What US retailers can learn from Alibaba's record-setting Singles Day
China's annual marketplace sales event once again shattered sales and volume milestones. What does its success mean for retailers on this side of the Pacific?
Created in the 1990s by unattached university students who wanted an antidote to Valentine’s Day, China's Singles Day event was once all about about having dinner with friends and buying gifts that had little to do with romantic love. No longer. Thanks to the efforts of marketplace juggernaut Alibaba, whose founder Jack Ma saw fit to take full advantage of the event's grass-roots enthusiasm, Singles Day (so named for all the “ones” in the Nov. 11 date when it’s annually held) is now among the biggest shopping events in China, vacuuming up some $18 billion in sales this year, a whopping 32% increase over last year's already huge haul.
“Since officially adopting the cause in 2009, Alibaba has continued to grow awareness for Singles Day, a consumerist holiday meant for treating oneself,” Euromonitor International retail analyst Tim Barrett said in an email to Retail Dive. “Each year, the company encourages more Chinese shoppers to take part in this cultural phenomenon by continuing to innovate in the retail space and by catering to customer demand.”
Singles Day is all about e-commerce — physical stores in China don’t participate — and increasingly about mobile commerce in particular: Mobile gross merchandise volume settled through Ma’s Alipay unit accounted for 82% of the sales total, compared to 69% in 2015.
It could be now characterized as a global event too, considering that shoppers from 235 countries and regions completed cross-border Singles Day transactions this year, and 37% of total buyers purchased items from international brands or merchants, according to Alibaba data. Japan, the U.S., South Korea, Australia and Germany led all countries selling to Chinese shoppers on Singles Day: The top U.S. brands were Apple, Nike, New Balance Playboy and Skechers, while the top European brands were Siemens, Philips, Adidas, Jack Jones and Only.
In all, Singles Day 2016 raked in roughly seven times as many sales as Cyber Monday 2015, the most comparable U.S. holiday, according to Euromonitor International. Still, this is a China-based event, so how much value do such comparisons have? And what implications does Singles Day have for merchants in the U.S., or other parts of the globe?
Probably very few, says Keith Anderson, vice president of strategy and insight at e-commerce analytics firm Profitero.
For starters, Alibaba doesn’t appear to have much intention of entering the U.S. market in a major way, Anderson says. To the extent that Alibaba has made it increasingly easier for American retailers and brands to participate, many do jump in, and that trend will continue. But U.S. retailers already have existing sales holidays to contend with. Plus, there are many unfamiliar aspects of Singles Day — the marketplace, the pricing and the merchandising — that retailers must consider.
“A lot of these retailers are under pressure to grow in their home market,” Anderson told Retail Dive. “Time is the scarcest resource, so anytime that something is unfamiliar or has a steep learning curve, a retailer is not inclined to do it. From an American perspective, [Singles Day is] not particularly well understood or participated in. There are some — Costco, Target, Macy’s — that have sort of bought in to some of the cross-border activity, but most are oblivious."
But U.S. retailers still can learn practical lessons from Singles' Day's unprecedented success. Here are some takeaways.
Lesson 1: Retailers can create their own holidays
While many wonder how Singles Day might be replicated here, U.S. retail does already have Black Friday — the make-or-break sales event so named for its potential to finally get retailers out of the red as the calendar year hurtles to a close.
“Throughout retail history, there have been essentially fabricated holidays essential to driving traffic and driving sales,” Anderson said. “You could argue that Singles Day was inspired by Black Friday."
U.S. retailers must also grapple with the demands of fourth-quarter seasonality and Cyber Monday, not to mention that a slew of retailers have their own longstanding annual sales events. "And they’re already at their limits with those events... which are already diluted by the extended season," Anderson said, suggesting that retailers have likely carefully analyzed Singles Day and concluded it doesn't offer a huge opportunity on U.S. shores given the number of other sales holidays on the calendar, especially during this time of year.
Still, Singles Day is a reminder that reasons to hold a sale can be concocted essentially from thin air, Anderson says, and perhaps no U.S. retailer has better absorbed that lesson than Amazon. In fact, for at least some U.S. retailers, the focus of shiny object syndrome may not so much be Alibaba's November phenomenon, despite its colossal numbers, but rather Amazon's Prime Day midsummer sales event.
“Amazon uses Prime Day as another hook to get more members into [its $99 Prime annual membership service],” Anderson said. “Is there a way to either participate in it or counter it? As time goes on, somebody like Wal-Mart can’t afford not to have a response to this — the question then becomes 'What about everybody else?' If they know that Amazon is going to be promoting deals, how can other merchants piggyback on that buying window so that consumers don’t just stop at a single site.”
Lesson 2: Marketplaces matter
Amazon and Alibaba aren’t just e-commerce giants that host one-day sales events. They’re both also marketplaces, which allow many brands and merchants to participate as sellers. That establishes a virtual cycle for marketing and sales, says Adrien Nussenbaum, co-founder and U.S. CEO of online marketplace platform provider Mirakl.
"We have seen the success of 'holidays' like Singles Day in the past,” Nussenbaum told Retail Dive in an email. “This past July, Amazon’s Prime Day was a huge success in the U.S. What drives the success of these holidays is not only marketing, but the business model behind them. Amazon and Alibaba never pay for inventory or service; rather, they just collect a commission – it is an extremely profitable way to do business. Furthermore, third-party sellers bring exponentially more products and offers to the table, allowing Alibaba and Amazon to achieve an endless aisle and ensure that their platforms will capture as many sales as possible.”
