China now has one of the largest and most prosperous retail markets in the world. The country’s retail sales are predicted to reach about 48 trillion yuan ($6.99 trillion) by 2020, growing at 10% a year, whilst ecommerce trade is projected to grow at about 15% in the same period. In 2015, the United Kingdom’s total retail sales of £339 billion were just 10 per cent of China’s 30.1 trillion yuan (£3.39 trillion).
These impressive figures are due to the growing Chinese middle-class consumer base, as increasingly more customers are hungry for foreign products and brands. Foreign brands are often perceived to be of superior quality and represent luxury for the Chinese middle-class. Demand for these brands has led to an increasing number of overseas companies looking to operate in the country to connect with local customers in what is the world’s most populous country. This is evident from the fact that the number of foreign companies operating within China’s free trade zones doubled last year.
However, setting up operations in countries such as China can be very challenging and is not without its risks. As a result, many of these Western brands use platforms such as Alibaba’s Tmall Global, which gives them access to the 439 million active buyers on Alibaba’s platforms without any need for a local bricks and mortar set-up. Tmall Global currently hosts more than 7,700 brands from 53 countries and is increasingly used by a growing number of brands from the UK, US, Germany, Australia, New Zealand, South Korea, Japan, Taiwan and Hong Kong as a spring board to China. The opportunity is huge.
Adding to this opportunity is something which is unique to the Chinese retail market – the growing popularity of shopping festivals. These online events now form a vital part of China’s retail identity and are huge calendar events which many Chinese online shopping enthusiasts look forward to. They play an integral role in encouraging consumers to experience new products and brands, especially those from overseas, as well as providing businesses with a platform to increase brand exposure and trade.
The best example of one such shopping event is Alibaba’s 11.11 Global Shopping Festival, which is now bigger than Black Sunday and Cyber Monday combined. The festival originated from the Chinese folk holiday ‘Singles’ Day’, which falls each year on November 11th and was first celebrated at Chinese universities in 1993. This date was adopted by Alibaba in 2009 as a way to invite people to buy themselves gifts in the spirit of an “Anti-Valentine’s” Day. It has since evolved into the biggest 24-hour online shopping festival in the world, breaking sales records each year since it began. At the 2016 festival, transactions worth RMB 120.7 billion (USD 17.8 billion) were processed, representing a growth of over 30 per cent compared to 2015. At peak periods, a staggering 120,000 transactions were processed per second.
These shopping festivals are excellent gateways into China for brands from around the world. The 2016 11.11 festival was the most global to date, with a total of 235 different countries taking part. Of the 100,000 brands involved, 11,000 were from outside of China, whilst 37 per cent of Chinese buyers purchased products from international brands including Adidas, Apple, Pampers, Phillips and Uniqlo as well as major British brands such as Dyson.
Another example of a themed shopping festival is Alibaba Group’s inaugural 9.9 Global Wine & Spirits Festival, held in September 2016 and bringing 100,000 international drinks from 50 different countries to Chinese consumers via B2C marketplace Tmall.
Shopping festivals in China give brands a chance to use new and innovative ways to reach consumers: Alibaba’s Chinese Lunar New Year Shopping Festival 2017 is set to include live broadcasts from Chinese villages on the Tmall and Taobao mobile apps in order to show urban consumers how their produce is harvested and processed. At the 2016 11.11 festival, consumers were treated to augmented and virtual reality, live streaming and entertainment by Chinese and international celebrities. Indeed, eight million users sampled and purchased products on the virtual reality shopping channel, whilst more than 70 million played the Pokémon-Go type ‘Catch the Tmall Cat’ game through the Mobile Taobao mobile app. This app helped drive footfall to the offline locations of Tmall merchants such as Intime shopping malls, Suning, Shanghai Disney, KFC restaurants and Starbucks.
The demand for foreign goods in China is growing and Chinese shopping festivals are providing brands with a unique opportunity to access the Chinese market. Shopping festivals are here to stay and are shaping the future of Chinese retail. Their benefits are twofold – great offers and accessibility for consumers hungry for new products and unrivalled exposure for brands, something crucial for those looking to enter a new market for the first time.
Meifang Chen is senior manager at Alibaba Group UK [IRDX RALI]