Singles Day Remembered: A Hard Truth About Alibaba
- January 29th, 2015
- in Ecommerce
The problem with big numbers is that they often cause us to lose sound judgment. For example, even people who know lotteries are a tax on the poor will go buy a few tickets when the jackpot is up to a few hundred million.
So a merchant may be forgiven for hearing about Alibaba’s last Singles Day, when the platform sold over $9 billion of goods in 24 hours, and losing her marbles. “How do I get in on the bonanza?” she wonders.
What the merchant must understand, however, is that the bonanza is very much Alibaba and the customers’, although sponsored by the merchants.
Remember the real sales ABCs. No, not “Always Be Closing”, unless you want Glengarry levels of sustainability. Today’s ABCs are “All Bout the Customer”. Why do all those Tmall and Taobao customers flock to those sites on Singles Day? Why has Singles Day itself quickly made Christmas revenues look like a PTA bake sale’s?
Discounts. Deep, deep discounts.
As confirmed by Web Presence In China for its clients’ Tmall campaigns, Alibaba “suggested” a minimum discount of 40% on products for Singles Day. In fact, that discount was mandatory for inclusion in Singles Day promotions – not just banners, but search results, related products, and the other erstwhile algorithmic methods by which Tmall and Taobao visitors are shown products.
A tip of the hat to a merchant who instantly thinks, “Fine. I’ll mark down the inventory that’s not moving.” But you have to get up earlier than that to catch wily Jack Ma sleeping. The discount stipulation was for best-selling products.
But hey, Christmas is about the kids customers, right? If you’re ABC, you understand that that’s what makes Singles Day magical – all the shiny merch at prices too good to resist. And if Alibaba happens to sell more in one day than the yearly GDP of Cameroon, that’s the rags-to-riches magic of a socialist economy with Chinese characteristics.
Now, for a struggling brand or shop trying to establish a customer base, maybe a 40% discount can be justified as the price of getting traction on the world’s biggest online sales platform. After all, 200 stores that Web Presence In China analyzed for Singles Day sales, all offering standard promotion packages, saw between 40 and 100 times volume for that 24 hours, in categories from apparel to B2B office products.
High sales and revenue are great. Profits are even better, though.
WPIC’s clients with Tmall presence are international organizations, for whom profit margins are slim but vital. Factor not just Jack Ma’s 2-5% commission into COGS, but another 40% for holiday discount, and you’re left taking a beating on your best selling items, a 40-100 times beating. Those clients’ marketing directors were more willing to be Walmart greeters on Black Friday than have their bottom lines ravaged so thoroughly on Singles Day.
Jack is a benevolent feudal e-lord, however. He put the squeeze on to make sure there were Singles Day Santas aplenty, but he didn’t penalize any merchants for non-participation. In fact, it was possible to run customized Singles Day promotions without Alibaba assistance, a loophole WPIC exploited to advertise sustainable discounts on the platform, and get its clients an average of 14x volume for the day. Far from 40-100x, but the difference was in there being a profit.
Alibaba, like the Catholic Church and other society-changing mass institutions, offers opportunity to the wise and misery to the witless in equal measure. Wisdom comes from experience. The good news is that today this experience can be collected and curated in smart data sets, so that a western enterprise can join and be a member in the know from store launch.
Those who join Alibaba with good faith and the mantra “$9 billion” will have the consolation of making a lot of Chinese customers happy on Singles Day. And Jack Ma – which is always nice.