2016 SINGLES’ DAY PREVIEW: AIMING HIGH AS ALIBABA PAIRS ...€¦ · 19/10/2016  · ALIBABA: A...

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OCTOBER19,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

2016 SINGLES’ DAY PREVIEW:

AIMING HIGH AS ALIBABA PAIRS

SHOPPING WITH ENTERTAINMENT &

SOCIAL MEDIA

1) WeestimateAlibaba’ssalesforthe2016Singles’Daywillincrease40%yearoveryeartoreachUS$20billion.

2) Thegamificationofshopping,omni-channelsolutionsandglobalizationareexpectedtobethekeyhighlightsforthisyear’s Singles’ Day sales, according to the media. Weawaitofficialannouncements fromAlibabaon thisyear’sSingles’Daymarketingstrategy.

3) Other e-commerce platforms in China have plans tocompete against Alibaba through promotions, improvedfulfilment capabilities and collaboration with industrypartners.

D E B O R A H W E I N S W I G M a n a g i n g D i r e c t o r ,

F u n g G l o b a l R e t a i l & T e c h n o l o g y d e b o r a h w e i n s w i g @ f u n g 1 9 3 7 . c o m

U S : 6 4 6 . 8 3 9 . 7 0 1 7 H K : 8 5 2 . 6 1 1 9 . 1 7 7 9

C N : 8 6 . 1 8 6 . 1 4 2 0 . 3 0 1 6

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OCTOBER19,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

INTRODUCING SINGLES’ DAY: CHINA’S LARGEST ONLINESHOPPINGDAYSingles’Day (November11) is themost influential annualonline shoppingday inChina,andbrandedbyAlibabaastheGlobalShoppingFestival. It isconsidered a chance to boost sales after China’s GoldenWeek holiday inOctober.

Figure1.OnlineSalesforSingles’Day,CyberMondayandBlackFriday,2011-16E

Source:Statista/ComScore/FungGlobalRetail&Technology

HISTORYOFSINGLES’DAYSingles’ Day (November 11) was first started among students at NanjingUniversity inthe1990sasadayformentocelebratetheirbachelorhoodor“singleness”. The date was chosen because the number “1” resembles anindividual that is alone. Alibaba rebranded it as a day for singles to treatthemselveswellbybuyingthethingstheydesire,andmarketeditsfirstonlinesales in 2009 with special “Double 11” deals to attract customers.Subsequently,AlibabaeventrademarkedseveraltermsrelatedtoSingles’Dayin 2012. The online sales extravaganza caught on with other e-commerceplayersinChina,withJDlaunchingitsfirstSingles’Daysalesin2010.

OURPROJECTIONFORSINGLES’DAY2016At FungGlobal Retail& Technology,we expect Singles’Day 2016 sales toreach US$20 billion, which represents a 40% year-over-year increase.Weexpectsalesmadeonmobiledevicestoincreasesequentiallyonthisyear’sSingles’Day,from71%in2015and43%in2014.

Ourgrowthexpectationisdrivenbythefollowingfactors:

• Extensivepromotionalcampaignsandmarketingactivities

• Increasingglobalreach• IncreasingconsumptionbyagrowingmiddleclassinChina

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2011 2012 2013 2014 2015 2016E

US$billion

Singles'Day(Alibaba)CyberMondayBlackFriday

+40%

Singles’Dayissignificantnotonlyduetoitsimpactonshort-termearnings,butalsobecauseofitsread-throughtothecompany’sfuturestrategy.

Singles’DayoutperformedbothCyberMondayandBlackFridayintheUSbysalesvolume.

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OCTOBER19,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

• ImprovedfulfilmentcapabilitiesthroughAlibaba’ssuiteofsolutions:Alibaba has increased the efficiency of its payments, supply chain,omni-channel, online payment and logistics infrastructure ahead ofthisyear’sSingles’Day

HIGHLIGHTSTOLOOKOUTFORONSINGLES’DAY2016Singles’Dayhasevolvedfromaone-dayoccasionforChinesecustomerstoshop for deals to aworldwide shopping festival.Weoutline the followingplansAlibabahasforSingles’Day2016inordertomeetitssalesobjectives,as reported in themedia.Official announcements for Alibaba’smarketingstrategyarescheduledforOctober20.

1)TheGamificationofShopping

One of Alibaba’s strategies for Singles’ Day is tomerge gamificationwithonline shopping. The company will leverage its media and entertainmentassetstodriveincreasedonlineconsumption.

2016AlibabaSinglesDayCountdownGalawillbeheldontheeveofSingles’Day. The countdown to the event will be held in Shenzhen and will bebroadcast live by Zhejiang Satellite TV, its official media partner, andAlibaba’smediaassets, includingYoukuTudou,TmallTVBoxandUCWeb.Alibaba has hired US television producer David Hill, the producer of theSuperBowl,theOscar’sceremonyandAmericanIdol,accordingtoBarron’s.

