Fueling the “Double 11” Phenomenon
The Singles’ Day shopping spree, also called “Double 11” because it falls on November 11, quickly became a nationwide retail phenomenon in China. Even in 2019, as the Chinese economy was facing downward pressure, major online shopping platforms still achieved exceptionally successful sales performances that day. The total turnover during the 2019 Singles’ Day shopping festival was 410.1 billion yuan (US$58.4 billion), a year-on-year increase of 30.1 percent. Among the winners, Tmall increased by 25.71 percent, JD.com by 27.9 percent and Suning by 76 percent.
Although the United States, Europe, and Japan also have discount seasons during their own traditional holidays, China’s “Double 11” has been more explosive and topical. It is even more fascinating that Singles’ Day was not even a traditional holiday, but an online shopping festival created entirely by internet businesses. However, Singles’ Day has become more and more festive. Evening galas on Singles’ Day have become popular among young people. Why has the Singles’ Day online shopping festival been such a huge success in China? Many factors have contributed to it.
The most prominent factor has been a highly developed online payment system. Online payment platforms represented by Alipay established their own credit systems to provide convenient online payment services. One controversial mechanism has been relatively loose protection of personal information. However, a moderately loose regulatory mechanism that focuses on economic efficiency and tolerates minor flaws is the prerequisite for the rapid development of China’s online payment industry. China is working to establish regulatory policy that matches the innovation economy while controlling risk with a bottom-line mindset and ensuring the efficiency of the innovation economy.
The second factor has been the massive size of China’s economy. China has a huge, dense market with the younger population concentrated in urban areas where fast and effective logistics distribution systems are more easily formed. At the same time, China’s economy is highly networked, enabling single events to easily spread throughout the structure of the economy. The huge internet users can easily generate explosive online events. As e-commerce networked consumers’ behaviors, “Double 11” made massive online consumption a festival and a movement by leveraging the network structure.
The third factor has been Chinese lifestyles that tend to be highly dependent on online social platforms. Traditionally, Chinese people value communication in small circles over interacting with strangers face to face. Online social platforms help avoid the possible embarrassments of face-to-face communication and expand the scope of sociality for Chinese people. It is not unusual to see a party of Chinese people eating together at one table with each person glued to a phone to communicate online with distant friends. Chinese people’s behavior modes are highly consistent with their online social modes, fostering an effective interaction mechanism between online shopping platforms and social networking platforms. Online shopping festivals are more likely to inspire the “herd effect” through social networking platforms.
Fourth, the phenomenon has benefited from the factor pricing structure in which the cost of physical stores is higher than human delivery cost. Contrasting with the brick-and-mortar sales model, online sales rely on express delivery and require more labor to save on rentals, a process in which “human couriers” replace “physical stores.” Housing rent in China is more expensive than hiring a person, which promotes the development of online sales models. Thanks to China’s relatively flexible employment system, express companies can easily recruit short-term workers during the Singles’ Day shopping spree to cope with the abrupt increase in express delivery volume during the period.
The fifth factor is China’s solid network infrastructure. China boasts developed mobile networks and terminal equipment, with a high smartphone penetration rate. A cashless society driven by online payment promotes the popularity of online payment. In China, even many older people are now skilled in using online payment software.
The 5G era is arriving and bringing excellent infrastructure for the development of artificial intelligence. China’s online sales model will grow new characteristics. Phenomenal network events could appear or disappear overnight. Even the “Double 11” phenomenon could disappear completely and be replaced by a new online consumption model favored by tomorrow’s young people. China’s outstanding and creative entrepreneurs are constantly innovating new economic models. “Creative disruption” is the spirit of China’s economic vitality. Across four decades of reform and opening up, China has achieved great results by introducing business models from developed economies. The Chinese economy will gradually foster its own business innovation model and continue to create Chinese miracles through spontaneous “creative disruption.”
The author is an associate professor and doctoral supervisor at the School of Applied Economics of the Renmin University of China.