The World’s Biggest Shopping Holiday Is In China, Not The US

0
617

 Here’s how Singles Day became No. 1

  • Both Alibaba and Amazon achieved impressive growth and historic highs in their annual shopping events this year.
  • Yet at the same time, iconic American brands are filing for bankruptcy and closing down stores.
  • Analysts note that that there is nothing wrong with the American retail landscape, but tax and debt levels distinguish the winners from the losers.

Making a billion dollars in sales in the first 90 seconds of a 24-hour shopping event sounds like a dream come true for many retailers — and Chinese tech giant Alibaba managed to do just that.

At this year’s edition of Singles Day on November 11, the company made US$ 30.8 billion worth of sales across the e-commerce giant’s various platforms in 24 hours. In Chinese currency terms, the gross merchandise value was a 27% jump from last year. While significant, that growth was smaller than the 39% year-on-year rise recorded in 2017.

US e-commerce titan Amazon also saw its sales surge to historic highs this year, recording US$ 7.9 billion of online sales on Cyber Monday, according to research firm Adobe Analytics. That marked a 19.3% increase from e-commerce sales a year ago.

In addition, the company pulled in a record US$ 6.22 billion in online sales on Black Friday, a 23.6% increase from a year ago. The success of the two tech titans in e-commerce seems antithetical to the wave of retailers filing for bankruptcy or closing down stores in the US, such as iconic American retailer Sears and household name Toys R Us.

Winners and losers in US retail
There’s nothing wrong with the retail landscape in the US, analysts say. “Retail is doing just fine,” said Michael Klein, Adobe’s director of industry strategy for retail. “What we’re seeing is an increasing difference between the winning and losing retailers,” he said, noting that the retailers which focus only on product and pricing will perish.

Also Read  UK To Regulate Online Marketplaces For Unsafe Toys

“The American consumer has never been healthier,” said Jan Rogers Kniffen, chief executive of New York-based J Rogers Kniffen Worldwide, citing record low unemployment, rising wages and historically strong consumer confidence. But Kniffen, a longtime department store veteran, explained that retail store closures were a result of several factors.

Traditional brick-and-mortar businesses have been fighting for “the anemic growth” in physical store sales, but retailers that have invested heavily in online and in-store sales have seen much better sales, he said. He singled out companies like Walmart and Target, where online sales have accelerated at about 40% annually recently. He also noted that there were two big differences between US retailers which have gone broke and those which have won growing market share: taxes and debt.

Companies enjoyed a tax reduction after corporate taxes were cut from 35% to 21% – but Kniffen highlighted that only companies which were profitable were able to use this tax saving to invest in their businesses. Those which were not profitable “saw no benefit from the tax cut.”

Those that went broke, he added, “were carrying high levels of debt and could not afford to reinvest enough back into their businesses to be winners either online or in-store.”

Also Read  Knowledge, Excellence, Network Is Ken's Secret Of Success

Why Singles Day beat Black Friday and Cyber Monday
In terms of online sales, China’s Singles Day is much larger than Black Friday and Cyber Monday combined. That isn’t too surprising considering that China’s population is about four times larger than that of the United States. However, analysts have also credited some of that success to strategies employed by Chinese retailers.

Chinese companies like Alibaba will be leading the way in showing how brands can “actually retail through experiences, not prices,” said retail analyst Tiffany Lung of Hong Kong-based research and tech firm Tofugear.

“America runs on such a price-driven concept in retail, which is what ultimately upholds the whole concept of Black Friday sales,” she said. In contrast, “China celebrates Singles Day with a fun and social experience through games and entertainment,” Lung added.

Jonathan Cheng, principal at consulting firm Bain and Company, noted that China’s permissive data regulation environment allows tech giants like Alibaba and Tencent to be with the customer throughout the retail process, including social media, payment and other financial services.

“For brands in China, there isn’t an option to not participate in Singles Day,” he said, explaining the relatively-higher proposition of Singles Day in terms of brand participation and promotion intensity to consumers in China compared to Cyber Monday.

But American and Chinese consumers are not so different, said Kniffen. China has a lot less retail space per person compared to the US — about a “tenth of what it is in the United States,” according to Kniffen.

Also Read  Clothes Retailer OVS To Run All 11 Gap Stores In Italy

“The United States has more retail square footage per capita than the next most retailed country in the world by a factor of two times,” he pointed out.

Chinese consumers were able to skip the in-store and credit card phase which most American consumers are still in, Kniffen said. Most people in China buy things on their phones, he noted, while about 87% of US sales are done in-store with a credit card or with cash. Lung noted that even Americans were increasingly spending on Alibaba’s Singles Day, with shoppers in the US bringing in some US$ 1.82 billion this year.

“US retailers will eventually be taking a page out of Jack Ma’s book and learn how to retail through experiences, not prices,” Lung said. “I would predict that Singles Day festival will eventually go global at a mass scale, as Black Friday ties in with America’s Thanksgiving traditions and cannibalises retailers’ holiday sales.”

Adobe’s Klein, however, noted that there were bigger factors than just Chinese retailers being more progressive and aggressive. “Singles Day is a phenomenon around a one-day event, whereas Cyber Monday is one day during an event that spans two months,” he said.

LEAVE A REPLY

Please enter your comment!
Please enter your name here