In a single day in 2015, Alibaba handled an average of US$9.9 million every minute in a retail feat that racked up US$14.3 billion of Alipay payments, mostly on Tmall and Taobao Marketplace. That’s one and a half-million dollars of sales in the time it took to read this article’s first sentence. That day was Single’s Day (11/11), first celebrated by proud singles in China in 1993.
Impressed? It gets better. Last week, Alibaba pulled in US$17.4 billion on Singles Day, passing the one billion-dollar mark in just under five minutes.
Why This Matters for US Exporters and Manufacturers
Singles’ Day went beyond China. On 11/11/2016, residents of 235 countries completed transactions, with more than 14,000 international brands taking part in the 2016 sale. Halfway into the event, those brands accounted for about 30 percent of total GMV.
Since inception, the Chinese holiday has since grown into a commercial powerhouse that towers over comparable Western shop-fests. According to Adobe Research, total US online spend on Black Friday and Cyber Monday in 2015 hit a paltry US$5.8 billion. One single Chinese online vendor handled three times the volume of the entire US retail industry online in their combined November shopping peaks.
But changing Chinese demographics and global logistics trends may transform Singles’ Day 2020 into a major milestone for US exporters and retailers. Here are four reasons why China-US trade is not a purely one-way street anymore.
1. Chinese Logistics Infrastructure Is Making US-China E-Commerce More Feasible
The logistics infrastructure in China is wildly underdeveloped compared to the United States. One popular metric — a country’s logistics costs as a percentage of GDP — has China at 18% and the US at only 8.5%. The ability to rapidly deliver packages across the US is the result of 60 years of improvements, from the Interstate Highway System to Same Day delivery.
But China is catching up.
Over the next 5-8 years, Alibaba plans to pour US$16 billion dollars into improving the country’s infrastructure. Better last mile delivery, much like the US has enjoyed for decades, means better e-commerce fulfillment. Which, in turn, means more potential for international online sales to China. And it’s getting even cheaper to sell in China since …
2. It’s Mind-Bogglingly Cheap To Ship To China
Almost one third of containers exported from America’s busiest port last September were empty. Supply and demand on US-China exports, combined with historically low freight prices, means that shipping a 40-foot container from the Port of Long Beach to the Port of Shenzhen costs less than the price of a midrange MacBook. Trucking that same container from Long Beach to Chicago can cost more than double that price.
With exporting prices so low for US manufacturers, all they need is the market …
3. The Chinese Middle Class Is Growing Rapidly
The size of China’s middle class surpassed the US’s middle class in 2015, and is now larger than the combined middle class population of Germany, Spain, UK and France. By 2022, McKinsey anticipates that a full 76% of Chinese nationals will be part of the middle class. And, at 410 million, the current number of Chinese shoppers that shop online is greater than the combined population of Canada and the US.
As a result, luxury international brands have been quick to jump on the bandwagon and offer their goods to the Chinese public. Major brands like Apple, Dell, Philips and Sony already sell products in China through Alibaba’s Tmall.
Global brands have a certain allure for the newly-minted middle class, so it makes sense that more US manufacturers will want to capitalize on the potential market, especially during the surge that is Singles’ Day. It’s no coincidence that the top five US brands that sold in Singles’ Day 2016 were Apple, Nike, New Balance, Playboy and Sketchers. US brands sell.
4. Singles’ Day vs Black Friday
Singles’ Day is ripe to become the Black Friday alternative for US manufacturers and distributors. Last year, growth of Black Friday and Cyber Monday online sales dipped into single-digit growth for the first time since 2008, and on the brick-and-mortar side, more stores are opting to let their employees stay at home on Thanksgiving instead of manning the registers.
Potential lost revenue from dipping sales growth and delayed profitability due to late shoppers — almost 60 percent of holiday shoppers will wait until November to begin holiday shopping — means that capitalizing on Singles’ Day could be incredibly lucrative for US manufacturers.
Singles’ Day Matters: Especially To The US
The market is there, the impetus to tap into said market is there, and the logistics infrastructure is getting there. Those not prepared to lead by example can simply look toward Amazon for inspiration. The retail behemoth recently launched Amazon Prime in China, offering shipping from US distribution centers to 82 Chinese cities in 5-9 days. Clearly, Amazon is determined to improve its flagging 1.5% market share in China. In 2015, the company launched its own store within Tmall, despite the fact that Tmall is owned by Alibaba, a core competitor.
Chinese Singles’ Day becoming a US sales festival isn’t a pipe dream. US sellers were already the second most represented seller demographic in Singles’ Day 2016, trailing only Japan and beating out South Korea. In may not happen in 2016 or 2017 … but by 2020, expect Singles’ Day to have become US retail sales’ holiday kickoff event.