2016 Tmall Singles Day Global Fashion Show features the latest fashiontrends and will be broadcast on multiple channels before Singles’ Day.Approximately50ofthe80brandsfeaturedintheeight-hourfashionshoware expected to be global brand, and the production teamof the fashionshowwasselectedfromseveralcountries.ViewerswillbeabletoorderanyclothingshownduringthefashionshowonTmallinrealtime.InternationalbrandsthatwillparticipateintheshowincludeBurberry,Maserati,GuerlainandRimowa.

Figure2.Tmall’spromotionalactivitiesbetween21Octand11Nov

Source:Companydata

Campaign/Pre-sale

period(21-31Oct)

• TmallandbrandswillpartnerwithKOL(keyopinionleader),mediaandcelebrioestoincreaseinteracoonwithshoppers.

Warm-upperiod

(1-10Nov)

• Emphasiswillbeplacedonincreasingexposureofbest-sellingproducts.• ShoppersareencouragedtoaddmerchandisetoshoppingcartsforpurchaseonSingles'Day,sobrandscanprepareforappropriateinventorylevels.

Singles'Day(11Nov)

• TmallwillbroadcastlivesessionswithCEOsofdifferentbrandswhowillpromotetheirproductsandinteractwithshoppers.

Introducingagamingelementtoincentivizeonlineshopping.

Promotionsfor2016Singles’Daywillbedividedintothreeparts,asbrandspartnerwithinternetcelebritiestoincreaseexposure.

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OCTOBER19,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

2.Multiscreeninteractiveexperience

AlibabawillpromoteproductsonTVscreensthatwillallowviewerstoscanQR codes and purchase the items on-screen. Thiswill allow customers toenjoyaninteractivemulti-screenexperienceovermobile,onlineandonTV,andtowatch,playandpurchaseinrealtime.

Figure3.Alibabacommerceandmediaassets

Source:Companydata

3.Omni-channel

Alibaba will integrate the online and offline channels, and increase theefficacy of its payments and logistics infrastructure, which is intended tostimulateconsumptiondemand.

Alibaba’s corporategoal is for its ecosystemand infrastructure to supportbothChineseandglobalcompanies.Thefivekey infrastructure inplacetohelplocalcustomersandSMEsexpandabroadaremarketplace,payments,logistics,cloudcomputingandbigdata.

CainiaoNetwork,Alibaba’s logisticsarm,expectsenhancedexpressservicelevels this year, with the support of big data and increased capitaldeployment.

4.Globalization

Overseasorderingactivitywasoneof theprimary reasonsdrivingsales tooutperform on last year’s Singles Day, and Alibaba expects the growthmomentumtobesustainedthisyear.

Participationofglobalbrandsinthesaleseventwilllikelyincrease,asTmallhas expanded its source of procurement from domestic to overseassuppliers. InternationalbrandssuchasAveeno,CorinedeFarme,Guerlain,utenaandNutrilonmade theirdebutonTmallGlobal in September2016.Moreover,TmallGlobal,throughitspartnershipwithTarget,hasintroduced

ExpectanevenbroaderglobalfocusforSingles’Day2016

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OCTOBER19,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

brands including California Baby, Lansinoh, Munchkin, Up&Up, ArcherFarms,AmedaandStarbucks.

JackMa, theChairmanofAlibaba, reiterated ina letter toshareholders inOctober2016,thatglobalizationisoneofthekeytenetsofthegroup’slong-termcorporatestrategy.

Figure4.TmalladvertisementforSingles’Day

Source:Companydata

RESPONSEFROMOTHERE-COMMERCEPLAYERSJD.com announced that it will set aside RMB500 million for logisticssubsidies to facilitateefficientdeliveryof itsmerchandise forSingles’Day.JDhasyettoannouncewhetheritwillcontinuebroadcastingitsSingles’DayGalashowthisyear.

Suning,20%ownedbyAlibaba,announceditscooperationwithZJSExpress,a domestic courier company for Singles’ Day delivery. Suning is set toannounceitsSingles’DaymarketingstrategyonOctober18.

NetEase, through its cross-border ecommerce platform Kaola.com, hasannounced partnerships with international brands such as UGG andBellamy’s Organic (both from Australia). Kaola.com also signed acooperationagreementwithSaSa,whichenricheditsproductportfoliowithinternational cosmetics brands such as Lancome, SK-II, Sisley, Dior, Gucci,ChanelandShiseido.

Yihaodian, an online supermarket that JD acquired fromWalmart in June2016,haschallengedAlibaba’sTmallsupermarkettoapricewarintherun-uptoSingles’Day.Yihaodianannouncedthat itwill investRMB1billiontoofferlowerpricestoshoppersonitsplatformthanonTmallsupermarket,inresponse toAlibaba’sannouncement in JulyofdiscountsofferedonTmallsupermarket.

