In 2009, on an unseasonably cold November night, Daniel Zhang, the head of Alibaba’s fledgling Taobao Mall business, was eating hot pot in Beijing. In Hangzhou, a few hours flight away on China’s East coast, his team was sending him messages updating him with the results of a promotions day they had been running. It had been a rough year for ecommerce in China. The 2008 financial crisis had sent ripples through the global economy and people were sceptical of buying goods online. Taobao, Alibaba’s consumer to consumer marketplace, was riven with counterfeit goods of dubious quality, so finding established brands to sign up to its premier Taobao Mall was proving tough. Internet penetration was low. The most used phone in the country was a Nokia with no internet connectivity.
It was a simple enough promotion. On November 11, 2009 Taobao mall had a 50 per cent sale with free nationwide shipping. By midday brands were calling the company to tell them to take them offline because they had cleared out their stockrooms. In a single day most of the brands on the platform had managed to sell goods that would have taken months to shift. As the clock rolled over into the early hours of November 12, Taobao mall had managed to clear RMB 52 million (£5.4m) gross merchandise value or GMV, a simple measure of the total value of items sold during the period. The promotion had brought in over six times as much business as a normal day.
Little did Daniel Zhang know, as the messages rolled in, that this day would be the day that changed his life. Eleven years later, on November 11, 2019, he would be seated in the front row of an auditorium at the Alibaba campus in Hangzhou as CEO of the company. Before him would be a stage and a giant LED screen counting down. Behind him, representatives of over 700 different media groups hoisted cameras and pointed phones. At exactly midnight on November 12, the results were in. Alibaba’s Singles' Day, the largest shopping festival in the world, had cleared over £29.5 billion GMV of goods. It had a taken a fraction of a second for Alibaba to beat 2009’s total.
The night before, in Shanghai, the company had hosted its annual gala to usher in the festivities. It was livestreamed across digital platforms and domestic cable networks to an audience of tens of millions. Taylor Swift, who sells more records in China than she does in the US, performed three songs. A magician correctly guessed that a celebrity was hoping to receive a watch. A small girl from Inner Mongolia, whose birthday is on 11.11 told the audience that her greatest desire was for them to buy beef jerky. A barbershop group sang ‘Happy Singles' Day to you’, to the tune of Happy Birthday.
Singles' Day has come a long way from a simple 50 per cent off sale on Taobao Mall – which was renamed and relaunched as Tmall in 2011. It is now a global shopping phenomenon with over 200,000 brands participating across over 30 different Alibaba platforms. Alibaba is not a retailer like Amazon, though the companies are often compared. While many associate Alibaba with Taobao, its eBay-like consumer-to-consumer platform and with Tmall, the upscale ecommerce platform once called Taobao Mall, Alibaba is also dizzyingly diversified into every aspect of China’s digital economy.
Through its affiliated fintech firm Ant Financial’s payment platform, Alipay, it dominates digital payments in the country. Ant Financial also incorporates Huabei, a revolving credit line embedded into Alipay, which has extended over £109bn of loans, according to the Wall Street Journal. With Cainiao, the logistics business it owns a majority share in and strategic investments in STO Express, ZTO, YTO and Best Logistics, it has a solid grip on logistics and digital supply chain management in China too. Alibaba’s cloud computing services holds nearly 50 per cent of the Chinese market, while its nearest rival trails behind with 15 per cent.
Alibaba is, in the words of its founder Jack Ma, a data company. It is a platform; an endlessly malleable set of digital shelves that host many of the world’s leading brands and everything else in-between. Singles' Day is not just a shopping day, it’s a stress test of the entire commercial ecosystem that Alibaba has created. This year, Cainiao processed 1.3 billion delivery orders on the day (in penance, Cainiao has coined November 20 China’s ‘cardboard recycling day’ and is setting up recycling stations at its logistics centres). Alibaba’s cloud system had to deal with 544,000 orders a second at its peak. “It’s like if you were a professional boxer who trains every day, but suddenly one day I turn around and tell you that in six months’ time you’re going to have to fight for your life,” says Jeffrey Towson, professor of investment at Peking University in Beijing.
