The world’s largest annual shopping event Singles Day kicked off in China and promises to bring billions of dollars in sales for the country’s biggest e-commerce players, as millions get their hands on good deals.
But the tone at this year’s bonanza is a lot more cautious than it has been in prior years, as companies contend with rising inflation in a slowing economy and a regulatory crackdown on their operations.
Alibaba (BABA) launched the first Singles Day Shopping Festival on November 11, 2009. The event, which is also known as Double 11, is pegged to China’s informal, anti-Valentine’s Day holiday that celebrates people who aren’t in relationships.
The date for Singles Day, 11.11, was chosen because it is written as four ones, or singles.
Since that first occurrence, Singles Day has ballooned into a shopping frenzy observed not just by Alibaba, but also by other e-commerce companies that offer their own steep discounts and promotions. Deals take place over several days or even weeks. It has also spread outside of China, with Alibaba’s Southeast Asia subsidiary Lazada offering deals in Singapore, Malaysia, Indonesia, Thailand and Vietnam.
It’s an incredibly lucrative event: Last year, Alibaba raked in roughly $75 billion in total sales. Rival JD.com (JD) said at the time that it reached $41 billion in sales.
Inflation and soaring energy prices are a dampener
China’s economy is growing at the slowest pace in a year as energy woes, shipping disruptions and a deepening property crisis take their toll on the world’s second largest economy, in the shadow of the COVID-19 crisis.
Inflation as always poses a threat to profit margins and the purchasing power held by consumers.
Government Crackdown Woes In China
E-commerce firms have also not escaped increased government scrutiny and surveillance over corporate behemoth CEOs.
Alibaba was hit earlier this year with a record $2.8 billion fine for behaving like a monopoly, and the company has shed hundreds of billions of dollars in market value as Beijing’s reforms take shape.
Competitors JD.com, Tencent, Pinduoduo, Meituan and other companies have also been investigated or fined over alleged anti-competitive behavior.
A lot of companies have also rushed to donate billions of dollars from their own profits to government-based social causes, as President Xi Jinping makes clear his priority to redistribute wealth.
Supporting Beijing’s Climate Goals
Companies are also rushing to support government initiatives intended to reduce climate change effects. Climate has been a particular focus, with China this week even pledging to ramp up its climate ambitions in an agreement with the United States. China is still the world’s biggest coal consumer.
All the e-commerce companies in China have pledged to invest more in renewable energy to make large events such as Singles Day more sustainable affairs.