Tmall’sSingles’DayadvertforHongKonghighlightsanofferingofover100internationalbrandsanda“BuyHK$300andgetHK$300free”promotion.

6

OCTOBER19,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

Figure5.AdvertisementsdepictingapricewarbetweenAlibaba’sTmallsupermarketandJD’sYihaodian

Source:Companydata

ALIBABA:AREVIEWOFSINGLES’DAY2015Lastyear,wepublishedaseriesofreportscoveringSingles’Day.Weprovideasummaryofthekeytopicswediscussedinthereports:SinglesDayFlashReport,SinglesDayFlashReport2andSinglesDayWRAPUP.

In2015,grossmerchandisevolume(GMV)forAlibaba’Singles’DayreachedRMB91.2billion(US$14.3billion),representingayear-over-yearincreaseof54%, and comprised 2.9% of Alibaba’s total sales for FY16 ended March2016.ThestronggrowthinGMVwasachievedprimarilybythesalesboostfromoverseasproductsandanomni-channelstrategy.

Figure6.Alibaba’sPerformanceDuringSingles’Day2015Singles’Day2015

Alibaba’sPerformance

Sales US$14.3billion(RMB91.12billion)

Orders CainiaoLogistics,Alibaba’saffiliatedlogisticspartner,received467milliondeliveryordersduringthe24-hourshoppingperiod,morethan15timesthedailyaverageof30millionorders,a68%increasecomparedtolastyear’sSingles’Day.

MobileSales TotalmobileGMVsettledthroughAlipPayisapproximatelyUS$9.8billion(RMB62.6billion),exceedingtotalGMVin2014,andaccountedfor68.7%oftotalGMV.TotalmobileGMVincreasedby158%comparedto2014.

ForeignRetailers

Morethan16,000internationalbrandscompletedtransactionson11.11.33%oftotalbuyerspurchasedfrominternationalbrandsormerchants.Buyersandsellerscamefrom232countriesandregions.

Source:Companydata

LHS:ATmallsupermarketadwiththeslogan“thewinneristheonewhohelpsyousavemost”.

RHS:AYihaodian(JDsupermarket)adwhichstates“Ourpriceswillalwaysbelowerthanyours[Tmall]withoutanyfancypromotionalcampaigns”.

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OCTOBER19,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

AGLOBALPERSPECTIVEON2015SINGLES’DAYOnSingles’DayinternationalretailerstargetChineseshoppers,andChineseretailers target international shoppers. Alibaba saw buyers and sellerscomingfrom232countriesandregionsduringSingles’Day2015.AccordingtoofficialstatisticsforSingles’Day2015:

• For every 12 Chinese people, there is one buying from Tmall onSingles’Day.

• Forevery10peopleoutsideofChina, there isonepersonbrowsingontheAliExpresswebsite.

TmallGlobal–InternationalRetailersSellingtoChineseConsumers

OnTmallGlobal,anonlinemarketplaceforimportedproducts,therewasacountry-specific section that includedproducts fromcountries suchas theUS, the UK and Japan. The products, with a heavy emphasis on beauty,health and personal care, were listed on a separate country page.International retailers such as Macy’s, Costco and Sainsbury’s werepromotedontheTmallGlobalsite.

According to official statistics, over 5,000 international brands from 25countriesparticipatedintheSingles’DaysaleonTmallGlobalin2015,andover30millionChineseconsumersboughtimportedproducts.

• The most popular categories of imports included maternity andchildcare(30%ofsales)andcosmetics(22%ofsales).

• The most popular import countries for Chinese online shoppersincludetheUS,Japan,Korea,GermanyandAustralia.

• CostcowastheNo.1retailerofimportedproductsonTmallGlobalin2015 by value, with sales reaching 50 million units. Costco firstenteredtheChinamarketthroughTmallGlobalin2014.

Figure7.Singles'Day2015‒theTopCountriesandProductsImportedintoChinabySalesValue

Rank Country

Rank Products1 US

1 Maternityandbabycare

2 Japan

2 Cosmeticsandskincare3 Korea

3 Healthcare

4 Germany

4 Food5 Australia

5 Personalcare

6 Thailand

6 Apparelandfashion7 UK

7 Consumerelectronics

8 NewZealand 9 France

10 Italy

Source:AliResearch

CostcowasaninternationalretailerthatsuccessfullyleveragedTmall’sGlobalplatformforSingles’Daysales

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OCTOBER19,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

AliExpress:ChineseRetailersSellingToOverseasConsumers

AliExpress, Alibaba’s international platform for overseas shoppers, allowsshoppers from around theworld to join the Singles’ Day shopping event.AliExpresswas launched in2010 tohelpmarketandsellChineseproductsoverseas.OnAliExpress,pre-dominantlyChineseproductswereshowcased,includingtabletsfromXiaomiandsportswearfromLi-Ning.

