Iris Gu’s post on Alibaba‘s immensely successful sale day in China grabbed my interest. I haven’t considered the realm of e-commerce in my blog yet, and my interest in the subject piqued after friends at a debate tournament bragged about buying clothing at ridiculously low prices from Alibaba.
Alibaba’s “Single’s Day” campaign sounds quite familiar, bringing to mind the hurricane of consumerism during the USA’s Black Friday and Boxing Day. The move seems logical; taking advantage of a rapidly growing middle-class market in China (growing annually by 25%!!!) is nothing more than common sense. It’s no wonder businessmen everywhere are learning Chinese. In China, political movements towards freer markets and consumerism are taking momentum. It’s only a matter of time before the world’s largest pool of consumers opens its gates for every hungry firm in the world (“27,000 global brands” – hooray for PEST analyses).
A diagram showing the difference in volume of the Chinese and American markets. Graphic by iResearch.
But while we can adore Alibaba’s impressive $9.3 billion in sales, the statistic that sets off alarms in my mind is the terrifying “278 million orders”. 278 million?! That’s over two-thirds of the population of the US (which is about 319 million)! While we stand with open jaws at these stats, one must raise an important point. The “Single’s Day” in China differs from Black Friday and Boxing Day in one critical area: it’s far, FAR greater in size. While markets in the US can form Industrial Concentration Ratios of greater than 50% with ease, the difficult geography and immense population of China will make logistics and market capitalization a pie too massive for any firm to swallow. The idea of a single e-commerce firm meeting the need of something the size of 3 Germany’s beckons immense logistical problems ahead. With the market in China growing far more quickly than any individual firm, it will be interesting to see what competition in a free capitalist market in China will look like, alongside how delivery firms like UPS will adapt to this tremendous opportunity. How will technology, regulations, culture, and economics shape the appearance of a mature Chinese market?