Factbox: China’s love of e-commerce powers Alibaba’s Singles’ Day

Published 11/11/2019 in Business News, Economy & Finance

Factbox: China’s love of e-commerce powers Alibaba’s Singles’ Day

SHANGHAI (Reuters) – China’s dominant e-commerce firm Alibaba Group Holding raked in $23 billion worth of sales in the first nine hours of its annual Singles’ Day shopping extravaganza on Monday, setting records as the event celebrates its 11th year.

The 24-hour shopping event is akin to Black Friday and Cyber Monday in the United States and has become a highlight of China’s e-commerce industry, with other retailers running concurrent promotions. This year, Alibaba netted $1 billion in sales in the event’s first 68 seconds.

Here are some quick facts about China’s e-commerce’s industry:

WORLD’S BIGGEST

China is on track to book $1.94 trillion in e-commerce sales in 2019, more than three times the United States which is in second place with $586.92 billion, a report from researcher eMarketer shows.

China on its own represents 54.7% of the global e-commerce market, nearly twice the share of the next five countries combined, the report showed.

However, the country is ranked fourth when it comes to forecast e-commerce sales growth for 2019, behind Mexico, India and the Philippines, according to eMarketer.

TOP PLAYERS

Alibaba’s e-commerce marketplaces, business-to-consumer Tmall and Taobao, where both individuals and businesses set up shop, are China’s dominant shopping platforms, hosting thousands of merchants selling products as varied as T-shirts, household sundries and four-poster beds.

The firm’s competitors include longtime rival JD.com, which sources goods and sells them directly to consumers, and four-year-old Pinduoduo Inc that managed to break into the top ranks by courting China’s rural residents with deep discounts and a group-buying model.

There are also a range of other e-commerce sites that focus on different market segments, such as cosmetics, groceries and home appliances.

Competition between platforms is rife and has boiled over into the public sphere. This month, regulators summoned over 20 platforms and urged them to stop practices that could be seen as monopolistic.

SECTOR’S BACKBONE

E-commerce in China is heavily reliant on logistics companies, couriers and payment systems such as Alibaba-backed Alipay and WeChat Pay from Tencent Holdings Ltd.

Couriers STO Express Co Ltd, ZTO Express (Cayman) Inc, YTO Express Group Co Ltd, S.F. Holding Co Ltd and Yunda Holding Co Ltd send parcels for as little as 8 yuan ($1.14), making purchases online more convenient at times than offline.

Many couriers are also part of the Cainiao Smart Logistics Network, majority owned by Alibaba which co-founded it in 2013. Cainiao provides software to and shares data with warehouses, couriers and logistics firms.

JD.com manages its own logistics network, a FedEx-style parcel delivery service which it started last year.

HOW ARE THEY FARING?

The rapid growth of Alibaba and JD.com has tracked that of China’s economy and the expansion of its middle class over the past two decades.

This, however, has also made them vulnerable, as the economy slows to its weakest pace in almost three decades and retail sales post their slowest growth since early 2003.

Alibaba said revenue for the quarter to September-end for its core commerce business rose 40% year-on-year, versus 56% in the same period in 2018.

Their next step, as a result, has been to diversify, with Alibaba moving into financial services, cloud computing and artificial intelligence (AI), while JD.com has invested in AI to improve its logistics and advertising capabilities.

They are also doubling down on reaching consumers in China’s third- and fourth-tier cities, where Pinduoduo currently has a foothold, citing more promising, higher growth.

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