China Singles Day Record Seen as BMWs Sell Cheap Online

Photographer: Imaginechina via AP Images
A dispatch center of Shentong Express is overcrowded by parcels from online shopping on Singles' Day in Guangzhou on Nov. 12 2012.

Shanghai office worker Xue Feng says he’s been resisting the crave to shop for the past month. Come midnight on Nov. 11, the 34-year-old plans to scratch that itch with an online shopping blitz for clothes, sneakers and snacks as websites in China slash prices.

“I’ve already chosen more than 50 items for my list,” Xue said. “And I may buy more.”

What started out as “Singles’ Day,” a modern Chinese take on Valentine’s Day, Nov. 11 has morphed into the country’s biggest excuse to shop -- and that has e-commerce firms flooding the Internet with promotions. Websites run by Alibaba Group Holding Ltd. to Suning Commerce Group (002024) to Tencent Holdings Ltd. (700) are slashing prices by 50 percent or more, setting the stage for this year’s sales to reach a record.

“It’s like Cyber Monday in the U.S., but larger,” said Jean Chan, an analyst at Sanford C. Bernstein & Co. in Hong Kong., referring to the Monday after Thanksgiving, when U.S. retailers offer big online promotions. “Chinese consumers love the thrill of getting a good bargain and e-commerce provides easier access in securing the best deal.”

Singles’ Day sales at Alibaba, the country’s largest e-commerce company, are expected to rise 50 percent to exceed 30 billion yuan ($4.9 billion), according to a Nov. 4 Xinhua News Agency report that cited a meeting between founder Jack Ma and Premier Li Keqiang. Industry sales will touch a record for the day, forecasts IResearch Consulting Group.

Photographer: Nelson Ching/Bloomberg

Dragon dancers perform near a Bayerische Motoren Werke AG (BMW) 3-series car near Shenyang Liaoning Province, China. Close

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Photographer: Nelson Ching/Bloomberg

Dragon dancers perform near a Bayerische Motoren Werke AG (BMW) 3-series car near Shenyang Liaoning Province, China.

Singles’ Day bargain hunters can also stock up on cut-price American Standard toilets, crystal chandeliers, ducks’ tongues, French wines and pineapple cookies. Autohome.com.cn, a Chinese car website, is promising special offers on BMWs.

Bricks & Mortar

Surging purchases show how Chinese demand is shifting away from bricks-and-mortar outlets. The percentage of retail sales made online last year jumped to 6.3 percent from 4.3 percent a year earlier, according to Bloomberg Industries. The market share of the top 100 chain outlets fell to 9 percent from 11.2 percent, it said.

Xue, the Shanghai resident, says his family hasn’t visited department stores for about six months as they now do a large portion of their shopping online.

‘Singles’ Day’ was invented by students in the 1990s, according to the Communist Party-owned People’s Daily, which said the date (11-11) is reminiscent of the Chinese phrase -- “bare branches -- for bachelors and spinsters.

Alibaba’s Tmall site began marketing the day as its biggest sales event in 2009, rivals jumped on board, and the day turned from an opportunity to seek out a partner -- or celebrate singledom -- into an online shopping bonanza.

E-commerce will help China overtake the U.S. as the world’s largest retail market as early as 2015, PricewaterhouseCoopers said in September. Shares of Suning and Tencent are up about 61 percent this year.

Big Alibaba

For now, Alibaba dominates China’s e-commerce. It accounted for 70 percent of package deliveries in China last year, Ma said in a letter published in February in a newspaper owned by the State Post Bureau. Ma faces intensifying competition from rivals wanting a bigger share of the pickings, which Euromonitor International expects to reach about $258.5 billion by end 2017.

Smaller rival 360buy Jingdong Inc. began offering half-price Pampers diapers from Nov. 1 and will slice as much as 70 percent off items including slimming belts and facial moisturizers, according to its website. Suning, an Internet retailer which started out selling electrical appliances, is running ads for online sales starting Nov. 8 with the slogan: ‘‘Four days, four nights, shop non-stop.”

‘Thermonuclear’

Price competition has been “thermonuclear,” says Euromonitor.

“Often retailers will operate at a loss to be able to capture market share and there have been ongoing price wars,” said Daniel Latev, the group’s head of retail research.

Suning said discounts and attempts to integrate its physical stores and online business hurt gross margins in the first-half. It forecast 10 billion yuan for Singles’ Day promotional period sales.

Alibaba will brush off the competition and grab a lion’s 70 percent share of the day’s sales, estimates Alex Wang, a Beijing-based analyst with IResearch.

“Other retailers don’t have the same depth of product offering and brands, neither do they have the consumer recognition Tmall enjoys on Nov. 11,” he said.

GAP, Coach

Starting midnight on Nov. 11, Tmall says its vendors will cut prices by 50 percent or more on selected products from 20,000 Chinese and international merchants, including GAP Inc. (GPS) and Steven Madden Ltd. (SHOO) The online sales platform is also doling out 300 million yuan in rebates from its own pocket, it said on its corporate website.

Alibaba is sheltered from Singles’ Day losses because it doesn’t sell merchandise itself, acting as a conduit between businesses and customers -- like a hybrid of Amazon.com Inc. and EBay Inc. (EBAY) It makes most of its sales from commissions and advertising with its profit margin of 48.4 percent in the March quarter topping EBay’s 18.1 percent and Amazon’s 0.51 percent.

Alibaba, valued by some analysts at as much as $190 billion, may be headed for the biggest initial public offering since Facebook Inc. (FB)

Last year, Alibaba’s Tmall and Taobao platforms hit a record 19.1 billion yuan -- or about $3.14 billion -- in sales during the 24-hour discount bonanza, eclipsing the $1.46 billion U.S. consumers spent on Cyber Monday.

Logistical Nightmare

The biggest problem for Chinese e-sellers: managing logistics to meet the demand. Last year some shoppers faced delays getting orders filled.

Shentong Express Co., a Shanghai-based courier that moves shipments from Alibaba online shops, said it has hired more than 45,000 temporary workers to add to its workforce of 150,000. S.F. Express (Group) Co., China’s biggest private express-delivery service, received a Boeing Co. 757 freighter at the end of last month to add capacity for the shopping bonanza. Tmall says its logistics partners have hired as many as 100 planes to handle the spike in orders.

Longer term, bricks-and-mortar chains such as department-store operator Parkson Retail Group Ltd. (3368) and Golden Eagle Retail Group Ltd. (3308) malls will have to add more entertainment options to draw customers, said Kenny Wu, Hong Kong-based analyst at JI Asia. Same-store sales growth at China’s department chains slowed to about 5 percent in 2012 from more than 18 percent in 2010 as consumers moved to the Internet, he said.

“People are now looking for a different shopping experience,” Wu said.

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net; Jasmine Wang in Hong Kong at jwang513@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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