Proudly presenting to you our brand new Podcast programme – SPRG Chatroom. We hope to use this platform to exchange ideas on top trending topics.
In the first episode of SPRG Chatroom, Arthur R. Hagopian, Senior Director Global Strategy/Digital of SPRG Beijing, will talk about the trends that emerged from the popular 2020 Singles’ Day, as well as the development of eCommerce in the PRC, pre-and post-pandemic. Serving as host for this debut programme is Pauline Yoong, General Manager of Strategic DigitaLab (Singapore).
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Listen to the podcast here: https://www.buzzsprout.com/1430020/6573826
Transcript for SPRG Chatroom Episode 1: Ecommerce in China
Pauline: Good day everybody. Welcome to the first episode of the SPRG Chatroom. We hope to use this platform to exchange ideas on hot and trending topics. My name is Pauline Yoong, I’m the general manager of Strategic DigitaLab, SPRG’s digital marketing agency located in Singapore. And I’m the host for today’s session. I have with me here my colleague, Arthur Hagopian, Senior Director, global strategy and digital from SPRG Beijing, and Arthur is well positioned in helping overseas enterprises enter the China market. Hello Arthur! Nice to have you here
Arthur: Hello, Pauline. Great to be here. And super happy and honoured to be the first guest to the series. Thanks.
Pauline: Glad to have you here too. Well, the biggest shopping day in the world just happened on 11. November, Arthur, Can you tell us more about the genesis of this Singles Day Sale? And how it has evolved to become such an important event for eCommerce businesses around the world?
Arthur: For sure. So yeah, the overall concept of Singles Day came from, interestingly enough, students at Nanjing University in China, back in 1993. And it was celebrated on 11.11, of course, because the ones in the date represent singles, of course, and it kind of turned into this anti-Valentine’s Day concept for single people.
So rather than say buying something for your partner or significant other, you would treat yourself and spoil yourself and buy something for yourself. And so, the first commercialisation of this unofficial holiday shopping festival was in 2009 by Alibaba, of course on their emerging TMall platform, who created Singles Day into this Shopping Festival.
Pauline: Well, I see. So how did it look like back then?
Arthur: Back then it was very different. We had 27 brands participating with a sales volume of around 52 million RMB. So around 8 million USD. And we can see, of course, it’s definitely grown since then. And that’s an understatement because they’ve been breaking their own records year after year since then.
Pauline: Well, it’s amazing how such a simple idea of self-love evolving into something so big. Can you share with us some insights to this year’s 2020 11.11 sales event?
Arthur: Yeah, absolutely Pauline. This year was an absolute triumph, particularly within the backdrop of COVID, of course, and it was truly symbolic as well, economically for China being able to project to itself and the rest of the world, the strength and direction of the economy after such a difficult year. And of course, that incredible consumer demand. So this year for the festival, though, things were a little bit different.
There was a little bit of a warm-up period from November first to the third, running up to November 11, as well. And this was kind of a warm-up period where people were able to participate in smaller shopping engagements and things like that as well. They’re able to make deposits on larger purchases that they planned on purchasing on November the 11th. But of course, the majority of the festival happened during that 24 hour period. And as we’ve come to expect, records were broken during this time now, before I’d mentioned how the Shopping Festival started. We had 27 brands, 8 million USD in sales.
This year saw over 250,000 brands, 5 million online retailers, 800 million participants with sales of around 500 billion RMB. And that’s close to 75 billion USD. And at its peak, Pauline, 583,000 orders were processed each second. And, now this is only sales volume from Alibaba’s TMall platform. If we combine figures with JD.com, of course, who are TMall main rival, sales exceeded 115 billion US dollars, largely within again that 24 hour period. And for some perspective, you know, Pauline, I know you’re in Singapore. So within the first 30 minutes of the sale on the 11th, Alibaba recorded a GMV, which is gross merchandise volume of around 56.2 billion USD, which is roughly the equivalent of Singapore’s GDP in all of 2019.
Pauline: Wow, the numbers are really impressive! So what about the other platforms? How are they doing?
