Rapaport Magazine


Ecommerce Extravaganza

By Julius Zheng
Online retailers set a dazzling new record for internet sales in a single 24-hour period with a recent promotion that confirmed
the appeal of limited-time discounts of as much as 50 percent, the effectiveness of aggressive marketing and the reach of ecommerce. 

   The one-day sales event was held on November 11, something of
an unofficial Chinese holiday that is celebrated as Singles Day or
Bare Stick Day — Chinese slang for bachelor — because of the four
1 numbers in the eleventh day of the eleventh month. In recent years, online retailers have spent considerable effort positioning the holiday, especially among young consumers, as a day to give gifts and to shop.

Breaking Records
   Alibaba Group, operator of the country’s biggest ecommerce platforms, Taobao.com and Tmall.com, achieved the world record for online sales volume in a single day with $3.04 billion transacted on November 11 through its two websites, three times more than on the same day in 2011. Some etailers who operate online shops on the two websites spent two months in preparation for the day, and were rewarded with
single-day sales that equaled their sales totals for several off-season months.
   To put those numbers in perspective, according to Alibaba, slightly more than $1 billion in sales were closed by 5,000 Shanghai outlets of 395 companies during the seven-day National Day holiday in October 2012, and the same amount of sales was achieved by Alibaba within half a day on November 11. Commenting on the day’s success, Ma Yun, board chairman of Alibaba Group, predicted that “Ecommerce will not only be complementary to traditional retail, but it will become the mainstream in China.”
   Clothes, handbags, fashion accessories and electronic products were among the best sellers, but jewelers got in on the action by offering commercial-quality goods at generous discounts.
   Not surprisingly, the day’s activity also placed extreme pressure on the online banking and payment system. Other ecommerce companies, including 360buy.com, suning.com and dangdang.com, launched comparable events around Singles Day. Promotions also were created by Chinese retailers around Thanksgiving this year, which, like Singles Day, is not an official holiday in China.

Assessing the Impact
   The Singles Day sales totals have resulted in heated discussion on the pros and cons of such an event and its potentially negative impact on traditional retail sales. The argument is that the huge discounts might change consumer behavior, leading the public to buy only on discount days and concentrating purchasing power in brief periods of time. There is little doubt that such promotions intensify the price war between traditional retailers and etailers, and also among etailers themselves.
   According to China Internet Network Information Center (CNNIC), China has the largest number of netizens — 538 million in June 2012, accounting for 39.3 percent of the population. “The rate is 70 percent in Western countries, which indicates China’s large potential for online purchasing,” said Jing Linbo, researcher of Chinese Academy of
Social Sciences. China’s State Council said in July that 9 percent of all Chinese
retail will be done online by the end of 2015. The number was only 5 percent at the end of 2011.

Blueprint For The Future
   The 18th National Congress of the Communist Party of China (CPC), held from November 8 through 14, is comparable in importance to the presidential elections in the U.S. Xi Jinping was elected as general secretary of the Central Committee of the CPC, leading the newly elected seven-seat Politburo Standing Committee. The election marked the first top leadership transition in China since the party’s national congresses in 2002.
   The new congress also drew a blueprint for the next five years and beyond, with the emphasis on building an all-around prosperous society and doubling the 2010 gross domestic product (GDP) and per capita income for both urban and rural residents by 2020. As the world’s second-largest economy with the world’s largest population, China ranked 77th out of 213 economies in 2011 with its per capita gross national income of $4,940, according to World Bank data. That falls far short of the global average of $9,491, signaling both the huge task ahead and the great potential for growth.
   Amid the global economic uncertainties, the new Chinese leadership is faced with challenges to increase productivity, develop the domestic economy and improve the standard of living for all people, while trying to become more energy-efficient and environmentally friendly. The country already may have a good start on its growth goals. A recent report by the Organization for Economic Co-operation and Development forecasted that China’s GDP might surpass the euro zone’s in 2012 and might become the world’s largest economy as early as 2016. For the diamond and jewelry trade members, a stable and growing economy and an overall increase in consumers’ income would clearly be a blessing to their businesses.

Article from the Rapaport Magazine - December 2012. To subscribe click here.

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