Singles Day 2018: China’s Record Sales May Mask Economic Vulnerability

Singles Day 2018 showed that middle class Chinese are not yet abstaining from spending money, especially for discounted consumer goods. Chinese e-commerce giant Alibaba smashed sales records once again on its signature shopping festival – also known as 11.11 – despite signs of a vulnerable economy and flagging consumer confidence.

According to data released by Alibaba, the company which owns the popular shopping platforms Taobao and Tmall – a record RMB 213.5 billion (US$30.8 billion) worth of products in terms of gross merchandise value (GMV) were sold.

Yet, while the sales figures are inarguably large, they may still be masking deeper insecurities among Chinese consumers amid an increasingly uncertain economic outlook, exacerbated by the trade confrontation with the US.

Singles Day 2018 shopping trends

Encouraged by live-streamed appearances from the likes of Mariah Carey, Miranda Kerr, Allen Iverson, Jackson Yee, and the Cirque du Soleil, Chinese consumers opened their wallets as the clock struck midnight on November 11.

In under a minute and a half, Alibaba already recorded US$1 billion worth of sales, and hit the US$10 billion mark, just over an hour later.

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At the end of the day, Alibaba solidified its status as the worldwide king of e-commerce shopping festivals, breaking the US$30 billion mark in sales for the first time in its history.

In comparison, in 2017, Black Friday and Cyber Monday – the rough US equivalents of Singles Day – witnessed US$7.9 billion and US$6.6 billion in sales, respectively.

Alibaba’s sales showed a sizeable 27 percent year-on-year increase over last year’s RMB 168.3 billion (US$25.3 billion), and other e-commerce platforms like JD.com, WeChat, Suning, and Pinduoduo also held promotions to exploit the consumer frenzy. Meanwhile, Lazada, Alibaba’s e-commerce platform for Southeast Asia, held Singles Day promotions for the first time.

Continuing the trend from last year, Alibaba promoted “new retail” – the integration of online and offline shopping experiences. For example, Alibaba highlighted its online grocery store Hema and its coffee delivery partnership with Starbucks to encourage shoppers to embrace e-commerce for products that are traditionally purchased offline.

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According to Alibaba, over 40 percent of Singles Day shoppers purchased international brands, including Apple, Dyson, Kindle, Estée Lauder, L’Oréal, Nestle, Gap, Nike, and Adidas, and over 240 international brands recorded at least RMB 100 million (US$14.4 million) in sales.

Alibaba also reported that the top overseas sellers were Japan, the US, South Korea, Australia, and Germany. Popular sales items included health supplements, apparel, cosmetics and beauty products, mobile accessories, and day-to-day consumer goods.

Sub-nationally, Shanghai shoppers spent the most among Chinese regions, followed by Beijing, Hangzhou, and Guangzhou.

What do the record sales mean for consumer confidence in China?

The high sales recorded for Singles Day is a positive sign for consumer confidence in China, coming at a time when national GDP is growing at the slowest pace since 2009 and the country is embroiled in a trade war with the US.

According to China’s National Bureau of Statistics, online retail sales in the third quarter of 2018 were down by 12 percentage points compared to the second quarter. Combined with anecdotal evidence of a “consumption downgrade” in China and diminishing returns after a decade of exponential Singles Day growth, many signals appeared to point to a more modest showing this time around.

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The impressive Singles Day performance bodes well for Alibaba’s future, as the company is in transition with high-profile founder Jack Ma set to retire and hand the reins to his lieutenant Daniel Zhang next year.

The heady sales numbers, however, are not necessarily evidence that all is well in the world’s second largest economy. Although Singles Day 2018 saw record sales, the rate of growth this year is down from the 39 percent recorded in 2017; the shopping preferences in fact point to more conservative spending habits.

For instance, growth in purchases of higher-value products largely declined. Sales of large home appliances and smartphones slowed, while the average value of individual baskets fell from RMB 207.1 (US$29.73) last year to RMB 204.9 (US$29.41). These trends are in line with recent national statistics that show a slowdown in the purchases of big-ticket items like cars and real estate.

Chinese consumers are aware of their country’s slowing economy, which has been hit by the trade war, the government’s debt de-risking campaign, and broader macro-economic factors.

While Alibaba raked in massive sales on 11.11, just earlier this month, the company slashed its revenue growth estimates for the fiscal year by five percent. The company’s shares have also fallen by almost 16 percent this year. Finally, some observers are skeptical over the methods Alibaba uses to count its Singles Day 2018 sales.

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