Extra Buzz #18: Single’s Day 2020 - Making the Biggest Even Bigger
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Since I’m working on a longer piece about Jack Ma, Ant Group, and Alibaba, I decided to make it easy on myself and pick Single’s Day for today’s issue. If you have friends in China ecommerce, you probably know that they have been working on 11/11 since the middle of the summer, as soon as 618 (the mid-year shopping festival that I wrote about for Issue #12) was over. As those 18-ish days amounted to a trillion RMB’s worth of GMV, $136Bn for those of you doing the math, you can only imagine the feverish excitement anticipating the eye-popping numbers that will surely come out of this November. Well, eye-popping or eye-rolling, depending on how you feel about the amount of sheer engineering -- business and technical -- that go into this spectacle.
Best,
Rui
PS Like last time, English-language links will not have any special indication but Chinese-language sources will have an asterisk (*) following the hyperlink.
Single’s Day 2020 - Making the Biggest Even Bigger
It’s been 12 years since the invention of Single’s Day in 2009 by Alibaba’s now-CEO to promote the then-fledgeling Tmall. Since then, it’s transformed from one company’s tentative gimmick to an industry-wide phenomenon, reported the world over as a key indicator of the health of the Chinese economy. Well, the consumer retail ecommerce economy anyway. And this year, in the wake of the coronavirus pandemic, Single’s Day is shaping up to be even more anticipated and significant than in the past.
With last year’s record at an already incredible $38.4Bn, the question was not just how to top it, but to do so with a jump that will do justice to the global attention it now commands. And domestically, a great number might almost become a sort of self-fulfilling prophecy. Due to the coronavirus, a lot of exporters who have lost their overseas orders have been steadily re-orienting their businesses towards the domestic market. Everyone is looking to Single’s Day to see whether or not the much talked-about but yet-to-fully-appear domestic demand that is the cornerstone of the current administration’s economic policies will finally materialize. A staggering 800 million consumers* are expected to participate in the festivities, 300 million more than last year. If things look good, it may encourage businesses to invest even more quickly in growing their local efforts, further greasing the wheel of domestic demand.
Single’s Day is Getting Doubled
First, the company leading the charge, Alibaba, is lengthening the “holiday.” As we’ve covered on Tech Buzz before, all shopping festivals in China play the game of multi-day pre-sales that are typically finalized (and thus officially booked) on a single day, for the sake of bigger headline numbers in the form of GMV. These astronomical amounts result in more publicity, more consumer and merchant FOMO, and of course, as is often the case, higher stock prices despite the companies’ repeated utterances that “GMV is misleading and unimportant.” (You can re-listen to our Episode 29 on why the metric is so loosely defined as to be somewhat meaningless. OK, not completely, but definitely problematic.)
The easiest way to ensure that healthy 20%+ growth investors, media, and frankly, consumers and merchants too, have come to expect, without resorting to further fudging of the definition of GMV, anyway, is well … simply to “double the holiday.” That is, instead of the usual pre-sales for the first ten days of November ending in the main event on the 11th, Alibaba just copy-pasted the same playbook for the last ten days of October. Thus, Single’s Day promotions would officially begin on Wednesday, October 21, and orders placed in the first ten days would be finalized and shipped beginning November 1, meaning that you could receive your hard-earned bargains a full ten days earlier than in previous years. After November 3, merchants would engage in pre-sales round 2, until the 11th arrives, when the second batch of wallet-emptying orders would be charged in full and fulfilled. It's wonderful isn’t it, that consumers and merchants can both breathe more easily now knowing that they have much more time to contribute to Alibaba’s P&L. (Well, not just Alibaba, since of course everyone else jumped on the bandwagon as well, JD, Pinduoduo, VIPShop, et al.)
"This year's Tmall Double 11 is 3 Days Longer."
But actually, I wasn’t being totally sarcastic when it came to “breathing easily.” Per Alibaba, 90% of the merchants* it surveyed were supportive of a longer, more relaxed Single’s Day. The logistical chaos that follows the event every year garners its own set of headlines, and it makes sense that a more spread-out spike in demand would be welcomed by most sellers, especially those with less resources to ensure a seamless delivery and after-sales experience. Consumers, too, have long complained of having to sit at their computer during ungodly hours for a chance at the best limited deals. The pre-sales have alleviated that somewhat, but some of the steepest promotions were always reserved for the moments immediately following The Countdown Gala ends on November 10th. Maybe physically dividing the holiday into two will halve the FOMO as well. But it’s a fine balance, because Alibaba certainly wouldn’t want you to lose too much of that hot-headed adrenaline rush, which it will be stoking nightly via …
Livestreaming, Livestreaming, Livestreaming!
