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Beyond the Bargains: How China Singles Day Became Unstoppable

Retail Festival

Another year, another China Singles Day. After the clock struck midnight and November 11th got underway, the records fell fast – and frequently – with sales eventually reaching USD $25.3 billion. This represents a 39% rise over 2016, which was in turn 24.4% higher than 2015. The growth trend is as predictable as it is impressive.

What is driving this continued upwards growth? At this point, it’s fair to say that it’s more than bargains alone. It was around this time last year that I pondered whether 11.11 really had legs, as some scepticism emerged around the fact that deep discounts meant retailers moving a lot of stock, but at the expense of healthy margins. It was noted that higher than average return rates led to increased shipping and logistics costs too, further cutting into tight margins.

So can this year’s 39% YoY increase (measured as GMV – Gross Merchandise Volume) be attributed to even deeper discounts? It seems not – something that’s backed up by Alibaba themselves. They openly acknowledge that while sales are important, it’s consumer engagement that is driving growth.

While Western shopping holidays, such as Amazon Prime Day (and Black Friday and Cyber Monday in their traditional single-day forms), have tended to focus on discounts, Alibaba takes an entertainment-centric approach to its 11.11 festival (and it really has morphed into a festival of consumerism in the past few years) in order to engage with Chinese consumers. It is promoted for weeks in the lead-up to November 11th, with the ‘Festival’ kicking off on the evening of November 10 – this year featured celebrities such as Pharrell Williams, along with Alibaba Founder Jack Ma, who is justifiably Happy to be the center of attention, whether it’s starring in martial arts films or playing dress up (he notably donned Michael Jackson attire for another Alibaba event).

Beyond the obvious emphasis on entertainment, augmented-reality games, interactive trivia games via Tmall and Taobao apps draw in and engage shoppers. Maybelline rolled out technology that allowed virtual lipstick trials, and this is just the tip of the virtual fitting-room iceberg.

While Alibaba is rightly referred to as a Chinese eCommerce behemoth, the convergence between online and offline is another part of the China Singles Day story. It’s now much more than eCommerce – as this year featured dozens of pop-up stores with more than 100 participating brands. Although the number of stores might seem small in the context of the event, this is the sort of initiative that can be seen as a testbed for Alibaba’s global retails ambitions.

The blurring of lines between online and offline has a lot to do with mobile – a channel that is not defined by location, unlike traditional desktop eCommerce, which is linked to home or work. In 2017, Alibaba claims 90% of all China Singles Day transactions were conducted via mobile.

What does all this mean for retailers – or for technology providers serving retailers – outside of China? Well Alibaba’s Chief Executive Officer Daniel Zhang has said the company wants to make the event more global, and is planning to take its gala overseas soon, although no time frame has been given.

For their part, retailers do seem to be cognizant of the need deliver to highly-engaging customer experiences, and the role of payments in achieving this goal. The key finding of ACI’s 2017 Global Payments Insight Survey, conducted with Ovum, was that merchants increasingly view payments as a key driver of customer engagement. Payments have moved from being purely transactional to being an integrated and integral part of the customer experience. In fact, the 2017 benchmark survey found that 89% of merchants expect an enhanced customer experience when they invest in their payments capabilities, up from 65% in 2016.

So the question, is investment in payments in order to improve customer experience really worth it? Well, the proof seems to be in the 25-billion-dollar pudding.