The site allows shoppers to buy products directly from China, and offersdiscounts on the sale day. AliExpress handled 21.24 million orders fromoverseasbuyerssoldby62,800ChineseretailersforSingles’Dayin2015.

Figure8.Singles'Day2015‒theTopCountriesandProductsExportedOutOfChinabySalesValue

Rank Country

Products

1 Russia

Householdappliances

2 Spain

Officeequipment

3 US

Digitalelectronics

4 Israel

Autoparts

5 Ukraine

Apparel

6 Belarus

Cosmetics

7 France

Jewelryandwatches

8 Chile Baby,Kids&Maternity

9 UK

Sportsandhobbies

10 Canada

Telecommunications

Source:AliResearch

Figure9.Singles'Day2015–BestsellingbrandsbyProductCategory

Women'sApparel

Men'sApparel Cosmetics

Baby,Kids&Maternity

SportsandHobbies Shoes

MobilePhones

MajorHouseholdAppliances

SmallHouseholdAppliances

No.1 Uniqlo Uniqlo Pechoin Balabala Nike Camel Huawei Haier Midea

No.2 Inman JackJones KanS Huggies Adidas RedDragonfly

Apple Midea Philips

No.3 Eifini Peacebird Chando Yashili NewBalance

AoKang Xiaomi Leshi Ecovacs

No.4 Elfsack MarkFairwhale

Lancome Goodbaby LiNing Skechers Meizu Siemens Joyoung

No.5 Peacebird Semir L'Oreal PurCotton Toread Playboy Qiku Hisense Supor

Source:AliResearch.Note:Internationalbrandsinbold

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OCTOBER19,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

ResponsesfromSelectDomesticE-CommerceCompetitorsin2015

Other e-commerce platforms in China actively competed with Alibaba onSingles’ Day in 2015 through promotions and collaboration with industrypartners.

JD, Alibaba’s closest competitor, formed a strategic alliancewith Tencentwhich enabled WeChat users to shop directly on JD.com via the app’sshoppingchannel.JD.comsawatotalof30millionordersonthesingledayofNovember11,whichrepresenteda114%year-over-yearuptick,breakingits2014recordof14millionordersinonly12hours.

Gomekickedoff itsbigsaleofupto70%offon itemsranging fromhomeappliancestocarcareproductsonOctober23.

Suning, partlyownedbyAlibaba, launchedaOneDollar Sale campaign toattract customers. On the day, Chinese online shoppers ordered 37,000health products from the US within 11 hours of the start of Singles Day,220,000 Xiaomi smartphones and around 380,000mobile power chargerswithinthefirst18hours.

WHATWASDONEOUTSIDEOFCHINAFORSINGLES’DAY2015InternationalretailerslaunchingtheirownSingles’Daycampaignremainedintheminority.ThefewinternationalonlineretailerssuchasNeweggwholaunched their own campaigns offered discounts on their products.According to paid search statistics by AdGooroo, a search marketingintelligence company, the total spend by US retailers on Singles’ Dayadvertisingkeywordswas“insignificant”.

• Newegg, an online retailer, selected 150 deals for the 24-hourSingles’Daycelebration,offering11%offordersforthoseusingVisaCheckout.

• OTTENewYork,awomen’sluxuryboutique,offered20%offduringNovember9to15,2015.

• Nasty Gal, an online fashion retailer, offered discounts for USconsumers,accordingtoInternetRetail.

InternationalretailersmostlyparticipatedinSingles’DaysalesthroughAlibaba’splatforms,withafewlaunchingtheirownSingles’DaymarketingfortheUScustomers

10

OCTOBER19,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

Figure10.AliExpressSingles’DaySalesPromotion2015

Source:Companydata

Conclusion

WeestimateAlibaba’sSingles’Daysalesin2016willincrease40%yearoveryear to reachUS$20billion.Ourgrowthexpectation isprimarilydrivenbyextensivepromotionalcampaignsandmarketingactivities,increasingglobalreach and improved fulfilment capabilities by Alibaba’s suite ofinfrastructure solutions. The gamification of shopping, omni-channelsolutions and globalization are expected to be the key highlights for thisyear’s Singles’ Day sales, as reported by the media. We await officialannouncementsfromAlibabaonthisyear’sSingles’Daymarketingstrategy.

11

OCTOBER19,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comEsmePauAnalystIvyHuangResearchAssistantHONGKONG:8thFloor,LiFungTower888CheungShaWanRoad,KowloonHongKongTel:85223004406LONDON:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NEWYORK:1359Broadway,9thFloorNewYork,NY10018Tel:6468397017

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