Arthur: Yes, and when we look at total sales volume, the number, of course, is actually higher because there’s so many more platforms that are participating in the festival now compared to previous years, so for example, Suning on their own platform, of course, they’re famous for their electronics and food products. Douyin outside of China, you would know this of course as TikTok, and Kuaishou primarily targeting second, third and fourth-tier cities. The last two, the Douyin and Kuaishou are especially active in live selling and live selling has become absolutely huge in China in the last 24 months, and analysts are predicting it to grow to over a trillion-dollar industry.
And this year’s festival had over 700 live streaming events, bringing in billions. And so if we look a little bit closer at live streaming, Viya, a famous live streamer had 82 million people visit her festival stream with a sales volume of 1.1 billion RMB, and Li JiaQi, also known as ‘lipstick brother’ had 62 million people visit with around 696 million in sales. So, live streaming had an incredible impact this year.
Pauline: Well, you know, live streaming has actually also picked up a lot, especially this during this COVID-19 period. And I know that this year is unique with COVID-19 that has brought more shoppers online. Can you tell us more about how COVID-19 has affected the purchasing behaviour in China?
Arthur: Yeah, so as we know, the eCommerce industry and landscape in China is highly developed and Chinese consumers are prolific online shoppers. And this year’s eCommerce sales for the first six months is up around 7.5% from last year to around 5.15 trillion RMB. And, you know, some of this can certainly be attributable to COVID-19 as the first half of the year was when we saw the majority of closures of offline retail locations.
And this is also when we saw fluctuations and availability in some household products. So many consumers decided to stock up and stockpile on these necessities. And around 33% of consumers decided to buy more health-related products understandably, as well, including, say things like medicine and masks, etc. And overall, we saw an influx of around 31% of more online shopping in general due to of course, a necessity.
And, of course, the highly developed nature of the logistics capabilities of the eCommerce platforms in China. And we saw some interesting things happening as well in the cosmetics area, for example, you know, women being of course, the largest purchasers of cosmetics were purchasing much less lipstick because of the mandate on wearing masks, of course, nobody was going to be able to see the mouth area in general. But these consumers then started taking a much more proactive approach in skincare products in general. And so we saw an increase of overall skin care products being sold through eCommerce channels, so something interesting there.
Pauline: So is there any group spending lesser?
Arthur: So yeah, it was very interesting. Actually, there were different approaches and different attitudes among consumer groups during this period where some people felt the need to potentially limit their spending due to the sort of economic uncertainty that COVID brought on, where others went in the opposite direction and maybe took a little bit more of a philosophical approach during the crisis, deciding to splurge on luxury items that they’ve always wanted, that under other circumstances, quite possibly wouldn’t have purchased, you know, so, again, it was due to that uncertainty that they decided to take the plunge and make a huge purchase for themselves.
Pauline: Well, that’s what we call revenge shopping. Right, isn’t it? So which brands are the biggest winners this year?
Arthur: So just to give some rough figures, 342 brands exceeded 100 million RMB in the GMV, of course, which is the gross merchandise volume, and 13 brands exceeded 1 billion RMB. So those are significant milestones, certainly for those brands. The top five categories that we saw were household electrical appliances, the three C products, of course, which are consumer electronics, clothing, skincare and cosmetics, and finally shoes and bags and rounding out eight and nine, we have food products and mother and baby products respectively. So some of the top brands that we saw during the festival include Apple, L’Oreal, Haier, Estée Lauder, Nike, Huawei, Midea, Lancome, Xiaomi, and Adidas. Those were some of the brands that exceeded the 100 million RMB mark.
Pauline: So which would you say that foreign brands were more popular among the Chinese this year?
Arthur: Foreign brands are certainly extremely popular for Chinese online consumers. But it’s really important to note that this year during the Singles Day Shopping Festival, Chinese brands actually dominated with over 66% of sales on TMall. So really, really interesting Chinese brands dominating this year.
Pauline: So Arthur, we know that China being the largest market in the world for eCommerce with sales surpassing the combined total of Europe and the US, some international brands are leveraging on cross-border eCommerce platforms to assess the Chinese market. Can you tell us more about this and which countries are currently dominating?
Arthur: Yes, certainly! So when talking about cross-border eCommerce (CBEC), we’re primarily discussing TMall global, and in short TMall global is a platform of TMall where international merchants sell imported products through cross-border eCommerce and of course, there are other platforms doing this including say, Xiao Hong Shu and Kaola but TMall has the largest share of CBEC.
