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It’s Called “Singles Day”, Not “Sellers Day”

Alibaba Singles Day means savings, not profits

The unsung heroes of Singles Day – logistics workers.

14.3 billion bucks. One day of sales. That’s more than ten dollars from every man, woman and child in mainland China.

 But if you’re not aware of the difference between sales and profit, stop here, click here, and we’ll talk about the China market some other time.

 It’s correct to assume someone’s making a whole lot of profit from Alibaba’s $14.3b in Singles Day sales – Jack Ma. As for the retailers … not so much.

START WITH THE CONSUMER, THE GLOBAL CONSUMER

 What drives the Singles Day frenzy? The appeal of a shopping holiday, for starters. More evidence that we in the PRC are as consumer-driven as any society in the West.

 But what really whips up that consumer-zombie frenzy, whether in Sheboygan or Shenyang?

 Deep discount.

 Not the kind of back-handed discounts on unwanted crap that turned Amazon’s attempt at Singles Day into the world’s biggest online swap meet. We’re talking about big discounts on primo gear: big screens, top shelf booze, luxury skin care, all that glorious junk that makes a consumption-based life worth living, whichever side of the Wall that life is.

SINGLES DAY UNWRITTEN RULES & BYLAWS

 The rules for participating in Alibaba’s Singles Day, like so much else about Alibaba’s whys and wherefores, are nowhere explicitly posted in their entirety. There are a slew of promotions, and retailers are encouraged to mark down their best selling items as much as 50%. Not ordered, mind you, never ordered. But those who bleed most from their bottom line to quench the discount lust are rewarded with better positioning in the Singles Day promotion blitz.

 The calculus is obscure, as a top brand spending big bucks with regularity on Tmall advertising will have different parameters for Singles Day than a new store whose owners think they’re actually in an online mall with customers just wandering by to take a look….

 …but the one unassailable law of Singles Day is that thou shalt make as free as possible thine most desired products. The corollary law is that thou shalt not try to offload your low-sale inventory.

 That’s why those of us who have taken western companies to Tmall cringe when hearing other companies abuzz with the new Singles Day record proclaim, “We should be on Tmall for next year!”

TMALL’S FOR KILLERS, NOT SINGLES DAY SLINGERS

 Even under normal circumstances, Tmall promises deadly competition for vendors of popular products, and advanced fishing for targeted traffic to lesser-known goods. For the SME, starting out in China on Tmall is akin to starting out at the $500 a hand poker table in Vegas. A lot of capital and experience is a prerequisite.

 Of course, there are agencies aplenty eager to take you to Tmall and establish a new profit center for billings. Such an agency may well take you on the path to bigger and bigger sales, but at linear rates of marketing spend and agency fees.

Take it from vetted TP Bruce Zhao, who helps Chinese companies on Tmall, and thus has to keep his pricing on this side of sanity: RMB15k for the first few months during registration and establishment, then RMB10k a month for management, including customer service. “Under good conditions, expect about 10% margin, 15% if you’re doing exceptionally well.”

TAKEAWAYS

 Singles Day has nothing to do with vendors making a profit, hopefully with scoring some “brand awareness.” (A goofy, expensive metric at best.)

 Vendors of quality products can give incessant western media gabbling about the “China Slowdown” the same credence they would “Weapons of Mass Destruction”.*

 *Not convinced by someone trying to help SMEs get into the China market? Fair enough. Check out what McKinsey has to say about it.

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