More reasons to spend

The reception to Alibaba's Double 12 shopping festival, which takes place just a month after its sister event Singles Day, shows that Chinese consumers aren't afraid to shop

First there was the massively popular "Double 11" festival, also known as the Singles Day shopping festival, which takes place every year on Nov 11.

Then came the "Double 12" which, as its name suggests, takes place on Dec 12.

Just a month after another record-breaking Singles Day shopping festival - this year's event raked in 168.2 billion yuan ($25.4 billion) in online sales in 24 hours - businesses again sought to entice shoppers to continue spending, but this time in brick-and-mortar stores.

Over 1 million merchants in China and around the globe were involved in the Double 12 shopping festival, with a slew of promotions offered at places such as restaurants, hypermarkets, movie theaters and hair salons.

Just like the Singles Day, Double 12 is the brainchild of e-commerce giant Alibaba Group. It made its debut three years ago as a means to help boost the revenues of small and micro online retailers on e-commerce platform Taobao that face difficulty competing against major brands during the major festival on Nov 11.

But in a bid to promote mobile payments offline and acquire physical retail stores so as to make them intelligent, the Double 12 festival was eventually transformed into the event it is today.

In Shanghai, the enthusiasm to exploit discounts on Dec 12 was evidenced by the long queues outside Starbucks and Carrefour. Fast food chain KFC saw brisk business on that day too. According to company figures, 30,000 egg tarts were snapped up across China in just 10 minutes. Everyday essentials were also popular, with bargain hunters around the country purchasing 50,000 bottles of Olay's shower gel, a brand under personal care giant P&G, in an hour.

In a Family Mart convenience store on southwest Shanghai's Jinshajiang Road, the average user spending ballooned from more than 10 yuan to nearly 20 yuan, thanks in part to the promotion, said the store chief Liu Jian.

Though the Double 11 and 12 shopping festivals are just a month apart, the latter is still distinctive enough to attract consumers, said Neil Wang, president of consultancy Frost & Sullivan Greater China.

"Singles Day is all about sales figures: Alibaba has repeatedly broken its own records year-on-year," he said.

"But Double 12 strives to create this fanfare of shopping in-store and build a personal connection between suppliers and customers."

Bank clerk Zhou Jianfei agrees with this sentiment. He admitted to spending much of his day grabbing coupons on Koubei, an online-to-offline local service site backed by Alibaba, which gives users extra discounts of up to 25 yuan on top of existing store promotions.

"You go to the restaurants, wait to be served, and get discounts automatically," said Zhou. "This level of sophistication in (omni-channel) shopping goes beyond making a few clicks of the mouse and waiting for your parcels to be delivered."

Tech-savvy young consumers were not the only ones getting in on the action on Dec 12. Senior citizens could also be spotted filling their shopping carts with discounted veggies, cooking oil and bags of rice before paying with their phones.

Companies are smart at creating such festivals so that they become established dates on the retail calendar, said Qi Xiaozhai, a senior business consultant at the Shanghai Municipal Commission of Commerce.

According to Qi, Double 12 effectively fills the gap between the National Day Holiday (on Oct 1) and the Chinese New Year (it usually falls in late January or early February), which were the traditional shopping seasons before e-commerce took off. As a result, other merchants, from fruit stalls to online retailers like NetEast Kaola, are jumping on the Dec 12 promotional bandwagon.

"Double 12 has become one of those special days in the year that is dedicated to shopping," he said. "At the end of the day, it is a sign of the meteoric rise of Chinese consumerism."

This willingness to spend bodes well for the economy, especially since the Chinese government is aiming to decrease its reliance on investment and export-driven models, and use consumption as one of the key drivers.

This point was also mentioned during the 19th National Congress of the Communist Party of China when General Secretary Xi Jinping underscored the importance of leveraging consumption for economic growth.

According to consultancy McKinsey, China's consumption levels are expanding faster than almost every other country in the world in the past decade.

Retail sales, for instance, have seen double-digit growth annually for several years, and is on course to reach 48 trillion yuan by 2020, according to the Ministry of Commerce.

An exciting part of Chinese consumerism is the rise of discretionary spending, according to Jeffrey Towson, managing partner of Towson Capital. He pointed out that the increase in expenditure on discretionary products in China annually is forecast to exceed 7 percent till 2020. Within this same period, the growth of spending on "semi-necessities" annually should hit 6 to 7 percent.

"Clearly, artificial festivals like Dec 12 play a role in boosting discretionary spending. Elements of the festival, such as countdown shows and celebrity endorsements help to drum up the mood for spending," Qi noted.

Case in point: for the first time in history, Alibaba hosted a star-studded Chinese-style variety show on the evening of Dec 12. The event was broadcast live across multiple platforms and customers could win discount coupons via interactive games throughout the performance before redeeming them in future offline purchases.

Alibaba's ambitions

According to consultancy eMarketer, the two shopping festivals signal the e-commerce giant's ambition to seize a larger share in the booming mobile payment landscape in China that is currently dominated by Alibaba's Alipay and WeChat Pay, a rival service from Tencent.

"The extra discounts provided by Koubei is a clear indication that though Alibaba is looking to extend its grip from online commerce to physical stores, payment methods should not lag behind," said Yang Yaqiong, an e-commerce analyst at consulting firm Analysys.

According to Koubei chief executive Fan Chi, physical stores also stand to benefit from these festivals because they get a chance to experiment with the New Retail strategy, which refers to seamless online-to-offline experiences. Alibaba founder Jack Ma had proposed this strategy in October 2016, indicating his intention to expand the company's reach into the offline retail domain.

Being part of the festival also allows businesses to tap into valuable customer data.

"Because of data analytics, we can now provide each customer with discount coupons that are customized according to their purchasing preferences and average in-store spending," said Fan. "By providing the most relevant discounts, it helps to draw more recurring customers and boost sales."

Zhang Haohan, chairman of Shanghai Yuanyuan Enterprise Management, who oversees MTR City Plaza, is one who can attest to the effectiveness of the Double 12 promotions.

"The promotions not only help us to increase customer flow but also give us better clues regarding customer demographics and shopping preferences, all of which we can leverage for more precise marketing," he said.

hewei@chinadaily.com.cn