ONlINE CARNIVAL

By Zhou Xiaoyan

Wang Kang, a clerk at the Industrial and Commercial Bank of China(ICBC) in Beijing, spent the whole day sitting in front of her desk on November 11, trawling the Internet to buy stuff online sold at halfprice. In the end, she spent over 8 0 0 y u a n($128.56) on clothes and shoes, and over 200 yuan ($32.14) on household goods.

“I love shopping online. Its faster, more convenient and more economical. As long as I can find what I want through online retail sites, I wont go to real shops,” said Wang.

It was no coincidence Wang spent more than usual shopping online. November 11 is dubbed Singles Day, and it means massive discounts for online shoppers in the country. The name originated with a group of university students, who drew inspiration from the date: November 11 or 11/11.

The day was adopted by Chinas ecommerce giant Alibaba Group in 2009 as a promotional opportunity for their Web sales, analogous to Cyber Monday in the United States. Other e-commerce players such as 360buy, suning.com, dangdang.com, and Amazon China, soon followed suit.

On this years Singles Day, over 213 million Internet users swarmed to Taobao and Tmall, two websites operated by the Alibaba Group, headquartered in Hangzhou of east Chinas Zhejiang Province, for its 24-hour 50-percent-off carnival. Together the sites raked in a record 19.1 billion yuan ($3.07 billion), up 260 percent year on year, according to a statement by Alibaba Group.

This massive online spending spree could be the biggest ecommerce sales day on record in China.

I n c o m -parison, online retail sales hit$1.98 billion in the United States on Cyber Monday, according to Adobe Digital Index. Cyber Monday is the day after Thanksgiving weekend and the busiest day for online retailers as U.S. shoppers prepare for Christmas.

As Chinas e-commerce players braced for a spending binge on Singles Day, more attention is being paid to this growing trend and its potential to facilitate domestic consumption at a time when China is working toward shifting its economy away from a reliance on manufacturing exports. Furthermore, critics contend that online shopping raises a host of problems and call for more government oversight.

Online purchase bonanza

With online shopping popular among the younger generation, Chinese retailers are quickly moving to cash in.

“E-commerce will utterly change Chinas business structure,” said Jack Ma, Chairman and CEO of Alibaba Group, in an interview with China Central Television. “Online shopping figures are a signal that Chinas economy is making a transition.”

“E-commerce is one of few bright spots in Chinas economy now,” Alibaba Group CSO Zeng Ming said at a media briefing on the sidelines of the companys annual Alifest customer convention in Hangzhou.

Alibaba Groups main shopping websites will see sales triple to 3 trillion yuan ($481.8 billion) over the next five to seven years, as the countrys online retail market continues to expand despite slower growth overall in the Chinese economy, said Zeng.

“People shopped online only occasionally in the past, but now online shopping is a lifestyle embraced by many,” said Zhang Yong, President of Tmall.

Wang Lizhe, a teacher at Renmin University of China (RUC), just purchased an apartment in Beijing and plans to decorate it through purchases made online.

“Shopping online has become a habit of mine. Buying stuff for our home online will save me tons of money and take less time and energy,” he said.

“When I want to buy something, I usu- ally go to the store first to see the product first hand before heading online to find it at a more reasonable price. Its how I do things,” said Wang Linzhe.

This dramatic lifestyle shift from offline to online shopping has been a boon for online retailers.

Total e-commerce sales revenue in 2011 stood at $55.37 billion, up 103.7 percent year on year. The year-on-year growth rate in 2012 is estimated to be 94.1 percent, said eMarketer, a market research firm.

In the third quarter of 2012, the total transaction value of Chinas e-commerce market amounted to 1.99 trillion yuan ($319.8 billion), up 21.9 percent year on year, and up 6 percent compared with the second quarter, according to a report from the Shanghai-based iResearch Consulting Group, which specializes in Chinas Internet industry.

In 2011, the total number of online shoppers in China stood at 187 million, representing an increase of 39 million from the previous year, according to an iResearch report.

Direct employment in Chinas e-commerce had topped 1.90 million people as of June 2012, and the number is expected to reach 2.65 million by the end of this year, the report said.

A new way for growth

China has been trying to stimulate domestic consumption to boost growth and shift away from a substantial dependence on exports at a time when the global economy remains uncertain. The countrys economy grew at a rate of 7.4 percent in the third quarter, its lowest quarterly rate in more than three years. Amid dwindling foreign demand and shrinking foreign direct investment, domestic consumption is increasingly seen as a way to facilitate growth.

Online retail sales accounted for 4.32 percent of total sales in China last year, up from 1.16 percent in 2008, according to the Ministry of Commerce.

“The online shopping spree in Tmall proves that Chinese consumers have a huge consumption potential,” said Tmall President Zhang. “E-commerce can better tap this immense potential and a huge revolution in consumption could be the result.”

Alibabas Chairman Ma said online and offline retail in China has each taken a different path of development compared to that of the traditional retailer in the United States.