In fact, Prime Day could be a sign that Amazon founder and CEO Jeff Bezos aims to take on Alibaba globally — at some point, or to some degree.
“The sheer volume of Singles Day transactions is staggering — I don’t think anything in the American market stands up to a Singles Day,” retail futurist Doug Stephens, author of the book “Reengineering Retail: The Future of Selling in a Post-Digital World,” out in March, told Retail Dive. “But Prime Day is gathering steam like crazy, and it’s looking like the next Prime Day could be bigger than Black Friday. As Amazon spreads out across the globe, there could be a head-on collision with Alibaba. Keep in mind that by 2020, Alibaba, Amazon and eBay — those three — will comprise 40% of all e-commerce globally. Amazon’s really made a concerted push to try to attract more top-tier brands and even making a try into luxury. It seems like Bezos doesn’t want to be [left behind]."
Lesson 3: Mobile and omnichannel matter, too
The fact that more than two thirds of Singles Day transactions took place on mobile is a clue to the future of e-commerce shopping, contends Euromonitor’s Barrett. For weeks, Alibaba promoted a variety of coupons and deals that shoppers could access by desktop or phone to apply at checkout on the sales day itself, making it clear that mobile is a priority for the retail giant, according to Barrett.
“Mobile devices are increasingly favored, with a reported 68% of total Singles Day sales originating from mobile devices,” Barrett said. “Alibaba also fully embraced an omnichannel strategy. With Alibaba distributing different deals across different devices, they have encouraged devoted savings seekers to keep separate shopping carts on their desktops and mobile phones. Alibaba is grooming a generation of mobile-first shoppers, a move which will pay off greatly when the entire world is addicted to their mobile devices.”
The opportunity for retailers on mobile is largely about loyalty, Barrett adds, a philosophy that was confirmed by Alibaba’s cadence with coupons on Singles Day.
“Loyalty is often an underrated component of mobile shopping,” he said. “With limited screen space and a number of users committing the majority of their time spent on these devices to just a handful of apps, it is important for retailers to be the number one shopping app and maintain that valuable real estate. Alibaba made sure to update deals every 10 minutes on mobile to maintain the valuable screen real estate, compared to only hourly updates on the desktop site.”
Lesson 4: Differentiation is still a difference-maker
Alibaba worked especially hard this year to build up Singles Day demand and anticipation, forging partnerships with brands months in advance, according to Betty Zhu, a senior manager at professional services firm PwC’s Shanghai office. The pent-up enthusiasm led to $1.4 billion in sales in less than seven minutes, reaching $5 billion within the first hour.
“For this year, the promotion for Singles Day started way before — in September and October, and there were different kinds of promotions,” Zhu told Retail Dive. “You could pay a deposit and buy things discounted on that day. Go to these websites, claim vouchers in advance, get a discount if you shop for 200 or more. When [Singles Day] started, it was so simple: Starting from 12:00 a.m. Nov. 11, some products would have discounts.”
And with so many consumer goods now part of the blockbuster event, many customers are simply postponing their regular shopping for a day when they can find things like their favorite shampoo steeply discounted and buy it in bulk, Zhu said. Those steep discounts, plus the fact that Alibaba’s accounting methods are viewed with some skepticism, leave some questioning the company's profit-taking ability on Singles Day.
Considering how much more fractured the retail market is in the U.S. (especially since so many traditional brick-and-mortar retailers are also players in e-commerce), that makes it hard to compare Singles Day to Black Friday, or Amazon (much less others) to Alibaba. “In China the dominant players are definitely fewer than the U.S. — there’s Tmall and JD — so there’s more of a reactive move in the Chinese market,” Profitero retail analyst Yan Deng told Retail Dive. “In the U.S., there are definitely a lot more retailers.”
That means that a department store like Nordstrom, which holds an annual sale of its own that's famous among its fans, is unlikely to create waves among its competitors. Moreover, Nordstrom doesn’t sell the commodity goods like paper towels or shampoo that make up much of Alibaba’s and Amazon’s revenue during their respective sale events, Deng says.
Deng notes that Target is one mass merchandise retailer building up loyalty and stickiness without pushing a blockbuster sales event. She points to Target’s Cartwheel mobile app, which features a slew of app-only coupons, and its REDcard payment card, which gives users free shipping on online orders and a 5% discount on all sales, as alternatives to such sales.
“Target is being a little bit selective, to the extent that those discounts are for customers enrolled in REDcard — like Prime, it has a lock-in effect — and their Cartwheel program,” Deng said. “They don’t necessarily want to be perceived as overly promotional. They’re trying to borrow some of the value orientation of a Wal-Mart or an Alibaba, without giving up the halo of ‘We’re curators.’ Within mainstream retail, [Target's] preferred event is the designer tie-up with an exclusive run in apparel or home goods. They’re not going to do an undifferentiated sales event. It’s not in Target’s blood.”
This story is part of our ongoing coverage of the 2016 holiday shopping season. You can browse our holiday page for more stories.
Follow Daphne Howland on Twitter