Last updated: November 10, 2013 4:11 pm
Alibaba rivals redouble efforts on Single’s day
By Sarah Mishkin in Taipei
In China, November 11 – or 11.11 – is known as Single’s day, a new twist on Valentine’s day on which bachelors celebrate the single life. But rather than going online in pursuit of love, young Chinese consumers now search the web for what money can buy – turning Single’s day into a national day of online retail therapy.
With retailers joining in, by offering steep discounts on everything from infant formula to BMWs, this year’s event looks poised to be
the biggest day for online shopping, by value of goods sold, in the world.
Using Single’s day as an opportunity to click for bargains has been popularised in large part by Alibaba Group – the company that controls 80 per cent of China’s e-commerce market and last year sold more goods than eBay and Amazon combined.
On last year’s Single’s day, Alibaba’s websites alone sold more than $3bn worth of goods – or
more than twice the value sold on the US’s Cyber Monday following Thanksgiving.
This year, Alibaba’s general manager of logistics says she is preparing to handle more than 100m packages, up from 78m last year. Alibaba’s official blog says the company expects $4.9bn worth of sales will be made on Monday via its sites.
Single’s day underscores Alibaba’s scale. But, as the company gears up for
an initial public offering that would give it a market capitalisation of about $65bn, it also highlights the increasing competition and challenges it faces.
Online shopping in China still mostly consists of so-called consumer- to-consumer sales, that are akin to shopping on
eBay in its early days. This is a market that Alibaba dominates through its
Taobao site, which has a 90 per cent market share.
However, in the same way that e-commerce in the west shifted from sales between individuals to sales by companies – so-called business-to-consumer transactions – Chinese online retailers are also in the ascendancy, and competing with Alibaba on discounts.
Research by brokerage CLSA has found that four out of five Chinese consumers have increased the proportion of online purchases they made via b2c platforms over the past two years, suggesting a shift away from Taobao.
In the b2c market, Alibaba’s
Tmall site has a 50 per cent market share, but other marketplaces are emerging from its shadow.
360 Buy, also known as
Jingdong, is Tmall’s closest competitor, with a 20 per cent market share in China and plans for its own IPO soon.
Further competition is forecast, as e-commerce groups spend money to gain a bigger presence. Paul McKenzie, analyst with CLSA, notes that only Tmall and two of its competitors are profitable, suggesting that b2c companies – and the often deep-pocketed investors backing them – consider grabbing users and market share to be more important at this stage than generating profits.
Alibaba’s scale, and its PayPal-like
Alipay service, give it a natural advantage over some of these competitors. “It is hard to say no to Tmall, there are millions of shoppers there every day,” points out Tony Chen, head of GroupM Interaction, which advises foreign companies looking to sell online in China.
Long Wong, an industry cons ultant and a former director of supply chain management for Amazon China, estimates that as competition and losses take their toll, “you’ll have some smaller companies falling off the landscape”. For prospective investors in Alibaba, though, the question is how much market share it could lose in the meantime.
Another challenge for Alibaba – if trends in the US and Europe are an indicator – is online shoppers’ shift from desktop and laptops computers to smartphones and tablets. One-fifth of Chinese consumers now make purchases on their smartphones, and about half of all shoppers say they expect that to increase, according to CLSA’s research.
In this area,
Tencent – China’s biggest internet group with a market capitalisation of $100bn valuation, and already the third biggest e-commerce company in China – represents Alibaba’s biggest rival.
Like Alibaba, Tencent has its own payment network. But, more significantly, nearly all Chinese internet users are already signed up to either its QQ instant messenger service or its WeChat chat app, which has more than 200m monthly active users.
In the past few months, Tencent has started to add e-commerce and payment features to WeChat, enabling users to buy products directly through the app. “It’s really changing the behaviour of the industry,” says Joseph Tsang, digital business director for Grey Group in China.
Alibaba has responded by banning Taobao sellers from using WeChat to talk to buyers, and taking an 18 per cent stake in
Sina Weibo, a popular microblog, in order to use the social network to drive traffic to its own site.
For Single’s day, Alibaba has increased the amount of traffic its mobile platform can handle. But if it cannot handle it all, consumers have plenty of alternatives. Nearly all of Alibaba’s rivals have been offering rebates, free delivery, or discounts of up to 80 per cent – for several days leading up to 11.11. Single’s day, it seems, is already more of a plural.
Alibaba rivals redouble efforts on Single’s day - FT.com
, suggesting that this year’s sales will be a lot bigger than a year earlier, when the two sites generated $3.1 billion in 24 hours.