Having run through this cycle eleven times now, the system is well tested. In 2010, Alibaba was four seconds away from crashing Alipay altogether; in the early years of the promotion the company would issue guides to customers explaining how to best ensure a stable internet connection, as the internet infrastructure in the country couldn’t keep up with the demands customers would place on it. There were reports of warehouse printers exploding in early years as they tried to process the sheer volume of orders. All of which raises the critical question: why?
Today the issues are not systemic, they are existential. Some commentators are critical of Alibaba’s use of the GMV metric, arguing that it doesn’t reflect revenue and is therefore useless. Others note that absent from the data are the amounts of products that eventually get returned and refunded. According to a press release from Ant Financial, MYbank, an online bank in which the company has a 30 per cent stake, offered RMB 300bn in loans to three million merchants that are participating in 2019’s shopping festival. This, it can be argued, is creating a circular economy in which one arm of Alibaba is effectively trading with itself from the other.
“Singles' Day has also gotten too complicated,” says Jiu Li, an editor and brand consultant in Shanghai. To boost engagement many of the discounts on offer through Alibaba platforms like Taobao and Tmall have been gamified. “There is one called gai-lou where you build a tower,” she says, “and you need to get your friends involved. So, my parents send me texts every day at 09:00 to make sure I participate with them to build this stupid tower. Otherwise they think they’ll look bad in front of their friends who are also building towers.”
Articles abound complaining about the complexity of the discounts; “it’s not saving you time, money or effort,” argues one posted to the popular social media app WeChat. Entire social ecommerce platforms have spun off to help navigate the convoluted maze of deals. The most popular of these, RED, boasts over 200 million users.
But as Towson explains, Chinese consumers still enjoy shopping events. There are others throughout the year – December 12 being the Double 12 Shopping Festival, and June 18, or 618, is also a popular shopping day (in Mandarin 618 is a homophone for ‘get rich’). Then there are traditional holidays such as Spring Festival and Mid-Autumn Festival. Nothing, however, compares to Singles' Day in terms of the sheer volume of products sold.
There are a number of origin stories for Singles' Day. The most common is that in 1993 a group of four single men in a university dorm in Nanjing got together on the eleventh day of the eleventh month, noting the resemblance of the days on the calendar to themselves as four lonely sticks (11.11), and decided they’d do something about it. Originally called guanggun jie (bare sticks day) the idea was to create a day for single people to get together. Daniel Zhang and his team latched onto it for their shopping festival simply because it fell close enough to the retail sweet spot of America’s Black Friday. It was simply a way for people to become aware that Taobao Mall even existed.
It was a case of good timing. Each year 11.11 extended Alibaba’s vast digital ecosystem and stress tested it. At the same time, symbiotically, the Chinese consumer grew with it. In 2009 China had only 130 million people online; by 2018 that number had grown to over 800 million. Of those, 98 per cent use mobile devices. According to a report from McKinsey, “in ten of the 15 quarters since 2015, consumption contributed more than 60 per cent of total GDP growth.” The once export-focused Chinese economy is finally turning inwards. Ecommerce is set to be a £1.4 trillion business in China by 2020.
The unleashed purchasing power of the Chinese consumer and the lure of its vast and seemingly bottomless market is what has driven the year on year growth of Singles' Day. That is why, despite the deals becoming increasingly opaque and inscrutable, this year Alibaba still managed to drive home a growth rate of 26 per cent greater GMV than the year before.
At 16:31 screens all over Alibaba’s headquarters in Hangzhou, in China’s Zhejiang province, flashed up the news that 2018’s total had been defeated. It was a strange, delirious moment of triumph.
The majority of the workers hustling their way around Alibaba’s Xixi campus, which has been the headquarters of the company since 2013, were wearing red t-shirts. The slogan for this year’s 11.11, ‘Make it Happen!’, was written prominently in white bubble letters across the front. The campus, which spreads over 450 acres, was decked-out in preparation for the day. By the evening, spotlights criss-crossed the night sky, occasionally trapping the moon in the centre of their lattice. The sombre grey façade of the main entrance had been cast in rainbow neon. People took photos under a piercingly bright white sign.
In the campus on 11.11 the company had set up ‘war-rooms’ for competing companies on a floor of one of the many towers. In the lobby by the elevators were two large drums encouraging passers-by to beat them for victory. Clustered in rooms with large TV sets, the brand representatives of companies like Nestlé, Estée Lauder and Unilever watched as the results rolled in.
