It seems fitting that in the midst of the Third Plenum of the Communist Party of China’s 18th Central Committee (Translation: A really important meeting.) in which the new leaders of China spoke so insistently about the need to relinquish government control of the economy to market forces, the Chinese not-so-quietly celebrated the 2013 Double 11 holiday.
Double 11, as you might have guessed, falls on 11.11 each year and was once known by the non-descript moniker Singles Day, or Bachelor’s Day. Not Valentine’s Day, mind you, where men and women swap amorous sentiments, but plain old Singles Day, on the basis, I’m told, that singles are sometimes called sticks and the date, obviously, has literal association with the idea. (See my recent post Chinese Copy Right.)
In the end it was Jack Ma and his hugely successful company, Alibaba Group Holding, Ltd, the Chinese equivalent of Amazon and eBay combined, that pushed Double 11 into the news and the record books. Ma claims that he wanted to provide a platform for vendors to thank consumers for their patronage through the offer of incredible deals. But whether driven by sincere gratitude or an insatiable appetite for sales, Alibaba and its massive stable of vendors have successfully turned the holiday into an unparalleled celebration of online commerce.
This past November 11, exactly three weeks prior to the U.S.’s own Cyber Monday, the Chinese once again re-calibrated the global yardstick by which all things mind-boggling are measured. Alibaba, which owns B2C online platform Tmall and C2C online platform Taobao, attracted 402 million unique visitors who collectively spent $5.75 billion, an 83% increase over the prior year. In one 24-hour period.
Alipay, Alibaba’s equivalent of PayPal, processed 188 million payment transactions, more than the number of transactions processed by Visa worldwide in any given day, on average. And more than 23 times the average daily transaction volume processed by PayPal.
With days like this it is no wonder that China will overtake the U.S. this year as the largest e-tail market in the world. Alibaba, it seems, has come far closer than any other company to attaining that elusive Western dream of selling one widget to each of the 1.3 billion Chinese.
But is it the sheer size of the population that is driving this e-tail explosion, or is there more to it than that? Unless this is your first visit to my site, you already know my answer to that.
For starters there is the convenience factor. Like most developing countries, the brick and mortar retail trade just hasn’t had time to build out here to the extent it has in more developed countries. There isn’t a Walmart or Ikea in every hamlet across the country and even in the big cities the cost of land and the bureaucratic hurdles one must clear in order to procure it (or at least the right to use it) make it all but impossible for even deep-pocketed foreign retailers to build out at the pace and with the density they are accustomed to in their home countries.
For most Chinese, therefore, a trip to a modern trade retailer such as Walmart, Carrefour, or Auchan is an outing at best, particularly when you travel by bicycle or bus. And even if you own an automobile, as more and more Chinese do, you typically spend more time parked on the highway than actually driving along it, so even traveling short distances can be a time consuming pain in the neck. Why not sit in your apartment with a cup of tea and let the deliveryman deal with the hassle of getting around?
And they will do it for next to nothing in cost. In a land renowned for cheap, the cost of getting packages from one place to another is almost a non-factor. Your package may show up at your door in the hands of a man or woman on a bicycle, of course, (They also have small vans for delivering your large screen plasma tv.) but somehow it works.
And with the largest Chinese cities projected to reach population levels of 50 million people in the next couple of decades it is doubtful that the convenience factor is going to lose any of its current value any time soon.
All of which suggests that online commerce may completely leapfrog traditional retail in China in the same way that mobile telephones completely leapfrogged traditional landlines in the telecommunications world.
On top of all of that convenience, moreover, there is the issue of communication style. As noted in previous posts when attempting to explain things that are quintessentially Chinese, Chinese communication is what the experts call receiver oriented. The burden of communication falls with the listener, not the speaker, as it does in the United States and most Western countries.
Rather than the word ‘burden,’ however, I’ve come to use the term choice when differentiating the speaker and listener orientation of communication. The Chinese, in other words, have no trouble simply tuning out the voices around them. While the cacophony of shrill and over-powering promoters one encounters in the grocery store on a Sunday afternoon is enough to drive me to the verge of insanity, the Chinese appear to not even notice their presence. Most, I think, would be visibly startled if you pointed out the fact that there was someone at their shoulder shouting into a tinny loudspeaker system in an attempt to get their attention.
Taking that one step further I wonder if the Internet isn’t ideally suited for the Chinese model of communication. It’s certainly cheap, an endearing quality to even the richest of Chinese. It’s convenient, of course, which we’ve already discussed. And all of the annoying negatives of the online world, like the constant onslaught of unwanted pop-ups, the crush of junk mail, the millions of pages of poor quality web pages that seem to have been thrown together by a group of 5-year olds over cookies and milk, are not burdens at all to the receiver oriented, who effectively just tune them out.
And if you surf a few popular Chinese websites, Taobao included, you’ll see that Chinese web sites do bear a startling resemblance to a crowded grocery store awash in promoters dressed in silly costumes literally shouting their call to commerce. The only difference is that what the stores attempt to achieve through the relentless din of promoters the websites seek to achieve through the use of overpowering graphics in constant motion. Both are overwhelming to our Western senses, the difference being only the path (audible v. visual) to sensory overload and the headache that often accompanies it.
The Chinese, however, see these websites through their own eyes, not ours, and they’re obviously effective. How else do you explain the fact that enough people logged onto Alibaba e-tail stores during the early hours of 11.11 to register 10 billion yuan in purchases before 6 a.m.?
But what are the implications of this nearly incomprehensible e-tail revolution for the Middle Kingdom and the rest of the world it increasingly influences?
I would certainly be concerned if I were a traditional Western retailer looking to pave my way to riches in China with brick and mortar. And any Western company, no matter how low tech or otherwise grounded in traditional channels of commerce, had better come up with a way to integrate the Internet into their commercial platform in a meaningful way.
Overall, however, I think the e-tail trend is generally good news for foreign companies looking to get in on the commercial action in China, particularly if they are now just showing up at the party. The cost of developing an Internet presence is not prohibitive (although the cost of getting any traffic may be) and the reach is universal on day one.
I would suggest, however, that you leave your Western web designers at home. They are bound to design websites that are appealing to your eyes but may not be so appealing to the Chinese you are attempting to lure into your universe. If you want to get your point across it’s always better to communicate in the same way your audience does.
The more intriguing question, and perhaps the most critical for those of us wishing to build strong long-term businesses in China, is where will it all stop? Will China, as it has in so many ways, slingshot past the rest of the world in the role ultimately played by e-commerce? And is e-tail so uniquely suited to Chinese culture and the realities of Chinese life today that it slingshots past itself? Instead of life playing out online, as appears to be the social trend in most Western cultures (think Facebook, Twitter, etc), will the online world play out in real life in China? And what will that look like?
Rather than the online world looking more and more like the physical world will the physical world ultimately imitate the online world? Instead of using the online world to capture sales leads that are then closed by traditional sales teams, for example, will the role of the sales team become one of feeding leads to the online platform for follow up and closure? Instead of using dating websites to arrange a shared activity will we use activities to arrange online relationships?
These are more than intriguing questions for companies operating in China. Because, as we know from experience, change occurs very quickly here. So if the online world is going to turn the real world on its head, I would bet dollars to donuts that it will happen first here in China.
As Confucius said, “Wherever you go, there you are.” A fitting thought indeed for an online world in which you can be, quite literally, everywhere at once.
Copyright © 2013 Glassmaker in China
Notice: The views expressed in this post are strictly those of the writer acting in a personal capacity. They are not in any way endorsed or sanctioned by his employer or any other individual with which he may be personally or professionally affiliated.