China’s rising consumer power plays an important part in the country’s dual circulation strategy and is an engine of global growth in many categories. The Double 11 shopping festival, as the largest and most popular annual global shopping festival in the world – now overshadowing Black Friday and Cyber Monday combined – serves as a window to observe China’s latest consumer trends.
This year, the Chinese annual shopping festival began on October 20, 2021 at 8 pm. It was first launched by the Alibaba Group Holding Ltd. in 2009 around the unofficial November 11 holiday that celebrated single people. Since then, the commercial activity around the celebration has expanded from one day to three weeks and extended from Alibaba’s Taobao and Tmall marketplaces to the whole retail sector.
Retailers and brands now tap into social features on social media platforms and embrace livestreaming sessions besides omnichannel marketing campaigns to increase their sales in the Chinese market, particularly as new entrants bolster competition during periods like the Double 11 shopping festival. In this article, we’ll walk you through the emerging new trends.
This year’s Double 11 shopping festival did not feature “battle reports”, which typically show new records created by the minutes as has been done for around a decade.
45 minutes after midnight on Thursday November 11th, a total 382 brands on Alibaba’s platform Tmall had sales exceeding US$15.6 million. The brands included domestic brands like Huawei and Erke and international brands like L’Oréal and Apple. Up from last year’s nearly US$78 billion, Tmall’s total transaction volume reached hit US$84 billion.
As of 2am, Xiaomi’s total sales during the festival had exceeded US$2 million.
JD.com reported a new record, with earnings of US$54 billion.
This year, presales were earlier. In the past, the Double 11 presales began at midnight. Consumers would pull all-nighters to place orders. However, this year, Tmall and JD.com’s presales began hours earlier at 8 pm on October 20th.
Besides the presales period, Alibaba runs two sales periods, a practice the company debuted last year. JD.com’s Double 11 sales began at 8 pm on October 31st, with a final “price-off” occurring at 8 pm on November 10th.
Extending sales meant e-commerce companies boosted the value of goods and eased pressure on logistics networks and merchants.
Short-video operators ByteDance Ltd. and Kuaishou Technology have also started shopping events on their platforms. Both platforms livestream e-commerce. Streamers use their connections and credibility with audiences to recommend products, with discounts exclusive to the stream at times.
These platforms have hundreds of millions of daily visitors. In August 2020, ByteDance’s Douyin reached 600 million daily active users while Kuaishou reached 293 million active daily users in the second quarter in 2021. These platforms also have special features such as content recommendation algorithms that contribute to sales figures.
In June 2020, ByteDance created its own e-commerce department and participated in the Double 11 shopping festival that year instead of acting as just an advertising platform for other platforms. Douyin recorded final sales of US$2.9 billion.
On October 1 this year, Alibaba released a new feature called “Zhongcao Machine”, which allows shoppers to search through reviews from other users. It translates to “planting grass” – referring to the idea of planting an idea to purchase goods in a consumer’s mind.
The notion of guochao – the desire to buy Chinese services and goods and connect with local producers and roots – has become popular much to the benefit of Chinese companies and likely in response to their greater competitive goods and service offerings in recent years. While the trend may have been strengthened by nationalist backlashes against foreign products, it has been some time since brand preferences in China shifted from foreign to domestic companies.
A recent survey conducted of 5,000 respondents from 15 cities found that the number of those who would buy a local brand over a foreign brand increased from 15 percent to 85 percent from 2011 to 2020. The shifts in preference has led to the emergence of large local players in some categories.
Over the last decade, local Chinese brands have captured most of the market in household packaged goods and electronics. In these categories, many Chinese brands hold market shares of more than 50 percent.
Historically, foreign players have had the largest market share in the beauty and automotive industry in China. Chinese premium automotive brands now account for six percent of the market while electric vehicles account for almost the entire market in China.
The guochao trend has been most noticed in apparel and footwear, with local apparel brands gaining three percentage points market share between 2015 and 2020. However, footwear and sportswear dropped between five and 10 percent in the same period. Despite this, some Chinese companies have shown strong growth. Sportswear company Anta Group increased its sales approximately threefold in this period while Li-Ning grew its sales by 85 percent. Some global brands also saw declines in early 2021.
Clearly, the preference shifts are thus responding to more than just ‘buying local’ but a mix of factors like quality expectations, market trends, price range, and perception among target consumer bands, etc.