As a digital shelf supplier, Alibaba is not out to pick favourites. Rather, it is willing, for a price, to significantly upgrade and outfit those shelves for brands that are seeking access to China’s huge consumer market. As a data company hooked into so many aspects of the Chinese digital economy, Alibaba is able to offer the kind of granular consumer data that brands are so desperate for. Aside from integrating payments and logistics, brands who choose to partner with Alibaba can get access to Tmall’s Innovation Centre. Representatives from the company refer to this as the TMIC.
In Nestlé’s war room sat Adrian Ho, the vice president of Nestle Greater China Region. He was wearing the standard issue red Make it Happen! T-shirt. He wanted to talk about coffee. Despite headlines to the contrary, China’s coffee culture is still nascent. “On average consumers in China only drink eight cups a year. Compare that to the UK where you are close to 500,” Ho said, frenetically picking up and waving a series of coffee related products spread on the table before him. The point therefore has been identifying when exactly those eight cups a year are drunk, and how to target consumers specifically.
One curious trend he had noted in the data that had been provided by the TMIC was that there was a core overlap between fitness fanatics and instant coffee drinkers in China – further delving discovered that they were drinking caffeine before hitting the gym. “So, we partnered with Under Armour,” Ho said.
Budweiser noticed a confluence of fashion forward women and people drinking fruit-flavoured beers for the first time, and so they did a cross-over with Moschino for a new flavoured drink. Snickers released a numbing-spicy Sichuanese flavoured candy bar. And so on.
The Chinese consumer is no longer particularly drawn by the lull of western brands simply for their foreignness or perception of superiority. Domestic equivalents are now easily as good and often better. Examples abound. Starbucks is not only fighting Luckin Coffee, a domestic coffee rival, but their biggest challenge might actually be from Heytea, a Chinese tea brand that has taken the country by storm (they pioneered cheese tea). Nike and Adidas are finding young Chinese turning towards domestic brand Li Ning. In 2011, 70% of Chinese smartphones came from abroad, by the first half of 2019 the top three selling smartphones; Oppo, Huawei and Vivo were all domestic brands. The trade war has also had an impact; in a Brunswick Group survey conducted in June, 56 per cent of Chinese consumers said they had avoided purchasing American products to show solidarity in the trade war.
It was clear, therefore, that part of the overall strategy isn’t just selling huge quantities of stuff, it was to develop completely new stuff, targeted at select consumers based on Alibaba’s vast datasets. “It used to be about helping the consumer find a product, now the product will find you,” said Stephane Wilmet, L’Oréal’s chief consumer officer, as the company made final preparations for Singles' Day.
There were over a million new products listed this year, according to Alibaba, and many of the leading international and domestic brands put out some kind of limited edition deal for the day. While this is a driver of growth for the company, it is clear that for 11.11 to continue to break records in the future the company has to claw growth from the parts of the Chinese economy that are less developed. The tier of consumers often referred to as those who live ‘beyond the fifth ring road,’ – referring to the economic precariat who live far in the commuting suburbs of China’s sprawling metropolises – or who live in smaller interior cities or the countryside, are only now developing the kind of purchasing power and ecommerce infrastructure that puts them into play for 11.11.
In this highly price sensitive and extremely contested market Alibaba is now facing a new competitor. Pinduoduo, which gamifies shopping and exclusively targets shoppers in the lower tiers of the Chinese economy, crashed onto the market four years ago and is now the country’s second largest ecommerce player, trailing only Alibaba itself. With 366 million monthly users it is valued at £31bn greater than that of eBay. This year it ran its own 11.11 promotions, and to snub Alibaba it intentionally made them as simple as possible. One promotion, for an iPad Air, not only showed the exact discount (RMB 430) but also exactly how many bubble milk teas you could buy with the savings – 43. Despite its incredible growth, the company is yet to turn a profit. Alibaba is set to capture 55.9 per cent of all retail sales in China this year – a feat that Pinduoduo is in no position to match.
Another advantage that Alibaba has is its livestreaming network. In 2016 Taobao launched its own livestreaming platform, and now many of the Alibaba verticals also leverage livestreamer marketing. Taobao generated more than £8.5bn in GMV through livestreaming alone last year – the platform is home to over 4,000 livestreaming hosts who generate over 150,000 hours of content on a daily basis, according to Alibaba.
