Three words for anybody doubting the increasing popularity of e-commerce in China: nine billion dollars.
That was the amount of sales – in fact, it was $9.3 billion — generated in one day last week by Chinese e-commerce company Alibaba. The occasion was Singles Day, Nov. 11 (because 11/11, get it?), an unofficial holiday that began as an anti-Valentine’s Day but now essentially functions as a giant online shopping festival, much to the delight of retailers across the country.
As a Techcrunch article noted regarding the universality of purchases, home decor was a popular product category and Alibaba revealed that it sold over 1.2 million “large” home appliances, and over 3 million light products. But the “holiday” also covers regular products — Alibaba sold more than 200,000 bottles of detergent — and the one-offs, too: the company sold 50,000 cars from across its retail businesses.
Last year, Alibaba did $5.75 billion, a figure it reached this year with 10 hours left in the day.
But it wasn’t just Alibaba enjoying the spoils – Chinese internet companies JD.com and Xiamoi also recorded record-breaking sales for the day.
So far this year, the motif has increased 20.1%; the S&P 500 is up 12.4%.
The Singles Day phenomenon has also illustrated the growth of e-commerce in China, and particularly the increasing amount of it being done via mobile devices. According to Techcrunch, Alibaba’s total gross merchandise volume grew 60.3% over last year’s total of $58 billion. Significantly, volume for transactions made over mobile devices represented 42.6% percent of sales, a good sign for the company because of its key goal to grow its mobile business. As Techcrunch pointed out, just one year ago, more than 90% of transactions made on Taobao and Tmall, Alibaba’s two main consumer marketplaces, came from PCs.
A recent executive summary report from Morgan Stanley also painted a rosy picture for Chinese e-commerce growth. The report says they believed the country’s e-commerce “mega-growth” trend is still in its initial phase in many countries, including China. As online consumers become more sophisticated, the analysts expect online spending per user to reach $1,880 by 2018, up from $1,040 in 2013.3
Further, Morgan Stanley estimates China’s e-commerce industry in 2018 will account for 18% of the country’s retail sales, up from 8% in 2013. In addition, they expect it to contribute 30-40% of incremental retail sales annually in the same period, becoming one of the key drivers in China’s $3 trillion consumption market.
China is faced with slowing growth, an aging population and overcapacity in multiple sectors. Until now, China’s ambition to be a consumption-led economy has been impeded by lack of a social safety net, fragmentation and uneven quality of its physical infrastructure, and regional imbalances in economic development, the summary report said. But China is also in the midst of a digital revolution, with the Internet embraced by major sectors, not only those that are consumer-focused. Morgan Stanley believes that technological innovations and data-centric solutions will help the consolidation process that is required to ensure sustainable growth.
As for mobile, Morgan Stanley said that 26% of online purchases were made on mobile devices in China in the first half of 2014. Of China’s 780 million active mobile devices, 58% are registered in lower-tier cities, where users’ first Internet experience is likely through mobile. Morgan Stanley maintains there has been a strong correlation between online shopping and smartphone penetration since 2011. Faster and cheaper 4G network connections should help accelerate mobile usage, according to the report.