Creating a Holiday
Since 2009, each year every China watcher and market analysis holds their breath and waits before finishing their report on Alibaba. What are they waiting for each year? They are waiting for Singles Day or “Double 11 day”. So, what is Singles Day? Singles Day is an unofficial holiday started by college students during the 1990’s has a way to express their feels about being single. The day has been referred to as anti-Valentine’s day.
Recently, all that has changed and now Singles Day is a digital shopping bonanza that puts Cyber Monday to shame. Over the last few years Alibaba has been hijacking this holiday and turning it into a shopping extravaganza.
November 11/2013 – Singles Day
According to Bloomberg, “Taobao and Tmall, Alibaba’s two main platforms, topped 35 billion yuan ($5.75 billion) in the 24-hour period, surpassing last year’s sales of 19.1 billion yuan, the company said on its official Twitter Inc. account.” The internet giant continues to promote and create this holiday into its most profitable day each year. The companies that participate offer discounts of 50% or more. These extreme discounts spur the buying spree but the question that should be asked is: Does Singles Day hurt online shopping sales?
Does Singles Day Hurt Online Shopping Sales?
While everyone marvels at the great success of Singles Day, I often wonder if this is a strong business model. As online shoppers become more aware of MSRP (Manufacturer’s suggested retail price) and the cost of goods sold, many will start to wonder why they have to pay 50% or more on regular days. If all the research is showing that companies are making millions in profits on one day when all their merchandise is half price, the average consumer’s next question should be: Why is there such a high mark-up the rest of the year?
According to Internet Retailer, “Joining 11/11 is not like taking part in any marketing promotion,” says Kevin Shih, CEO of Jollywiz, mainland China distributor of Taiwanese skin care brand Naruko. “Our usual daily sales is about RMB 500,000 ($82,000), and on this year’s 11/11 it could rise 90 times to RMB 45 million ($7.4 million), all in a day.” The research suggests that companies are still making millions, presumably in profit; otherwise they would not participate in the event. This business model could lead to consumer backlash or consumers waiting to purchase. In both scenarios, the business model damages online seller’s profit margins. Alibaba ends up being the big winner because they make money off of every sell but merchandisers end up eating the margins.
The next step
It will be interesting to see how the next few years play out and if merchandisers and consumers wise up to the fact that they are both being screwed; if they do online shopping could change dramatically. What do you think about my theory? Am I giving consumers and merchandisers too much credit? Are merchandisers too greed to care? Are consumers too lazy to notice?