Singles’ Day Underscores The Importance Of Mobile And Lower-Tier Cities For China’s E-Commerce Companies

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Major Chinese e-commerce companies like Alibaba, JD.com, and Xiaomi all achieved record-breaking sales yesterday during Singles’ Day.

That’s not too big of a surprise, considering the increasing importance of the event for Chinese consumers and businesses alike (for those of you still scratching your heads over what the big deal is, Singles’ Day was created in 1993 by a bunch of university students as an “anti-Valentine’s Day”, before gradually turning into an online sales frenzy similar to Cyber Monday in the U.S.). What’s especially interesting about this year’s Singles’ Day, however, is that it showed mobile transactions are indeed growing rapidly, to the relief of e-commerce companies, and underscores the importance of smaller cities for the growth prospects of Alibaba and its peers.

Beyond big-ticket items

Singles’ Day may be marketed as an excuse for people to treat themselves, but sales figures also show that shoppers are beginning to use it to stock up on basic goods for cheap. In addition to buying fun items like designer clothes and consumer electronics, Alibaba and JD.com consumers also snapped up loads of laundry detergent, lighting products, and even milk.

As Hans Tung, managing partner of GGV Capital (an early investor in Alibaba) told TechCrunch yesterday, “Chinese users now plan their shopping around this promo day. They have come to expect great deals. And are willing to wait for it to buy. So this sales record will likely be broken every year.”

Alibaba Group, China’s biggest e-commerce company by far, scored $9.3 billion in sales during the day, leaping over the $5.8 billion it made last year. To put that figure in context, sales for Cyber Monday, the United States’ own national day of online shopping profligacy, totaled a comparatively paltry $1.735 billion in 2013.

Mobile growth

Total gross merchandise volume (GMV) sold through Alibaba Group’s Chinese and international retail market places grew 60.3 percent over last year’s total of $58 billion. Significantly for Alibaba, GMV for transactions made over mobile devices represented 42.6 percent of sales, a good sign for the company because it has been seeking to expand its mobile business. This is important because just one year ago, more than 90 percent of transactions made on Taobao and Tmall, Alibaba Group’s two main consumer marketplaces, came from PCs.

The mobile app for Taobao marketplace is currently China’s most popular e-commerce app, but Alibaba’s mobile strategy isn’t just about making it easier to for consumers to buy stuff no matter where they are (people shopping online while stuck in long commutes or waiting in queues are a key source of traffic for many Chinese e-commerce companies).

It’s also an important step to building Alibaba’s larger mobile ecosystem as it competes with China’s two other top Internet companies: Tencent and Baidu. In June, Alibaba purchased UCWeb to oversee its browser, mobile search, location-based services, mobile gaming, app store, and mobile reader operations. The company also said during its earnings call last week that it hopes its mobile phone operating system, YunOS, will eventually compete with Android.

Alibaba expanded its sales this year to include international transactions, and says that consumers in over 217 countries and regions bought goods from its marketplaces, with most sales originating from Hong Kong, Russia, the U.S., Taiwan, and Australia. But the company did not disclose GMV for its international platforms, even though Ma said that Alibaba Group’s goal is to “prepare comprehensively for our globalization in the next three to five years. We hope that one day all small businesses and consumers around the world will be able to trade online.”

The company’s near-term expansion plans, however, will probably focus on tackling second- and third-tier Chinese cities instead of overseas markets. “We feel the Chinese economy doesn’t lack external demand but internal demand is much needed and we are fortunate enough to be able to tap this demand,” said Ma.

During its earnings release, Alibaba Group said that more buyers from small Chinese cities are starting to use Alibaba’s marketplaces every year. Though their purchases are smaller than ones placed by buyers from first-tier cities, like Shanghai and Beijing, Alibaba Group believes they will be an important growth driver.

Items sold by Alibaba included: 1.2 million large home appliances, 3 million lighting products, 200,000 bottles of laundry detergent, and 50,000 new cars.

For more analysis of Alibaba’s sales figures check out this post from TechCrunch’s Jon Russell.

Not just about Alibaba

Meanwhile, JD.com, Alibaba’s smaller but still formidable competitor, also set internal records on Singles’ Day (though, interestingly enough, it didn’t break out revenue figures). While the company extended its Singles’ Day event from November 1 to November 12, it reported that on November 11 alone its GMV more than doubled year-on-year, with more than 40 percent of transactions made on mobile (similar to Alibaba’s mobile transactions), or eight times more than last year’s event. In a press release, the company said that orders placed on Tencent’s WeChat messaging app and Mobile QQ microblogging platform helped drive mobile sales along with its own native app.

Other JD.com stats: over 14 million orders were placed on November 11, an increase of 120 percent from last year, while GMV more than doubled. In total, JD.com sold 35.19 million products (excluding virtual items) on Singles’ Day.

In order to deliver goods to smaller cities more quickly, JD.com has been building out its own logistics network. For example, it recently launched operations at 100,000 square meter warehouse in Shanghai that it claims “leverages the most advanced, highly-automated sorting technology in the world, with the capacity to sort up to 16,000 packages per hour with an accuracy of 99.99 percent.”

Even Amazon involved

Amazon China hasn’t broken out its sales figures for Singles’ Day, but the company was eager to get in on the action with several new initiatives this year. [UPDATE: The company said that sales of imported merchandise grew 70 percent from the previous month, while its sales volume has grown by nearly 63 percent, though it still did not break out specific data for Singles’ Day.] The trial launch of its Z.cn coincided with the event. Z.cn allows consumers in China to shop 80,000 products sourced through Amazon’s U.S. website.

In addition to offering the same prices as the U.S. site, so Chinese consumers don’t have to pay the premium often charged by third-party sellers for imported goods, the site also automatically estimates import tariffs during checkout. If its estimate is less than the actual amount, Amazon China credits the balance back to the user. On the other hand, it pays the extra if it undercalculates the rate.

Amazon India also tried to capitalize on Singles’ Day by offering discounts, but only through its mobile app in an attempt to increase downloads.

Though Amazon China has operated for a decade, it still holds just 2.7 percent of China’s total B2C retail e-commerce sales in 2013, according to Observer Intelligence (compared to Alibaba Tmall’s 50.1 percent chunk and JD.com’s 22.4 percent slice). But it remains eager to gain a foothold in China’s fast-growing e-commerce market and connecting Amazon China with its main site may help win over consumers in search of imported goods. Z.cn, however, will have to compete with Tmall, which already hosts shops operated by international brands like Apple, Gap, and Sony.

E-commerce marketplaces weren’t the only businesses that benefitted from Singles’ Day. Xiaomi set a new record for itself by selling 1.16 million phones, generating $254 million in revenue. For more info about Xiaomi’s Singles’ Day bonanza, check out Jon Russell’s post. LeTV, one of China’s top smart TV makers, disclosed that it achieved sales of more than $159 million RMB (about $26 million) on Alibaba’s Tmall, with 40 percent of those transactions made through Tmall’s mobile app.

Featured Image: Karl Baron/Flickr UNDER A CC BY 2.0 LICENSE (IMAGE HAS BEEN MODIFIED)