Who will be the winner of 11.11 shopping carnival?
November 11, which is known as Singles' Day in China, has become a shopping carnival since e-commerce giant Alibaba Group started launching massive discounts to mark the day in 2009. Online stores on taobao.com and tmall.com, both operated by Alibaba, made the amazing sales of 35 billion yuan on 11.11 in this year. Some people say that it’s the display of the overturning strength of E-commerce. Then whether E-commerce or Taobao, have they really changed the retail sale times? Are they all winners?
Viewing at present, it’s no doubt that Taobao is the winner. In terms of Taobao, “11.11” is a gifted originality and operation. Its winning lies in three points. The point that is most easily to be observed is the large growth of Alipay balance of deposits. Secondly, such a holiday is a big competition, a big ranking and a big finding of Taobao with its E-commerce platform peers. Finally and what is not easily perceived is that through the threshold of “peak information flows processing capacity,” such a holiday not only has magnified the technical advantage in peak information flows processing for Alipay compared with other means of payment such as UnionPay etc., and has strengthened the leader status of Alipay and strong fund deposit has been created, at the same time, the holiday has also magnified the scale advantage of Taobao’s technical platform to other E-commerce platforms.
But are all the E-commerce merchants on Taobao winners? The answer is not sure. The merchants with leading ranking on Taobao have mobilized large resources for the peak sale moment, but the earnings gained may not cover their related costs, and there are quite some merchants who have sustained losses in business for gaining popularity. In certain sense, “11.11” uses today’s losses to seek the expected growing benefits in future. This is thought-provoking. This kind of recurrent losses makes us worry if it’s possible that the bubble of E-commerce also is emerging?
Are other E-commerce platforms that have been involved into the competition all losers? The answer is also not sure. For those E-commerce platforms that have enough differentiation with Taobao, such as JD.COM, it can be said that they have taken advantage of the power and strength of this carnival. Those E-commerce platforms that are struggling with difficulty are those with laggard ranking. Each round of “11.11” all has exposed their shortcomings, and their gap with the leaders has been further drawn away. In this sense, “11.11” still has urged the market shares to be further centralized, and has even strengthened the mechanism arrangement of the monopoly position of leaders.
For the outlook on “11.11” of 2017, 2018 and 2019, will there any change for the situation? Will Taobao still be the very influential winner? Will E-commerce merchants become the mainstream leader in the retail field? I’m afraid it’s not so optimistic, because there are two factors that need to be considered. The first one is the population structure change; the second one is the change of search and flow entry.
Just as the saying of Peter Drucker, father of modern management, the change of population structure is the source of all changes. It is the fundamental motivation to determine the pattern change for E-commerce. In the future several years in China’s population structural changes, there are three prominent points.
The first point is the rapid increase of the middle class. In the future, the newly increased amount of the middle class is nearly 30 million annually, and young people are the main force of the newly increased middle class. Compared to the elders, young people prefer E-commerce type consumption, and this has formed the fundamental motivation for the future continuous leap for E-commerce as a whole.
The second point is the upgrading of the middle class to the wealthy class. In the future, the amount of such an upgrading population is nearly 20 million annually. Compared to the middle class population, the consumption of the wealthy population is more mature, and they pay more attention to services, and they are driven more by emotions but not by functions. For the consumption online of the wealthy population, the input for searching will reduce significantly, and the sensibility for prices will reduce simultaneously. This means that the E-commerce firms that provide higher search efficiency and pay more attention to emotional needs will gain faster development. In other words, for the wealthy population after upgrading, the attraction of the traditional Taobao pattern will decline, and this is a signal that is worthy of the attention by Taobao, for it is very likely to become the bottleneck that influences Taobao’s rising.
The third point is that among the future newly increased middle class population and wealthy population, three fourths is from third tier and below third tier cities, and they scatter in nearly one thousand cities and towns in the whole country. This is a double-edged sword for the development of E-commerce. For the E-commerce of some categories, such as low end standard substances and special long tail products, they have a chance to realize the great-leap-forward development. Other E-commerce merchants that can’t keep up with consumption upgrading are very likely to be eliminated by the market. Accordingly, traditional E-commerce platforms including Taobao, their control power for low end standard products will decline, and the key point will increasingly shift to the long tail of consumption. In other words, the shares occupied by traditional E-commerce platforms in total market have the trend of separation but not concentration.
One of the core values of traditional E-commerce platforms is to help users to reduce the cost of search. The search and flow entry are the fields that Internet magnates invest most and fight most intensely, and are also the fields that change fastest and revolutionary changes will most likely appear. The impact of a new generation mobile intelligent devices of mobile phones and Google Glass etc. on search and flow entry is appearing. I’m afraid that for traditional E-commerce, this is a challenge rather than an opportunity. The good illustration is that WeChat is forming a strong challenge for E-commerce magnates and even has a chance to overturn the pattern of the whole E-commerce market.
The opportunities and challenges coexist. Great changes are being brewed for E-commerce industry and E-commerce platform industry. Let’s wait and see what happens for the latter several “11.11”.
Originally published on Oriental Morning Post | 2013-11-12