I almost feel silly writing about this, because livestreaming ecommerce is the single most obvious truth of China tech this year (the last few really, if I’m being honest), and it seems redundant to say that it will dominate Single’s Day activities. The only question is how big a piece of GMV it will contribute. And given that Alibaba corporate PR has specifically called out livestreaming as “core to the event,” I imagine it will be a substantial majority. Earlier this year, estimates for China’s livestreaming ecommerce GMV had already been over $130Bn (and double that of last year), but momentum seems to be stronger than that, even. Here’s my tweet regarding June GMV numbers for the top livestreamers:
Rui Ma 马睿
@ruima
Top e-commerce livestreamers in China for June 2020 by GMV:
Viya $400mm
Simba $280mm
Austin Li $210mm
Viya and Austin are on Taobao Live, Simba on Kuaishou. Each platform has 5 in top 10.
#7 & 10 are new entrants. They’re actually actresses Kitty Yuqi Zhang & Tamia Tao Liu. https://t.co/YQ3qrSzZbB
7:32 AM - 16 Sep 2020
Recall that in 2018, #1 streamer Viya (specialty: household goods, consumer electronics and apparel) was doing just $380mm for the entire year, which was already an astronomical sum given that it was on par with some of the largest shopping malls in China (see this tweet). But just 18 months later, accelerated by the pandemic, we are looking at more than a ten-fold increase. It’s nothing short of astonishing. Of course, these are GMV numbers, which I’ve already reiterated are not only flexibly defined, with plenty of give, but almost certainly “brushed” to some degree (read: faked, even though such faking is technically illegal by a law passed in 2019). But assuming they are not a Luckin-level disaster, the directional lift is telling.
So let us take a moment to be wow’ed by the preliminary numbers that have been put forth by the top streamers. Now, the below is still unsubstantiated, but the first reports have come in showing that just the top two streamers alone (Viya and Austin) pulled in over $1.1Bn of pre-sales on the very first night with a combined viewership of over 300 million. (Granted, both of them streamed marathon sessions of over seven hours* and sold well over 100 products each.) Again, while I am skeptical there isn’t some amount of “brushing” involved, a combined effort in the hundreds of millions is not completely out of the question.
First off, the goods being sold have an average sticker price of $50 to $80. This is easy to verify. It’s also expected and has been the case for the past year. These streamers are such household names by this point that they are exclusively working with big brands, including top foreign names. The categories they shine in -- cosmetics and electronics -- are not particularly low ticket items and so each order is easily in the hundreds of RMB.
Secondly, the deals they are offering are indeed “irresistible.” Getting the “best deals” for their fans has become the rallying cry of many a livestreamer, and with the audiences that these two can command, they are often able to negotiate better promotions than the brands offer on their own Tmall stores. (The only exception being subsidized goods* on platforms such as Pinduoduo, but also further validating that barring those special circumstances, they really are the rock-bottom price giver, somewhat opposite of their glamorous air.) The con is that they are also almost certainly cannibalizing from the brands’ own sales channels. The pro is that the FOMO being in the same virtual room as millions of other rabid consumers is often cited as a top 3 reason* for making a purchase. And so that’s how a certain make-up brand ended up with nearly a record-breaking near-$100mm in pre-orders for a single product last night with Viya as salesgirl. Add to this the fact that Alibaba has been heavily pushing all of its business customers towards livestreaming for the last few years as well as the current newsworthiness of this space, and you have the incentives for the brands to undercut their own storefronts for a chance at making both the Tmall front page and media headlines. In fact, that’s how a lot of these campaigns are advertised, and any streamer found to be not offering the best (or at least equivalent) deal on the internet are often torched with criticism. The promotional nature of livestreaming, by the way, is often cited as a key weakness; it has led many analysts to complain of it as “just another way of conducting flash sales.” That is, it does not sustainably build true brand loyalty nor drive return purchases. The verdict is still out as to whether or not loyalty to the livestreamers themselves translates into loyalty for the merchandise they hawk.
