On November 11, 2017, while most of Asia was sound asleep, a floodgate was opened at exactly 12:00 a.m.
The gigantic data server room at e-commerce giant Alibaba’s headquarters in Hangzhou, China went “live” for the start of the eighth annual Single’s Day shopping event. And it opened the floodgate to a torrent of activity – the likes of which had never been seen before.
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While few people in the west are even aware of Single’s Day and its significance to the Chinese retail market, it’s the most anticipated shopping event in China.
By 12:01 a.m. on November 11, goods worth US$1 billion had already been purchased through Alibaba’s two online shopping sites, TMall and Taobao. That’s a rate of US$16.6 million worth of products sold every single second.
After the first hour, a massive US$10 billion worth of goods had already been ordered, paid and processed for delivery.
And when Single’s Day ended nearly 24 hours later at 11:59 p.m., a mind-boggling US$25 billion was spent by Chinese shoppers looking to get a good deal on everything from smartphone cases to speedboats.
That’s four times bigger than sales during Cyber Monday, which is the largest online shopping event in the U.S., held last November 27.
What’s more impressive is that the 2017 Single’s Day sales figures were 40 percent higher than those of the previous year’s US$18 billion… and 2,500 times more than when Alibaba started the event back in 2010.
China’s consumption is growing… along with its middle class
The growth of China’s middle class is one of the defining economic trends of our time.
We’ve been talking about the Chinese middle class for ages. And with good reason.
Back in 2000, just four percent of China’s urban population was considered middle class, defined as urban households that earn US$9,000 – US$34,000 a year. (This may not sound like a lot, but adjusted for prices, it delivers a roughly comparable “middle class” existence to other countries.)
And according to a study by consulting firm McKinsey & Company, 76 percent of China’s urban population will be considered middle class by 2022.
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China had an urban population of 730 million people in 2015. So even if that figure doesn’t change (and it will only grow), by 2022 over 550 million people in China will be considered middle class. That would make China’s middle class alone big enough to be the third-most populous country in the world.
And this growing middle class plans on spending more money – a lot more.
Chinese consumption (that is, the amount of stuff people buy) is expected to grow 9 percent a year through 2020, according to Boston Consulting Group.
Overall, the consumer economy is forecast to grow by 55 percent, to US$6.5 trillion. That’s an increase of US$2.3 trillion – which is like adding a new consumer market 1.3 times larger than the current consumer markets of Germany or the U.K.
People in China are doing a lot of their spending online
The e-commerce market in China is growing at around 27 percent per year, according to research firm iResearch China. By comparison, the U.S. e-commerce market saw growth of 16 percent in 2017. And Chinese e-commerce is expected to grow from just 17 percent of total retail sales in 2017, to 25 percent by 2020.
So where is all this growth coming from?
According to Statista.com, 83 percent of the internet-using Chinese population bought a product online in February.
Also, though, only 55.5 percent of the Chinese population is using the internet (compared to 96 percent in the U.S.)
Many of the non-internet users in China live in the poorer parts of the country. But they’ll be coming on line over time… and growing wealthier. That means there are hundreds of millions of potential Chinese customers who will come online in the coming years.
In short, the Chinese e-commerce revolution is here… and it’s only getting bigger.
Editor, Stansberry Churchouse Research
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