Alibaba’s 2016 11.11 shopping event beats records again

The origins

Alibaba’s 11.11 Global Shopping Festival, renamed from Singles Day in 2015, is an annual promotional event on Tmall to reward consumers through discounts. It is the biggest 24-hour online sale event both in China and globally. 

alibaba

The event's sales have grown in 2016 to $17.8bn, while last year's sales were worth $14.3bn and the holiday’s success and cross-border expansion has gained the interest of Alibaba’s local and international rivals. Chinese-based JD.com and Suning both offered special promotions in 2016 on Singles Day for the second year running. While Alibaba is attempting to expand Singles Day abroad through AliExpress, there has also been increased competition from international competitors attempting to replicate the strategy.

Logistics network test

In 2015, on November 11 alone, more than 1.7m delivery workers (including hundreds of thousands of temporary staff), 400,000 vehicles, 5,000 warehouses and 200 airplanes were used by the 3,000 logistics partners who cooperate with Alibaba Group’s logistics affiliate, to handle deliveries. For cross-border deliveries, Cainiao signed up 49 international partners who set up 16 dedicated global delivery routes and 74 warehouses, creating a cross-border network to handle up to 4m international package deliveries per day.

In preparation for the 2016 event, Cainiao has worked with its partners to make sure the entire supply chain ran smoothly. This included taking stock of the manpower and vehicles necessary to handle such a high volume of parcels, as well as running stress tests to detect any possible issues with the system. Cainiao also reported moving more inventory into a larger number of warehouses outside the obvious logistics hubs of Beijing and Shanghai in order to reduce any potential bottlenecks.

2016 results

Alibaba said sales during this year’s global shopping festival had reached $18bn (€16.7bn), a rise of 32% on last year's sales. According to Alibaba, 82% of purchases had been made on mobile phones (up from 68.7% in 2015). The event hit $5bn (€4.6bn) in the first hour, Alibaba noted that this first hour figure included pre-orders made by customers who could "lock in" prices. It took 90 minutes to hit the $5bn milestone in 2015. During the first hour, order volume set yet another record, with a peak of 175,000 orders in one second (vs. 140,000 in 2015), while the number of payments settled per second totalled 120,000 at their peak.

According to Alibaba, 235 countries and regions completed cross-border transactions during the festival, with thousands of international brands participating. Adidas, Apple, Nike, Pampers, Phillips, Siemens and Uniqlo were among the most popular in their respective product categories. The top five countries selling to China on this day were Japan, the US, South Korea, Australia and Germany – the same as in 2015, but in a slightly different order. The final total marked a 32% rise from 2015, but growth was significantly lower than the 60% increase in 2015. The slowdown in sales growth came in a more saturated domestic online retail market with competitors such as JD.com taking advantage of the shopping event and a weaker economy.

Higher volumes, lower margins for delivery companies

The continuous growth of the 11.11 Global Shopping Festival and similar online shopping events reflect how consumers - especially in China - are becoming more enthusiastic online shoppers every year. In future, more products from non-traditional categories are going to be bought online by consumers lured by the promise of free and ever faster delivery. As a result, delivery companies and packaging firms will see increased competition with lower profit margins despite large sales volumes.

Source: alizila.commarketwatch.com, cep-research.com, alizila.com, theatlantic.com