The November 11 Singles’ Day (a holiday popular among young Chinese people that celebrate their pride in being single), set new sales records this year. Launched by Alibaba in 2009, the first event featured 27 merchants and generated US$7.8 million in gross merchandise value (GMV). Fast forward to 2018, when Singles’ Day featured 180,000 brands and generated US$30.8 billion in GMV—a 27% increase from 2017. Purchases were recorded from 230 countries and regions, and more than 40% of consumers made purchases from international brands.

JD.com, China’s largest e-commerce retailer by revenue, with 300 million active users, enjoyed a record event too, with November 1–11 transaction volumes hitting an all-time high of US$23 billion.

‘New Retail’

Aside from sales volume, this year’s event was significant in that both Alibaba and JD leveraged bricks-and-mortar stores alongside their e-commerce capabilities. Alibaba bills this trend as “New Retail,” a convergence of online and offline retail through technology.

“Over the last two years, we have pioneered the concept of New Retail to accelerate the digital transformation of the offline,” said Alibaba Group CEO Daniel Zhang. “On the back of China’s explosive digital transformation, astounding growth [of Singles’ Day] over the past decade has powered the steady growth of quality consumption sought by Chinese shoppers. The evolution also showcases the development of the Alibaba ecosystem over time, expanding well beyond e-commerce,” he said.

This year, for example, Alibaba harnessed more than 20 businesses from across its ecosystem on Singles’ Day. This included about 100 Hema grocery stores and 400 RT Mart hypermarkets. Further, Alibaba’s online food delivery service, Ele.me, provided delivery services for select Starbucks stores across 11 Chinese cities, including full-service coverage in Beijing and Shanghai. In addition, 150,000 merchant partners of Koubei, Alibaba’s local services guide, offered discounts on services including catering, beauty and hair salons and karaoke bars.

James Hebbert, U.K. managing director of Hylink, China’s largest independent digital advertising agency, suggests that physical stores will spark future growth. “2017 marked Alibaba’s first venture into the offline, in-store market—200,000 smart stores have been opened in China over the last 12 months across the apparel, [fast-moving consumer goods], beauty, automotive and home décor industries,” he said. “Traditionally an online platform, the Chinese tech giant opened its first offline stores, allowing it to forge partnerships with Western brands such as Starbucks.”

JD, meanwhile, chose Singles’ Day to open its largest 7FRESH store to date in Langfang, Hebei Province. 7FRESH is JD’s offline fresh food supermarket. JD reported the new store received more than 10,000 customers within a single hour on November 11. In addition to 7FRESH, JD’s portfolio of offline stores includes unmanned convenience stores and JD Retail Experience Shops.

“After more than a decade of building out technology and infrastructure for our own retail business, we will spend the next decade extending our capabilities to enable and empower both online and offline retail innovators,” said Jianwen Liao, chief strategy officer of JD.com. “We see the future of retail as one without boundaries, where [customers] can buy whatever they want, whenever and wherever they want it.”

The China Opportunity

A study conducted by JD, Walmart, JD Daojia and Tencent—which owns WeChat, China’s premier messaging platform—supports consumer willingness to meld online and offline channels. Researchers found that Chinese shoppers increasingly are buying groceries online for immediate delivery from local offline stores. Two-thirds of shoppers (67%) actively use services such as JD Daojia, which can deliver products from local online shops, including Walmart, within one hour.

Tencent also is helping local Chinese retailers sell online and deliver offline and has partnered with Walmart and Carrefour, connecting physical store formats to new digital services plus mobile payments. “WeChat is the social media platform in China, so you can understand why retailers of all sizes prefer partnering with Tencent,” said Michael Davis, NACS vice president of member services.

For international retailers and brands, China presents a massive opportunity. “Over the past two decades, the rise of China on the world stage has been one of the most significant macroeconomic events in terms of the global economy,” said Sukhjeeven Nat, head of the retail and wholesale sector, Santander Corporate & Commercial. “For instance, China has become the world’s biggest player in online shopping, with £477 billion [US$612 billion] in online sales recorded so far in 2018. This is significantly higher than the [US$485 billion] and the U.K. [US$82 billion]. By the end of 2018, China is forecast to have 650 million online purchasers, up to 722 million next year and 797 million in 2020.”

Further, as Hebbert points out, the Chinese population includes 400 million millennials—74 million more people than the entire U.S. population—and they historically have been the most engaged online.

As incomes rise in China, consumers want faster access to and a wider variety of high-quality products from around the world.

Alibaba recently announced its commitment to help import $200 billion worth of goods from countries including Germany, Japan, Australia, the United States and South Korea over the next five years, meeting the rising demand of Chinese consumers. “China’s middle class is booming. As incomes are rising in China, consumers want faster access to and a wider variety of high-quality products from around the world,” said Alvin Liu, general manager of Tmall Import and Export.

According to a report by Deloitte China, the China Chamber of International Commerce and AliResearch, China’s cross-border e-commerce market has grown remarkably, with the proportion of imports to total e-commerce sales growing from 1.6% in 2014 to 10.2% in 2017. The report also highlights that, between 2014 and 2017, the number of shoppers on Alibaba’s dedicated platform for cross-border shopping, Tmall Global, has grown tenfold.

Walgreens Boots Alliance, The Royal Mail, COS and Jo Malone are among Western brands recently opening on the Tmall Global platform. “Tmall Global has opened doors for American retailers such as first-mover Costco, to go from a small assortment of nuts to an actual store on Tmall itself—and potentially a brick-and-mortar store in China,” said Davis at NACS. “Other retailers such as Macy’s and Brookstone are slowly looking at the Tmall Global opportunity.”

However, some retail and luxury brands are reported to be closing stores on Tmall because of fierce online competition while others, such as Gucci, are said to be reluctant to partner with Chinese e-commerce platforms run by Alibaba and JD.com because of widespread counterfeiting.

Social Commerce

Azoya Group, an e-commerce solutions provider, suggests that social commerce—with players such as WeChat, group discounter Pinduoduo and shopping app Little Red Book—is the new e-commerce.

“On general e-commerce platforms, users generally open an app because they already have in mind what they want to buy,” said Elena Gatti, managing director of Azoya Group’s sales activities in the DACH region. “Social commerce is designed to help brands and retailers find customers that didn’t have that intention to purchase a particular product in the first place. This means that retail players can better reach potential customers in smaller-tier cities, and more niche, emerging brands have a better shot of reaching new customers that haven’t heard of their products. User-generated content helps bridge the trust gap between products and customers because it shows that such products have already been vetted by their peers.”

Hebbert at Hylink believes there is still ample opportunity for brands to take advantage of a growing and lucrative market. “It has been predicted that China will make up 60% of global e-commerce by 2020,” he said. “Alibaba is certainly open to this. Tmall Global, for example, provides 3,700 categories of imported goods from 75 countries and regions on its platform.”

Hebbart recommends that businesses tailor their approach to the Chinese culture and retail environment. “Brands will need to create exclusivity through limited-edition products, collaborate with influencers and key opinion leaders, implement pop-up stores to drive sales from online to offline and vice-versa and most importantly, be acutely aware of the nuances of Chinese technology platforms such as WeChat, Weibo and Alipay,” he said.