In the campus on 11.11 the company had set up glass boxes from which livestreamers hawked their wares. Passers-by paused and watched, aquarium like, as the hosts lifted products and extolled their virtues, their words silenced by the plexi-glass. A Taiwanese singer sold makeup; a man with an impressively square head sold travel packages. An inter-racial couple sold products targeted at people born before the year 1985.
None of these can compare, however, to Viya Huang, the livestreamer who recently streamed with Kim Kardashian West in a piece of Tmall-mediated commercial diplomacy. Kardashian told her fans that she “loves beauty” and “selling products” but brought only 100,000 viewers to her side of the stream. Viya brought over 13.3 million, according to Jing Daily. Between them, sold out 15,000 bottles of KKW perfume in a few minutes.
All in a day’s work for Viya, who can livestream for up to nine hours a day. “I’m sorry, this is the only time today I had to go to the bathroom,” she said after arriving at a Singles' Day press conference 15 minutes late before answering a few questions and hurrying back to her studio to continue streaming. On October 10, she broke her own sales record once again, driving £38.6m worth of sales in a single day.
Outside of the studio a large lobby was stacked with boxes overflowing with products. Large bags of dogfood were lined up against a wall, along with a treadmill and some hoovers. Viya is not China’s most famous livestreamer. That accolade belongs to Li Jiaqi, or ‘brother lipstick’ as his fans affectionately call him, after he tested 380 lipsticks in a single session. His focus is makeup and the times he has strayed to other areas have not ended well – he was recently embroiled in a scandal after a non-stick pan stuck on air. Viya, however, is like a department store. “I never thought I’d be selling rice and carpets,” she said, “but here we are.”
In her studio she sat at a desk in front of the cameras, a large curved screen before her showing comments from fans. The energy was frenetic. In just a few minutes she pivoted from selling an air conditioner unit to selling a large down quilt (the air conditioner being so effective you might need the latter) to selling a skin care device that looked like a magic wand. Her patter was fast and direct and witty.
While Alibaba fights Pinduoduo and slams the accelerator on influencer marketing to connect with the few Chinese consumers who exist outside of its ecosystem, there remains a significant question: will China continue to be a reliable generator of growth?
The trade war with the United States has cast a long shadow across the Chinese economy. Oxford Economics, Bank of America Merrill Lynch, and Bloomberg Economics have all cut their forecasts for gross domestic product growth in 2020 to below six per cent. While Gordon Orr of McKinsey notes in a report that “narrow short-term GDP impact on China of the tariffs alone is modest, on the order of 0.5 to 0.8 per cent of GDP,” the long-term risk of increased job losses means that economic sentiment in the country is on a downswing.
The trade war has also cast into stark relief some of the underlying frailties of the Chinese economy. This year some 8.3 million graduates will enter the Chinese job market, the highest ever, but big-name companies such as JD.com and Tencent are downsizing and laying off employees. The Chinese precariat is growing. A survey of more than 88,000 graduates, conducted in the early months of 2019 by Zhaopin, an online jobs platform, found that 88 per cent of respondents thought it would be difficult to find a job this year.
This hints at a wider problem lurking in the Chinese economy: the country will grow old before it will grow rich. The birth rate is declining and by 2030 a quarter of the country is estimated to be over 60 years old. There is also the unanswered question of what automation will do in a country of such abundant low-skilled labour. In the FlyZoo Future Hotel, an Alibaba affiliate which has its flagship right next to the Hangzhou campus, facial recognition cameras allow you to check in, handle all your payments in the hotel – including in the restaurant – and grant you access to the elevators. You stand in front your door and it flashes green once it has read your face. You call, via a Tmall voice-activated assistant device, a robotic cleaner to turn down your room (it got stuck in the hallway because of the throng of journalists trying to interact with it). In the gym personal trainers had been replaced by a giant screen and a motion sensing pad that programmed a workout for you. In the downstairs bar, a robotic arm mixed cocktails and poured coffees.
