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2017 Single’s Day: Online shopping frenzy poses new challenges to global retailers

Competition in the China e-commerce market escalate. With rising cost of acquisition and changing market situation, how should retailers deal with the biggest online shopping festival in the world?

by AzoyaLab

In a few days, the Single’s Day online shopping festival will kick off in China. With record sales of 180 billion RMB in 2016, this year’s Singles Day has driven retailers both online and offline, domestic and overseas, to participate in the national discount frenzy. Started in 2011, the Single’s Day is no longer a privilege of retailers working with Alibaba marketplaces – with countless e-commerce businesses participating, the influence of this sales event is now even close to the Spring Festival.

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Single's Day online shopping festival is a stress-test for logistics companies in China every year. This year, logistics companies in China uplifted charges before the Single's Day to deal with rising labor costs.

Discounting is a double-edged sword

Shopping for discounted products are the main motivation for Chinese consumers to participate the Single’s Day. During the event promotion, retailers often provide unusually heavy discount to attract more customers and to boost sales. With a large number of consumers shop online during the Single’s Day shopping festival, effective exposure in the market could significantly improve brand awareness. And if retailers don’t participate in the Singles Day shopping festival, not only will they lose the sales, but also customers attention during the holiday sales seasons, and the year to come.

Making discount can easily attract customers, but if retailers can’t price the products right, it may also go against retailers’ will. Frequent and overly-heavy discount could potentially harm a brand’s image and value as perceived by customers; while slight price cut could sometimes be rephrased as lack of sincerity.

An interesting phenomenon is that, retailers in China would even sacrifice margin for maximum marketing effects during the Single’s Day. German retailer Metro told media that they were unprofitable for the past 2 Single’s Day events even after successful campaigns to deplete over 2.2 million liters of imported milk. They highlighted the biggest challenge for 2017’s Single’s day is the profitability.

Competition for customers stepped up acquisition costs

Attracting customers during the Single’s Day shopping festival can be very complex. Retailers are no longer just aiming for customer attention during the 24 hour, but a longer time span starting from mid-October.

Heavy competition for the traffic acquisition has also stepped up advertisement cost. Criteo statsitics indicates that CPM (cost per one thousand impression) will rise 10 days before November 11th, and will peak at 230% compared to daily average. Sales representative from Focus Media also informed us that the elevator ad placement in Shenzhen during the festival week was over-booked as early as September – 2 months before the Single’s Day. Rising costs of marketing during Single’s Day has made it a game only for big sellers.

The two largest marketplaces in China are competing for the customers long before the event. This October, JD announced a coalition with Tencent, who has over 900 million users combined in QQ and WeChat, to compete with Alibaba & Sunning alliance, who have over 454 million online customers and 3500 offline stores.

To many SME sellers, their own strategies are being ripped apart by the ‘black holes’ companies. To achieve maximum marketing effect, some marketplaces ask for exclusivity and price guarantee from retailers, which harms the independence and flexibility of retailers.

Alternative routes to reach out to Chinese consumers?

An extra bonus of this year’s Single’s Day is the timing: the event will take place in a non-working day. The last time for a Single’s Day to take place in weekend is in 2012. The benefit is that customers will have more attention for online campaigns, but they will also spend a great amount of time in bricks-and-mortar stores. Online e-commerce businesses will unavoidably face challenges from offline retailers this year, while some may be benefiting from successful executions of omni-channel strategy.

Data from the iResearch Consulting Group indicate that annual spending of Chinese online consumers will reach 12,000 RMB per year. The affluent consumers are seeking upgrade of their consumption, and they are increasingly seeking to purchase high quality products from a variety of channels.

One possibility is to cooperate with membership programs from businesses that shares similar customer base. These businesses are also seeking for better membership perks for the customers, and could potentially become a channel to acquire customers for SME businesses.

If advertising is too expensive to become an option for overseas retailers during the Single’s Day festival, they should at least plan some campaigns to retain their current customers – the most effective way to connect with the customers and create a bond with them.


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