For example, Chinese domestic skincare and makeup products have been able to challenge global counterparts through a better understanding of Chinese consumers, R&D capabilities, and better online channels for sales. The industry has also received support from the government and the Ministry of Industry and Information Technology (MIIT), with promises being made to team up with other agencies to offer the cosmetics industry innovation and funding support.
According to Shanghai Shenyin Wangou Research & Consulting Co. Ltd., though foreign cosmetic brand led in presale figures, domestic brands Winona and Proya Cosmetic Co. Ltd. ranked number 5 and 10, respectively, during the first two days of presale in the Double 11 festival. In the first hour of presales, Winona achieved sales of US$109 million. This surpassed its record for the whole festival period last year. Sports brands like Erke, MobiGarden, and Warrior and appliance brand like Tineco and Narwal surpassed sales figure records for the entire day within the first hour of sales.
It has been a common practice for years for the largest tech companies to block rivals’ links on their apps. This is known as the “walled gardens” approach and can protect a company’s digital ecosystem, discourage consumers from spending money elsewhere, and reduce their competitor’s growth. This year’s Double 11 shopping festival saw a major change as this walled gardens approach was banned by government directive to avoid monopolies and uncompetitive practices.
Previously, a walled gardens strategy meant that links from Douyin and Feishu (a workplace tool) could not be opened easily on Tencent Holdings Ltd’s WeChat platform. Links forwarded from Taobao and Tmall could not be opened directly in the app either. Tencent claimed this practice was for security concerns. These practices led to legal issues and complaints from users.
Other companies implemented similar restrictions. Alibaba did not allow shoppers to use Tencent’s WeChat Pay system for years. Douyin also banned third-party website links on livestreaming channels during the 2020 Double 11 festival.
However, these practices are now effectively banned. On July 26, this year, the MIIT detailed a six-month campaign to clean up the internet industry, and blocking external links was one of eight types of activities targeted. On August 17, the State Administration for Market Regulation (SAMR) released draft guidelines to regulate anti-competitive measures in the industry, barring link blocking once more. On September 15, the cybersecurity watchdog released guidelines that required platforms to cooperate on traffic and data in line with national rules.
Tencent, ByteDance, and Alibaba all expressed support for the new rules. On September 17, Tencent allowed WeChat users to share external links in private chats. On October 27, Alibaba’s Chief Marketing Officer Christ Tung confirmed WeChat Pay could be now used to make purchases on their apps. Users can also share their Alibaba shopping carts to WeChat group chats and “Moments” feeds.
During this Double 11 festival, some companies tried to promote public welfare and green consumption. The efforts come at the backdrop of government calls demanding the tech sector to contribute more towards “common prosperity” and several authorities introducing plans to meet China’s carbon reduction goals.
On Tmall, US$15 million worth of green vouchers were given out to encourage consumers to buy green certification and energy-efficient products. At the same time, Alibaba’s logistics department introduced 60,000 package recycling points across 20 cities. JD.com said it is recycling and reducing packaging, and making deliveries using electric vehicles. These initiatives come as no surprise due to sustainable consumption becoming popular in China. In a survey conducted by Pwc, 72% of respondents in China said they buy from companies which are committed to protecting the environment.
Alibaba also launched philanthropy campaigns. For example, their RMB 1 donation for social media posts mentioning the “Goods for Good” program. An initiative from 2006, donations from the program benefit older people living alone, low-income workers, and “left-behind children” of migrant workers.
China contributes a large amount to global consumption but McKinsey reports there is ‘room to grow’. China’s household consumption is approximately 38 percent of its GDP. In comparison, the whole of Asia-Pacific’s consumption is 50 percent of its GDP, the European Union’s is 52 percent, and the United States’ is 68 percent. McKinsey reports that a more complex financial system and new policy directions may steer customers towards discretionary spending or financial assets.
As China continues to urbanize, cities remain the driving force of China’s growth. Approximately 80 percent of future consumption growth is expected to happen in cities. Consumption in China is driven by its 30 largest cities. Consumers in these cities have large amounts of purchasing power, spending more on a per capita basis than the average national spend. These cities have had larger service offers and retail opportunities, historically. However, new hotspots of consumption are emerging in cities outside the top 30, such as Guiyang, and reporting higher household consumption. Many companies are anticipating this next wave of growth and are expanding their reach into cities where incomes are rising.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at firstname.lastname@example.org.
Dezan Shira & Associates has offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Russia, in addition to our trade research facilities along the Belt & Road Initiative. We also have partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh.
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