Debt levels are also rising. The Wall Street Journal quotes a JPMorgan estimate that “China’s ratio of household debt to gross domestic product will climb to 61 per cent by 2020. That’s up from 26 per cent in 2010 and higher than current levels in Italy and Greece.” The incredibly high savings rates that typified Chinese consumers in previous eras is far less common amongst digital natives. As is the taking out of small loans for commercial purposes, in part, no doubt, fuelled by the kind of easy credit readily accessible through platforms like Alipay’s Huabei.
People might also, finally, hit commercial fatigue. “Where did my shopping highs go?” says Denni Hu, a fashion writer from Shanghai, “I know I’d be happy with my new Dyson vacuum cleaner, but the feeling is just not registering.” And so, for its long-term health, Alibaba is doubling down on its global aspirations. Jack Ma’s absence at this year’s 11.11 was notable not just for underscoring this as the first year without him at the helm of the company, but also for where he was instead – in Ghana for an entrepreneurship event.
In Hangzhou, it took only five minutes after the official counter started racking in the takings on 11.11 for the MC of the evening Huang Lei, the head of Taobao University, to mention the Belt and Road Initiative, a major government talking point since Xi Jinping took office. As time has passed along with numerous corruption scandals, defaulted loans and China’s wholesale usurping of a Sri Lankan port, the Belt and Road Initiative has become less of a formulaic plan and more of an ambient government commitment to expand its influence in developing markets. This comes at the same time that the US, under the auspices of America First, is retreating from them.
Huang Lei stood in front of the floor to ceiling screen with the ticker rolling over all of the sales that Alibaba was taking in, his red Make it Happen! T-shirt worn awkwardly over a black shirt. The screen would occasionally cut to granular data about specific purchases. Chinese people born since 1995, we learnt, like to try women’s perfume from Oman; they like rum from Cuba; they like date palm from Saudi Arabia; they eat Indian coffee-flavoured biscuits. You could trace packages being sent from Taobao villages – villages in once poverty stricken regions in China where the village now brings in over £1m a year online and over ten per cent of households are engaged in ecommerce – as they went to logistics centres in bigger cities to be sent out to the world.
And to stare at that screen, with Alibaba’s vast network tracing the globe, the world looked incredibly flat. It seemed, for the briefest of moments, somewhere around the time that the third decimal place was added to the overall figure for GMV, that the last fifteen years hadn’t happened. It was a vision of a world of pure commerce, a-political, a world in which Alibaba’s digital shelves would expand to encompass us all. Cuban rum sellers buying Inner Mongolian beef jerky; Viya’s followers buying Kim Kardashian’s perfume because she vouched for her.
But at the exact same time that these numbers rolled in, a protestor was shot in the chest by police in Hong Kong, and angry protestors’ set a pro-Beijing civilian alight. Uighurs continued to be persecuted in Xinjiang. Academic decoupling continued apace in both China and America. Meng Wanzhou, Huawei’s chief financial officer remained under house arrest in Canada, pending extradition to the US. Two Canadians, Michael Kovrig and Michael Spavor sat in prison in China, widely rumoured as bargaining chips in the negotiations. Chinese netizens complained about a cake contest in the UK.
The world is flat, it seems, only on a screen. The numbers continued to roll in. Every so often the entire auditorium; stage floor, ceiling and walls would burst with white light. A graphic would simulate a tunnel and we would emerge into another sales record. It was undeniably impressive, a feat of technological dexterity that in 11 years has propelled Alibaba from Hangzhou to the world. And yet, for all of its futurism, there was something that felt dated about such an unabashed celebration of consumption.
“It is a treadmill,” says Duncan Clarke, author of the book Alibaba: The House that Jack Built and a long-time consultant to the company. “And I’m not sure how they’re going to get off”. As the final tally rolled in, we looked up at the big screen. Golden confetti rained from the sky. Daniel Zhang rose from his seat and waved to the cameras of the world. Underneath the figures, which took up most of the screen, was nestled in small text the phrase, ‘what was once unimaginable will become the new normal’. At some point 11.11 won’t break records. But until then, Alibaba is doing everything it can to make sure that doesn’t happen.
Digital Society is a digital magazine exploring how technology is changing society. It's produced as a publishing partnership with Vontobel, but all content is editorially independent. Visit Vontobel Impact for more stories on how technology is shaping the future of society.
This article was originally published by WIRED UK