So in general, the dominant regions participating in cross-border eCommerce in China, are the United States, of course, Japan and Korea, as there’s a huge appetite specifically for their skincare and cosmetics products, as well as France, is a dominant player for those same categories, also emerging is Italy for a number of their fashion and luxury brands. And in certain categories, for example, baby food and formula, Australia, New Zealand are top cross-border performers.
Pauline: So Arthur, last question for you. Can you give us some advice on how international brands can plan to get involved for next year’s 11.11 event?
Arthur: Absolutely Pauline. And so for international brands looking to tap into this incredible 800 million online consumer market in China and again, hopefully, participate in next year, Singles Day. And Pauline, I should say even though Singles Day is the biggest shopping festival of the Year in China, it’s definitely not the only Shopping Festival that’s happening in the calendar in this region. And there’s more than 15 actually. And we have shopping festivals for Valentine’s Day. Girls Day and women’s day that happens in March. There’s men’s festival, of course, there’s Mother’s Day, there’s the I Love You day that happens in May, Children’s Day, JD’s 618 festival that’s for the JD’s platform that happens in June.
We have the 818 Fever Shopping Festival in August. And of course, we know double 11 Singles Day, We have Red Friday, of course, you know that’s a response to Black Friday in the United States. And we have the double 12 Shopping Festival that’s coming up in December. And of course, we have Christmas as well. So there are shopping festivals in China for Christmas that I don’t think a lot of people may know about.
Pauline: Wow, there’s a lot of shopping opportunities out there.
Arthur: Yeah, so for brands looking to jump into eCommerce in China, it’s really important to gain some market insight concerning your product, its category and the wants and needs of Chinese consumers. And so for TMall now we’re talking about TMall classic, not TMall Global, merchants are required to have a local Chinese entity and register their products with local authorities. And these merchants tend to be larger Chinese brands and top global brands that already have a footprint in China, for example, H&M, Estée Lauder, and Nike. Now, TMall global on the other hand, the sellers are companies with entities outside of China that sell imported products.
So it’s important to not only anticipate where you are now or where you want to be in one year but potentially five years down the road. So brands also have to consider logistics as well as the domestic TMall products, are generally warehoused within China at Alibaba’s warehouses which makes shipping much faster and much more efficient. And TMall global products are often stored in warehouses in Chinese Free Trade Zones, and the products only clear customs after an order is made. Another thing that you should consider is other service elements, including, say, returns, which tend to be much more difficult for TMall global customers.
Pauline: Interesting! So are there any brands on both platforms?
Arthur: Yeah, absolutely Pauline. Some brands do in fact choose to be on both platforms, using the TMall classic platform for their more proven and popular products that have already been registered in China. And then they use the TMall global platform, for, say, their new products to assess the popular demand and then switch over. It’s also really important to note that TMall global has moved towards an invitation-only model which means that for international brands that are looking to participate on the platform, the global platform, they are going to have to receive an invitation from TMall and this is why it’s extremely important for those brands, specifically in the case of TMall global to use a registered TP, which is a trading partner who can help guide the brand through the market and the process, etc. And in Beijing here, we work very, very closely with the top TPs in China, in order to facilitate that.
Also, Pauline, it’s really important to mention that the opening and operating of a brand’s TMall store, whether it’s on the domestic platform or the global platform, is only really the beginning and just the first step and successful brands that operate on the platforms always have a robust integrated marketing and advertising programme to ensure their products, specifically, are breaking through the noise.
Pauline: Wow, these are really great insights Arthur and we hear you. If any of the international brands out there are eyeing the China market, it really makes sense to understand the whole ecosystem. So, thank you so much, Arthur, for sharing this in-market knowledge with us.
Arthur: Thanks a lot, Pauline. It’s a great pleasure that you know, the Chinese eCommerce landscape is ever-evolving and ever-growing. So very, very exciting.
Pauline: We have come to the end of our podcast today. Do stay tuned for our next podcast and for some of you listeners who are interested to know more about eCommerce marketing in China or Asia, do write to us at firstname.lastname@example.org.
Thank you and goodbye!