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China’s slowing economy suppresses Singles Day

China’s slowing economy was the primary reason for the slowing growth of sales on Alibaba’s Singles Day on Sunday.

This year marked the 10th anniversary of the online shopathon, and while everyone expected a new record Gross Merchandise Volume (GMV) would be set, no-one was sure whether the spectacular 39 per cent growth rate of last year would be bettered. It wasn’t.

While the total volume of transactions this year was 213.5 billion RMB (US$30.8 billion), the growth was a more moderate 27 per cent. Singles Day still dwarfs similar events in the US, such as Black Friday ($8 billion) and Cyber day ($6.6 billion). But are there early signs the gloss is starting to wear off?

Pascal Martin, partner at OC&C Strategy Consultants, says the striking topline Singles Day numbers demonstrate Chinese consumers continue to love these big commercial events, which allow them to try new premium brands – normally out of reach – at more affordable price points. “Singles Day is therefore a great opportunity for brands to reach out to new customers and more and more of them are excited to join the party.”

Martin says the reduced sales growth for Singles Day reflects a slowing Chinese economy, a view backed up by Alibaba’s recent announcement that its growth for the year would be 5 per cent lower than it initially forecast. The ongoing trade war and more cautious consumer sentiment were also factors, combined with growing competition from other big promotional events such as JD’s recent 618 shopping festival, which generated a GMV of $24.7 billion over 18 days (40 per cent growth year on year) and the high number of promotional opportunities during the year, such as Spring Festival, Labour Day in May, and Golden Week.

Martin says growing competition from e-commerce sites that offer everyday super-low prices such as Pinduoduo, an upstart e-commerce company that went from zero to 350 million customers in just three years. “Prices on Pinduoduo are hard to beat round-the-year and the application has become hugely popular in China’s smaller cities and towns.”

Three remarkable features

Meanwhile, Martin says there were three remarkable features of Singles Day this year:

New Retail: There were more brand partners this year, both online and offline, leveraging Alibaba’s New Retail ecosystem. “For example, Tmall’s 3000+ convenience stores, Hema and RT Mart supermarkets, Suning and Auchan, were all part of the event. Altogether 200,000 brick and mortar stores joined the party.”

Globalisation: Singles Day has expanded beyond China through Lazada, the Southeast Asia platform owned by Alibaba. “We saw increased participation of international brands that are taking advantage of the Tmall Global platform – which is the number one by far among Chinese cross-border platforms – to get introduced to Chinese consumers without having to build a direct presence in China.”

Diversification: The event is moving beyond just being about consumes purchasing products, it is also increasingly about purchasing a variety of services such as food delivery on, videos on Youku to mobile games on UC, theatre tickets on Taopiaopiao, music on Xiami music and travel on Feizhu.

Martin believes given China’s slowing economy Chinese consumers are becoming more cautious and the fact that Singles Day is now in its 10th year, it is less of a big news story. “There might be some consumer fatigue setting in.”

Obstacles moving forward

Martin believes three main challenges need to be addressed to sustain the growth momentum of massive commercial fairs like 11.11.

Firstly, given the growing competition from other promotional events, Alibaba will have to continue to reach out to consumers earlier and earlier, and to expand the scope of the event even more broadly.

“Another challenge is to continue to ensure flawless delivery for millions of parcels all over China in such a short amount of time. As the event grows, the logistical challenge becomes greater and greater. The number of parcels delivered during this year’s event hit 1 billion on Tmall alone. That’s a huge jump over last year’s 812 million parcels. Additionally, although brands don’t like to talk about it, there is a significant challenge in taking care of huge quantities of returned goods. Singles Day is a massive test bed for Alibaba’s backbone infrastructure: the network of partners that make it all possible, from payment to delivery to data management, as well as AI and cloud technologies that are put to work to ensure a successful event.

“Finally, 11.11 has become much more than a commercial fair, it is now a major annual milestone in China’s cultural calendar. To keep the event fresh and exciting, Alibaba will need to continue to surprise Chinese consumers with entertainment and festivals around the event. This year, the double 11 gala event featured Miranda Kerr, Mariah Carey and Cirque Du Soleil, but no current big stars. Is this enough to continue to excite consumers, particularly younger generations?”

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