader spread of events across the year,” he said.

Consumer enthusiasm wanes

Consumers are losing their appetites with the proliferation of shopping festivals and abstruse discount methods. They will become more rational in spending, observed Echo Gong, an analyst with research agency Coresight. “More and more consumers will do their own research before placing the orders, and only buy big-ticket items at the biggest discounts.”

The China Consumers Association, a state-backed advocacy group, warned consumers on Nov. 4 of misleading prices during Double 11. 

Lower-tier cities are the main driver of new user growth, although consumers from higher-tier cities will still be the major shoppers. A report from Bain & Company expects more first-time Singles Day shoppers from lower-tier cities than from first and second-tier cities.

They may not be first-time online shoppers, however, given that platforms like Pingduoduo have reached many consumers in lower-tier cities. It’s therefore possible that shoppers from smaller cities will take part on Taobao’s platforms during such a big sales day, according to Zhang Gang, assistant professor of economics at CKGSB.

Conclusion: After more than a decade of development, e-commerce platforms and brands should understand that Singles Day is not their guaranteed sales booster.

Singles Day is good news for consumers looking to buy products at a lower price. But whether the event is sufficient to stimulate economic recovery hinges on how effectively new brands emerge to create new demand and how widely Singles Day penetrates across the country, according to CKGSB’s Zhang Gang.