The $200+ skincare set that Viya pre-sold over 420K units of to get to nearly $100mm on a single SKU.
But if there is some percentage of “traditional e-commerce” that will be subsumed by livestreaming, then aside from a longer sales period, is there anything else that will add to GMV? Why yes, actually … because ...
Everyone is Selling, Truly Everyone You Can Think Of
Again, with the pandemic as an accelerant, every industry has become more open to ecommerce, and if you’re even somewhat serious about ecommerce, you can’t sit out Single’s Day. The auto industry, with its mature distribution channels, would only participate in a small way in years past. No more, no more. It’s learned from its near-death experience in the first half of this year when sales ground to a standstill, and is not taking any chances on its tentative revival. The real estate industry is jumping in head first, with over 3,000 apartment complexes selling online, covering 200 cities. That’s a result of Alibaba and JD’s continued efforts in real estate though. Long in the works, I imagine the momentum has nonetheless been strengthened by KE Holding’s recent successful IPO, which we’ve covered on Tech Buzz. In case you missed that one, it is all about the story of real estate being currently the second largest online transaction platform in China … again by GMV, a spot Alibaba and others will not concede so easily of course.
It is not just whole new industries jumping into the fray however, but also brand new sellers. Again, the pandemic has decimated the export industry, many of whom have nowhere to go but to embrace domestic customers. 300,000 hard-hit factories* will be joining Single’s Day for the first time this year. Some of them have been ramping up efforts for the past few months though, so it will not be their virgin livestream and customers will be spared guinea pig status. On Douyin, I’ve been bombarded for months with ads and livestreams for small workshops selling textiles pleading the viewer to buy cancelled orders from them at greatly reduced prices. That’s in addition to the many manufacturers who have already adapted to the C2M (consumer-to-manufacturer) craze that’s swept through Chinese e-commerce and popularized by Pinduoduo. (Note: we have an episode in the works on that coming out shortly!)
While traditionally the more “offline-oriented” shopping festival in the past has been Double 12 (Dec. 12), that is less clear this year, with Alipay jumping into the fray and discounts available on all manners of offline lifestyle purchases -- food, travel, entertainment, etc. Food delivery subsidiary ele.me, which has been losing ground to Meituan, is also kicking further subsidies into high gear. None of this is surprising in the least, of course. Even without the pandemic and the ongoing, accelerating digitization of Chinese retail transactions in general, the upcoming Ant Group IPO (November 5*, per the Hong Kong Economic Journal) would have ensured offline digital payments an even more prominent position than usual in the festivities.
Lastly, this would not be a note on Chinese ecommerce if I were not to point out the personal involvement of executives in these sales. I don’t know if Chinese business culture is better at making celebrities out of its founders than the West, but for the last year, a steady stream of ever more prominent businessmen and women have been hawking their goods on livestreams. Xiaomi’s Lei Jun, GREE’s Dong Mingzhu, NetEase’s William Ding being just a few you might recognize. This Single’s Day, more than 400 executives (along with 300 celebrities, not livestreamers, but proper celebrities) will be livestreaming. I've written about that more than once so I won’t belabor the point, but it’s still a thing to marvel at -- just how acceptable livestreaming has become, for the very poor and the very, very rich.
I’m not a shopaholic, and frenzied consumption has always made me a bit uncomfortable, so I personally look at Single’s Day with a good amount of side eye. But after experiencing the extremely lackluster Amazon Prime Day (Walmart’s concurrent Big Save event was better, IMO), I realized that maybe there is some truth to the phrase “revenge consumption” that Chinese media has been playing up for the past few months, at least for me personally, going on seven months of some variation of shelter-in-place. It’s just that the deals are probably not happening until next month, going by American timelines. Oh well, until then, I suggest you open up your Alipay account if you have one -- you might be surprised to see a coupon or two, given Alibaba’s massive push to make Single’s Day a global shopping event. (In fact, that is its official name, the 11.11 Global Shopping Festival.) I have a few coupons for the local drugstore, CVS, just in time for Halloween candy. What about you?
PS Are you ready for the Ant Group IPO? Do check out our (very well-received! thank you!) episode on the company here. And subscribe to our YouTube Channel!
Tech Buzz China Ep. 74: Ant Group: The Biggest IPO … Ever?