“Chinas retail infrastructure is not as advanced as compared to the United States, which gives e-commerce a chance to become mainstream and stimulate domestic demand, while logistics and other supporting facilities can improve and catch up,” Ma said.

One factor explaining the Singles Days spending binge, which generated in one day about as much revenue as three weeks worth of retail sales in Hong Kong, was an explosion in shopping among those who are usually reluctant to buy relatively higherpriced goods, Ding Ningning, a researcher at the State Councils Development Research Center, told China Daily.

“Its not that consumers cant afford to buy things,” he said. “Its that prices are sometimes too high, which affects peoples willingness to buy.”

Ding said that the half-off deals encourages shoppers—especially young Internet users who are often less inclined to splurge on relatively expensive items—to make purchases online.

The number of Internet users in China reached 538 million in June, and the online shoppers account for 39.3 percent of the countrys total population, said the China Internet Network Information Center.

“The rate is 70 percent in Western countries, which indicates Chinas large potential for online purchasing,” said Jing Linbo, a researcher with Chinese Academy of Social Sciences.

Although exports once again rose in October, China cannot be sure whether its export growth will fully recover.

“Chinas economy cannot just count on hard-to-predictexports, while investment is influenced by policies and the macroeconomic environment. Thus, domestic demand carries more expectations to stimulate Chinas economy,” Jing said.

Problems remain

The recent sales carnival is a test for the countrys online payment systems and its ability to deliver products.

While the promotion helped increase the number of online shoppers in China, many complained of glitches and other flaws while trying to pay for their transactions.

Wu Liying, a bank employee in Hangzhou, worked overnight to avoid any collapse of the banking system.

“It was too hustle and bustle,” Wu told Xinhua News Agency. “The scale exceeded the daily volume, which brought great challenges to our system.”

Payment channels at some banks appeared to falter, just as they did last year on the same day.

Although Alipay.com—Alibabas payment platform connecting the website to banks—has had a project team in place since August, it nonetheless experienced problems when trying to process payments from the China Construction Bank because of a high volume of customers.

The Bank of China and the ICBC experienced a similar fate.

Transactions through the China Construction Bank were so high during the overnight period that its system completely failed from 1:15 a.m. to 2:00 a.m. in branches in Beijing and southwest Chinas Sichuan Province.

“I wasnt able to buy anything on Singles Day this year,” Wang Linzhe told Beijing Review. “All websites were way too busy.”

The event has also triggered a busy day for the logistics industry.

“I only slept two hours at night. Some online shops needed to start deliveries at 3 a.m.,”said Wang Yunda, a courier at Shentong Express in Hangzhou.

Last year, 20 million packages were delivered with some customers having to wait three months for their goods.

Delivery companies were naturally busier this year.

Shentong Express had 8 million packages, Yuantong Express had 7 million, and ZTO Express had 4.7 million orders to deliver. Parcels piled up at their delivery stations after Singles Day, and the workload for delivery staff was 30 percent higher than usual.

A lack of consumer rights poses another problem for the future development of online shopping. Shoppers rights are often infringed upon due to counterfeit products, a lack of after-sales service and minimal laws and regulations in place to guide the field.

In late November 2012, China Youth Daily conducted a survey with sohu.com, which found that 96.5 percent of the 1,343 respondents had their consumer rights violated while shopping online.

“I once bought an OPPO bathroom heat lamp on Taobao.com and then called OPPOs after-sales department for installation. As soon as they learned I bought the lamp from an online store, they refused to offer me any help,” said Wang Linzhe.

“Online shopping is not suitable for all. For people who dont know how to maintain online security, you could lose your money. My parents would never shop online because they are so afraid of the risks,” said Wang Kang.

The government needs to expeditiously regulate the e-commerce, Professor Mei Shaozu, Deputy Director of the E-Commerce Panel under the Chinese Institute of Electronics, told the China Youth Daily.“Most countries in the world have laws on ecommerce, and so China should accelerate its pace in formulating stringent laws and regulations for this field.”

Top Players on Singles Day

Half-off online sales on Taobao and Tmall drew in 213 million netizens, bringing about a record of 19.1 billion yuan ($3.07 billion) in turnover. Among the total, 13.2 billion yuan($2.12 billion) was pocketed by Tmall, the Business-to-Consumer (B2C) platform and 5.9 billion ($948.1 million) went to Taobao, the Consumerto-Consumer (C2C) sales website.

360buy.com saw 4.5 million transactions worth of over 2.5 billion yuan ($402.3 million).

E-Commerce China Dangdang Inc., a U.S.-listed online retailer, had over 100 million yuan in sales ($16.09 million).

Suning.com of Suning Appliance took in 1.7 million orders, 20 times more compared to last year.

Tencent Holdings Ltd.s 51buy.com said its sales exceeded 120 million yuan($19.3 million), more than 10 times its sales last year.

Coo8.com received 260,000 orders worth of a record high of 240 million yuan ($38.62 million), almost 11 times more than its daily turnover.