In the contests around the world that Australia competed in last week, one bronze medal didn’t get much attention in the general media. In the Olympics of online shopping, China’s Singles Day Global Shopping Festival (GMV), Japan won Gold, USA Silver and Australia bronze, with 225 regions and countries competing to win the attention of the world’s fastest growing consumer market.
To understand the size of the battle, in 24 hours there were 1.48 billion payment transactions for a final tally of USD 25.3 billion in sales. To put that into context, that is about the GDP of Estonia and greater than the GDP of Iceland. In. One. Day.
When companies hear those numbers, the temptation is to calculate that if one managed to get just .01% of those sales it would make a great contribution to the bottom line. But would it?
The important thing to remember about the GMV is that it is a discount event. Think about the discounts you negotiate for the Myer stocktake sale and add steroids. With some companies discounting by up to 90%, it should be viewed as a market penetration strategy rather than a profit generator. We understand that in last year’s event, one Australian participant didn’t cap sales for some items and lost over $20 million, but did win significant market share and was ultimately profitable.
Just as participating in the real Olympics requires hours of preparation, so does Singles Day. If it is a promotional activity, what happens next? Does it match your unique selling proposition (USP)? If your USP is that you produce considered and handcrafted high-end products, is a gluttony of consumerism where people are in a frenzy of purchasing the right fit for your market positioning? In addition to discounts, many companies invested in augmented reality games and novelty gifts to cut through the noise and had integrated online and offline sales and customer service strategies.
Don’t let the excitement cause you to forget the basic 5 Ps of marketing. They apply both offline and online. As with all markets, China still requires proper market segmentation, selection and market entry strategy. There also needs be to a full return on investment analysis to sustain the promotional expenses, discounts, finance charges, third party logistics charges, marketing fees, liability and insurance risks.
The other important factor to remember is that this is an Alibaba festival, which is just one e-commerce provider for China. Cheekily, Alibaba’s closest competitor, JD.com, also held a sales promotion in the two weeks leading up to Singles Day, with close to $US20 billion in sales over the period.
Again, the basics of due diligence still apply when assessing the correct e-commerce partner for your China strategy. Austrade has an excellent guide for Australian businesses that compares the various e-commerce platforms’ business model and participation fees. Ai Group’s three TradeStart Advisors all have expertise in assisting companies to make these assessments.
Regardless of which e-commerce provider you go with, it isn’t quite the free-for-all that some might have you believe. There are still restrictions on what can be sold to Chinese consumers online and all exporters would be prudent to check the positive list prior to approaching the market and ensure that they meet the requirements of the China Food and Drug Administration.
Finally, exporters with consumer brands should be careful to protect their intellectual property and trademarks. On 1 December, Ai Group is fortunate to have IP Australia’s first IP Counsellor based at the Australian Embassy in Beijing, to speak in a free member webinar on strategies to protect your IP assets in China.
So, are you going for Gold on 11.11.18 or will you take a different strategy for China?
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