Alibaba’s Singles’ Day a way for US firms to tap in to Chinese market
China’s largest annual online shopping fiesta, known there as 11.11, is the flashiest example of how American consumer brands have come to rely on the world’s second-largest economy for growth
Hong Kong/Shanghai — For American brands struggling to survive a resurgent coronavirus, China is proving to be one of the few bright spots. As Alibaba Group Holding prepares to host its biggest and most global shopping marathon ever, its position as a gateway to the world’s fastest-recovering economy is winning points with an increasingly hostile US administration.
Alibaba’s annual Singles’ Day event held on November 11, is an online shopping phenomenon that, with $38bn of sales in 2019, easily dwarfed Black Friday and Cyber Monday. The festivities, which provide a snapshot of Chinese consumption, will feature the largest international presence since the company pioneered the format 11 years ago, including a number of US merchants making their first forays into the Asian market.
One such company, Uncle Bud’s, is targeting at least 1-million yuan ($150,000) in sales, all through its online store on Alibaba’s Tmall Global platform. The Los Angeles-based personal care goods maker has roped in former NBA superstar Magic Johnson to hawk its hemp- and cannabis-based products such as body gels and lotions to Chinese shoppers in a livestream ahead of Singles’ Day.
“Tmall really embraces finding brands that are emerging and bringing them to Chinese consumers,” Uncle Bud’s co-founder Bruno Schiavi said in an interview. “We wanted to have a big, powerful company behind us. As an emerging brand from the US to the China market, there are always many steps. But having Tmall behind you, to us that’s fantastic.”
China’s largest annual online shopping fiesta is only the flashiest example of how American consumer brands have increasingly come to rely on the world’s second-largest economy for growth. For them, Alibaba affords one of the biggest windows into China’s rising middle-class — American merchants commanded the second-highest sales after Japanese among importers in 2019’s edition. That’s especially true this year, with companies such as Estée Lauder and Nike banking on the Chinese consumer to help recoup some of the sales lost in the pandemic-induced global economic slowdown.
That fact is likely not lost on Washington. The online retail giant’s domestic focus — international commerce accounts for just 7% of total sales — means the company has limited access to potentially sensitive personal data, unlike fellow Chinese internet giants ByteDance and Tencent Holdings. Naspers has a 31.2% stake in Tencent.
US President Donald Trump has attempted to ban ByteDance’s TikTok and the WeChat super-app, owned by Tencent, in the run-up to the presidential elections and he may be emboldened by a second term to continue decoupling Washington from Beijing. Even if Trump loses, a Biden presidency will likely not lead to a strategy overhaul, with the Democratic candidate shifting towards a more confrontational tone towards China over the past few years.
Antidote for Valentine’s Day
Many Americans will not have heard of Singles’ Day, a uniquely Chinese antidote to the sentimentality surrounding Valentine’s Day. Originating in college campuses across the country, it takes its name from the way the date is written numerically as 11.11, which resembles “bare branches”, a local expression for the unattached.
This year, the promotional blitz has been expanded, with pre-sales starting on October 21. US merchants such as Nike, Apple and Estée Lauder were among 100 brands that achieved revenue of at least 100-million yuan in the first 111 minutes after sales promos commenced on November 1, Alibaba said.
More than 2,600 new foreign brands will be featured on Tmall Global for the first time in 2020. Earlier in the year, the company held its inaugural Go Global 11.11 Pitch Fest offering American merchants that have no physical operations in China a chance to be spotlighted during the event. Uncle Bud’s emerged as one of the winners, alongside eight other companies that will bring a range of products from vegan face creams to purple hair dye and drinking vinegars to the Chinese market for the first time.
Alibaba is hoping its growing role as middleman to global merchants can help revive flagging growth. Its revenue is expected, on average, to increase 31% in the September quarter, the slowest pace on record for the period. The company is set to report results on Thursday.
“For certain categories, such as cosmetics, apparel and electronics, if you want to win in China, you have to win e-commerce,” said Jonathan Cheng, partner and head of China retail at Bain & Co. “And if you want to win e-commerce, you have to work with the leaders.”
Nearly 800-million annual active shoppers frequent Alibaba’s wide array of platforms, ranging from the eBay-style Taobao site to Amazon-like Tmall and grocery service Freshippo. That’s helped the company turn itself into Asia’s largest — one that’s on its way to joining the trillion-dollar club after gaining almost $370bn in market value since its Covid-19 trough in March. That’s roughly one Walmart or Tesla.
Pole position on the line
However, its pole position is being challenged on multiple fronts. Startup Pinduoduo is offering cheaper bargains, JD.com has expanded beyond its traditional strength in consumer electronics, while Tencent-backed Meituan is engaged in a fierce battle with Alibaba’s Ele.me food delivery app.
While its core commerce business — which accounted for 87% of revenue in the quarter to end-June — has been relatively unscathed by US-China tensions, it is in cloud computing where Alibaba faces the most direct threat from the White house. As part of Trump’s broader campaign to prevent Chinese companies accessing the private data of Americans, the “clean network” initiative, unveiled by US secretary of state Michael Pompeo, seeks to stop US firms from using cloud computing services offered by Alibaba, Tencent and Baidu.
More recently, people within the Trump administration are said to be exploring potential restrictions on Alibaba affiliate Ant Group, though that hasn’t dented enthusiasm for the fintech giant’s blockbuster initial public offering (IPO) in Hong Kong and Shanghai.
Still, Alibaba executives have repeatedly touted their role in connecting American merchants such as Uncle Bud’s with Chinese buyers. “As the world’s largest e-commerce platform, Alibaba’s primary commercial focus in the US is to support our American brands, retailers, small businesses and the farmers to sell to consumers and the trade partners in China,” CEO Daniel Zhang said in August.
It’s this function that may give the next US administration pause when it comes to Alibaba, said Paul Triolo, a former US government official who specialises in global technology policy at risk consultancy Eurasia Group.
“There is no indication that the US government wants to go after Alibaba’s Taobao platform in the US, which targets small and medium US companies to allow them to access the China market,” Triolo said. But some politicians on Capitol Hill are “concerned about the market impact of any attempt to go after a large, consumer-facing Chinese platform”.
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