Singles’ Day is almost here. It’s gonna be awesome.
But it is a strange thing when you think about it.
It’s both a holiday and big sales event. There is tons of marketing by companies, purchasing by consumers and performances by entertainers. So it’s a big festival.
But all of this only exists on smartphones. It’s all virtual. In practice, it is hundreds of millions of consumers in China and Southeast Asia staring at their smartphone screens throughout their day. They are receiving promotion offers, buying stuff, and watching videos (like Taylor Swift at the gala). But it doesn’t exist in the real world.
It’s the world’s first massive festival / holiday that exists on small screens we carry around in our pockets. That’s weird.
And it’s increasingly global.
- Yes, Chinese consumers dominate the festival. But of the +200,000 brands/merchants participating, probably 70,000 will be outside of China.
- But Lazada and consumers in SE Asia are also participating. So we will also have millions of Thai, Indonesian, Malaysian and other SE Asian consumers celebrating this virtual event that started out as an obscure Chinese holiday about being single.
The more I think about Singles’ Day, the more odd it seems to me. Awesome. But a symbol of our increasingly unusual digital lives.
That said, I making a list of questions I am trying to answer for the event. Here are my top seven.
Question 1: What is the Fastest Advancing Frontier of E-commerce?
Singles’ Day is when all the new e-commerce tricks and ideas by merchants, brands, and Alibaba are implemented. They must be implemented well enough to the handle insane, concentrated activity of this spending surge. It’s like a moonshot program or a prize fight. It’s a big public test of all the new stuff.
That means Singles’ Day is also when the frontier of e-commerce (and the digitization of retail) really jumps forward. It’s where you see things becoming fully implemented at scale (they have to be). And where you see what is coming next in e-commerce. Not just in China. Everywhere.
At previous Single’s Day, we have seen big jumps forward in the development of e-commerce in SE Asia. We saw a big jump forward in the integration of entertainment and e-commerce (““See Now, Buy Now”). And we saw the integration of physical and digital ecommerce (i.e., “new retail”).
This year I’m looking for 3-4 things:
- Increasing integration of video and commerce. Think TikTok Shop and Taobao Live.
- New geographies of consumers (not merchants).
- New use cases in new retail.
- New infrastructure initiatives in logistics and delivery.
And I’m mostly looking for which frontier is advancing the fastest.
Question 2: How Much is Singles’ Day Increasing the Users, Participation, and Data of the platform?
In 2018, the GMV (gross merchandise volume) for Singles’ Day was $30B, up 27% from the prior year. And that was up 39% from 2016. GMV is a fun number to follow and it gets the most attention. But it’s not one I care too much about.
Because Alibaba is not a retailer. They aren’t selling merchandise. They are a platform business that enables transactions and other interactions between multiple user groups (merchants / brands, consumers, content creators, local service providers, banks / financial institutions, etc.).
They are an orchestrator of a retail ecosystem that is much, much larger than their company. And they do this by providing a common location, proper governance and various supporting tools and services. Per Nobel Laureate Ronald Coase, they are in the business of lowering transaction costs – and therefore connecting previously unconnected parts of a greater ecosystem. GMV doesn’t really capture any of that particularly well.
With Taobao and Tmall, Alibaba created digital versions of a marketplace and a shopping center. But they have gone way beyond this now. They have added entertainment, local services, payment services and new retail. They are more like a digital version of Orlando, Florida (home of Disney World). They are an ultimate B2C marketplace that increasingly offers everything a consumer wants.
In this digital version of Orlando, the numbers that really matter are how many users (merchants, consumers) have moved to Central Florida – and what is their level of activity (purchasing, investment, innovation, entrepreneurship, etc.). Singles’ Day is a bit like a big moving day. It’s the day when you see a quantum increase in the users, participation and data of the platform. And you can think about the lifetime value of these users.
So the objective of Singles’ Day is not a one-day spike in sales. It is a permanent increase in the users and their participation on the platform. What you want is lots of users focusing their lives, time, spending, creativity, innovation, investment and businesses on the platform.
Ultimately, digital platforms are built on three intangible, long-term assets: users, participation and data. Singles’ Day is a big jump in these assets.
Question 3: How Many Consumers Will Participate in SE Asia and Outside of China? Same Question for 4th and 5th-tier Chinese Cities.
Alibaba’s biggest strategic difficulty has been adding non-Chinese consumers to their platform. Their internationalization efforts have mostly focused on serving Chinese tourists abroad (especially in payment) and on adding foreign merchants and brands (thereby connecting them with Chinese consumers). They have natural advantages in these activities.
But the company has had no obvious path for capturing consumers in geographies like India and Europe. They have been doing some M&A, such as the purchase of Lazada (which was expected) and the investment in Indian Paytm (which was lucky). But this has mostly been opportunistic.
The two geographies where they could show significant consumer growth are in SE Asia and 4th and 5th tier Chinese cities. And I want to see how fast these are growing this year. I’m also curious if there is a tipping point at which consumers in these geographies really take off. Outside of this, I am watching for other regions. Spain seems to be getting more activity right now.
Question 4: What Products and Services Are Going to Be Bundled Next? Any New Loyalty, Membership or Bundled Programs?
A few years ago, now ex-CEO Daniel Zhang released a statement that I thought was a very clear and succinct summary of Alibaba (located here). The phrase that really caught my attention was his description of Alibaba’s business as a combination of physical products, digital media and local services. And Alibaba is clearly bundling these, which is a really good strategic move.
Bundling has real economic and competitive power. I going to go into the economics of bundling in my Moats and Marathons books. But the basic idea is that by combining multiple products / services under a single price, you can increase total spending and create a product that is powerful against competing solo products. And as Alibaba is combining physical products with digital media and local services, they are creating bundles that most other e-commerce companies can’t offer. It’s a powerful move.
I am also watching for initiatives in their membership and loyalty programs. These can lock-in consumers, create switching costs and improve cash flow predictability. Amazon Prime and Costco have been doing this successfully for a long time.
Right now, it looks to me like Alibaba is increasingly experimenting with both bundling and membership programs. They are combining entertainment and e-commerce (“See Now, Buy Now”). And they have their 88 VIP Membership program. I’m looking for their next moves in these areas.
Ok. That’s it for part 1. This is continued in Part 2.
- Can ByteDance Breach Alibaba’s Infrastructure Moat and Become An Ecommerce Giant? (Tech Strategy – Podcast 82)
- Alibaba Takes Over Sun Art Retail. Is It Going to Take Off? Or Is It Infrastructure? (pt 1 of 2) (Asia Tech Strategy – Daily Update)
- Could Sun Art Grow +30% Under Alibaba? (pt 2 of 2) (Asia Tech Strategy – Daily Update)
From the Concept Library, concepts for this article are:
- Singles’ Day
From the Company Library, companies for this article are:
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