Jan 11, 2016 marks the third Annual National Singles Day in the United States of America. The organisers claim that they’ve got a two-fold goal for their event: to recognise and appreciate the 107 million U.S. taxpayers (45% of the U.S. residents) and to spur an annual shopping event in the first month of each new year, benefiting businesses and consumers alike. The question is, will the event ever match the scale of the original event from China? We explore the topic.
You’ve probably heard of Singles Day in China. What started out in the 90s as a University tradition where single boys celebrated their singlehood, spread quickly through the internet into a phenomenon familiar for all young adults in the country, all to be eventually hijacked by e-commerce site Alibaba into a online shopping fiesta – a day of deep discounts across the board. After a humble but successful inaugural sale in 2009, with a mere 27 brands offering goods at discounted rates, Singles Day quickly exploded in China with other platforms such as JD offering sales as well, and many more online brands and retailers coming aboard. In 2015 the event outdid expectations and broke all records, with Alibaba alone raking up USD 14.3 Bn in gross merchandise value (GMV) in one day, with other platforms surely raising similarly mind-boggling amounts. To give some idea of the scope of the numbers, after the first 90 minutes, Alibaba’s sales alone had outperformed the combined spending of all Americans online over Black Friday and Cyber Monday combined.
Celebrate singles, a significant and growing proportion of the demographic, as people delay marriage? Great idea. Motivate people to spend an insane amount of money, boosting businesses? Downright fantastic idea. And like all good ideas, this idea was copied – although interestingly enough this time it’s the USA doing something that China has piloted – an interesting turn of events. November 11, the date of the Chinese event is out, as Veterans Day falls on that day in the U.S. As such, January 11 was chosen, with the “1”s in the date representing single-hood.
The question is: Will Singles Day in the USA ever match up to the shopping fiesta that is Singles Day in China? We think not, and here’s 6 reasons why:
1. China has a larger market.
There’s no getting away from this one – China is a larger market. With a population of 1.35 billion, there’s simply more people in China than there are in the USA (0.32 billion).
China beats USA hands-down when it comes to number of people online – China at 642 M is easily double USA’s 280 M.
Still, larger numbers would mean nothing without the ability to pay – which as it turns out is not a huge problem any more…
2. Chinese citizens are enjoying a rising affluence.
Sure, in absolute values, the average citizen of China is poorer than the average citizen from the USA. The average yearly disposable income in China of USD 4,393 is ten times less than USA’s USD 42,274.
However, the difference is that China’s citizens are getting richer more quickly. While economic growth in the first 9 months of 2015 slowed down to 6.9%, disposable income continued to rise by 7.7%. In comparison, the USA’s economy grew by 2% over the same period while disposable income only rose by 1.6%. Chinese citizens feel themselves getting richer at a faster rate than their economy, whereas their counterparts in the U.S. feel themselves falling behind. This makes the Chinese more willing to spend, while Americans might be tightening their purse strings.
3. Chinese consumers may have been “trained” to wait for the deep discounts offered during Singles Day.
Even amid an economic slowdown, a day of steep discounts might be the perfect spending trigger for any pent-up demand, Daiwa Capital Markets analyst John Choi told the Wall Street Journal. “It’s a day of discounts, so people, regardless of the economic slowdown, will want to go out and look for bargains,” he said.
Alibaba put in a lot of effort to offer their customers steep discounts. It forced merchants to offer at least 50% off if they wanted to participate, while at the same time the government made it illegal to raise prices before the event. Given the magnitude of the discounts offered to consumers during this event, what we may be observing is Chinese consumers delaying their purchases in anticipation for Singles Day, when they know they can get good deals. Singles Day in the U.S. lacks the same deep discounts, making it unlikely that consumers are going to go all out with their spending.
4. Chinese consumers are more wary of traditional retailers …
Compared to the U.S., traditional retailers in China are a lot more corrupt opaque. Kai-Fu Lee, a Chinese Venture Capitalist, told Wired Magazine that “in the U.S., hundreds of years of fair competition made commerce relatively fair and transparent”. In comparison, traditional business in China is riddled with deception and showmanship.
E-Commerce removes the middle man and introduces publicly available feedback from buyers, which helps consumers make more informed decisions and improves transparency. This makes it an attractive option for the Chinese consumer. Also, it helps that in many parts of China e-commerce malls have been around longer than their brick-and-mortar counterparts …
5. … but Chinese consumers are more accepting of e-commerce retailers.
China’s a huge country, which has only relatively recently been modernised. In many rural areas, there are no shopping malls and e-commerce malls are the places people turn to when they want access to brands. In contrast, the American consumer has easy access to physical stores in malls which have developed years before e-commerce was invented.
Not only are the Chinese e-commerce shops more reputable then their physical counterparts – in much of rural China they represent the consumers’ only means of access to branded goods.
6. On top of all this, Chinese e-commerce retailers are holding back no efforts to increase adoption.
Over 2015, Alibaba has been actively developing e-commerce in China’s countryside with the help of tens of thousands of “cuntao partners”. These are people who help villagers shop and sell goods online.
These efforts further increase the number of e-commerce shoppers. “Cuntao partners” can reach out to the elderly population and bring them onto the e-commerce grid. They are likely to be wildly successful, considering the lack of trust for traditional retailers (point 4) and the lack of access to brand names in rural areas (point 5).
To answer the question we started out with: No, we don’t think there is any way Singles Day in the USA will ever match up to its counterpart in China. The U.S. loses out by numbers, and there are some unique factors which make the Chinese consumer more predisposed to e-commerce.
This is a little sad, because of the two countries, America is a lot better equipped to handle the logistics operations rush that comes with an e-commerce extravaganza like Singles Day. The images below show the drastic contrast between logistics management in America and China. These images are not cherry-picked for effect – there is no shortage of examples of the chaos that permeates the logistics network in China after Singles Day.
On the other hand, this contrast highlights the importance of improving the capabilities of logistics providers in China. This marks a huge opportunity for improving the system. Cainiao Logistics, the logistics arm of the Alibaba Group, claims that it deployed over 1.7 million delivery personnel, 400 thousand vehicles, 5,000 warehouses and 200 airplanes to fulfil the delivery rush.
Cainiao Logistics is also relying on a slew of technological systems to improve their logistics operations during this peak period. They claim to have introduced an e-Waybill system, which introduces visibility into the supply chain by letting al players see the orders in the system. They also claim to have introduced warehouse management systems, including digitized parcel sorting solutions, to help with the tracking of inventory in warehouses. They also claim be using forecasting applications to help delivery firms anticipate demand.
In addition to these technologies, firms could consider using transport management systems to plan and manage deliveries, and route optimisation engines, to improve the delivery routes and maximise usage of existing fleets. Enterprising logistics players need to utilise these technologies to improve the state of logistics operations in China and make them world class.
As a quote attributed to Einstein advises: “In the middle of difficulty lies opportunity.” Logistics operations in China has a long way to go – perhaps your company will be the one to turn things around?
At VersaFleet, it’s our mission to make logistics operations simple for logistics operators. We offer a SaaS Transport Management System for logistics operators, making technology that was previously the domain of big logistics companies like DHL and UPS available to everyone. Our platform helps you to plan your jobs, optimise routes, despatch drivers, include electronic point-of-delivery capabilities into your delivery services and much more. Check out our website to find out more, or request a free demo using the form below.
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