Introduction

The “Big Three” Internet giants—Amazon, Alibaba and JD.com—are not the only ones reaping the rewards of, and facing the challenges created by, the success of their respective online shopping festivals. Prime Day, Singles’ Day and 618 are also having an impact on the participating brands and third-party retailers, as a result of the significant increase in traffic generated by consumers hunting for bargains online. This report highlights three main learning points that brands and retailers can learn from past festivals:

1. The online shopping festivals represent a huge opportunity both for participating brands and retailers, as well as for competing retailers.
2. For participating brands and retailers, setting up a partnership with the event organizer—whether it be Amazon, Alibaba or JD.com—in preparation for the shopping festival is crucial to maximise visibility and conversion.
3. Retailers need to be ready to accommodate the extra traffic generated during the shopping festival by investing in their IT and logistics infrastructure.

The Shopping Festivals Mean More Business for Retailers

During the Big Three’s online shopping festivals, consumers are encouraged to browse online for deals, compare prices and look for product information on search engines. This increased level of consumer activity generates online traffic that brands and retailers can use to their advantage. Of course, those retailers and brands that jump on the shopping festival bandwagon through direct participation increase the likelihood of falling within consumers’ shopping radar. Amazon: Amazon tends to promote its own products and brands during its Prime Day shopping festival. However, the company always reinforces how the event represents a huge opportunity for smaller third-party retailers selling on its marketplace and that promotion of its own brands and products takes second priority and does not overshadow the promotions of the smaller sellers on its marketplace. During this year’s Prime Day 2018, for instance, Amazon announced that sales of the small and medium-sized companies selling on its marketplace had significantly exceeded $1 billion. JD.com: Similarly, JD.com has highlighted how participating in its 618 shopping event represents a huge opportunity for brands and retailers. During this year’s festival, leading sports brands Adidas, Fila and Under Armour saw sales increase 200% (Adidas) and 100% (Fila and Under Armour) year over year. Retailers that do not participate directly in the shopping festivals, but run concurrent promotions, also see these events as a huge opportunity. Promotions during Prime Day, for example, have served as catalysts that have effectively “caused all ships to rise,” and other retailers have taken advantage of the increase in traffic of people hunting online for deals. A good strategy that has been adopted by competing retailers is to offer matching deals on products in the same categories as those being promoted during Prime Day to attract consumers that might be searching online for more information on a certain product. Best Buy and Target were two retailers that jumped on the Prime Day bandwagon this year, offering promotions on product categories that were also discounted on Amazon: Best Buy offered discounts on 4K smart TVs, laptops and smartphones, while Target offered deals on smart TVs and smart home and kitchen products.

The Benefits of Partnering with the “Big Three”

For participating brands and retailers, setting up a partnership with the event organizer—whether it be Amazon, Alibaba or JD.com—in preparation for the shopping festival is crucial to maximize visibility and to ensure they are not overshadowed by the large number of deals offered by other participating retailers.

Amazon

In the lead up to Prime Day 2018, Amazon listed details about the promotions that would be available during the event, which, other than its own products, involved many more brands, such as Opal Nugget Ice Maker, Etekcity Smart Plugs and Noon Home Smart Lighting products. For retailers selling on the marketplace, better access to Amazon’s decision makers by closely collaborating with the company gives them sufficient advance notice about the other products that may be participating. This allows them to stock up on these items as well as be included in the list of sellers from which these products can be bought during Prime Day. Partnering with the organizers on various initiatives planned during the shopping festival, such as the various online-to-offline (O2O) events held by Alibaba and JD.com, is also a great way for brands and retailers to generate more visibility and sales.

JD.com

JD.com announced that more than 1,400 brands would be participating in the pop-up stores it was opening as part of its 618 event in 30 cities in China this year and that generated 43 million visits.

Alibaba

Alibaba ran a similar initiative during Singles’ Day 2017, partnering with 1,000 brands, including L’Oréal, Mondelēz, Nestlé and Procter & Gamble, to set up 100,000 smart stores in 31 cities in China. Shoppers at these temporary stores could browse merchandise and purchase items via Alibaba’s e-commerce platforms by scanning QR codes on the items in the stores.

Initiatives by the Chinese Internet Giants

Both Alibaba and JD.com strive to offer more variety to their shoppers are continuously expanding their partnerships with various brands. Initiatives include:

• The “See Now, Buy Now” catwalk show: Alibaba runs this as a kick-off event to Singles’ Day. It is broadcast throughout the country on different platforms, including videostreaming app Youku and the Tmall app, as well as on various TV stations. The event allows shoppers tuning in to tap on the product or scan a QR code on their screens to send the item to their Tmall cart for purchase. Alibaba worked with customer data and the brands to select which brands would participate brands. During the 2017 catwalk show, 27 fashion brands, including Opening Ceremony, Furla, Rimowa, Guerlain, Victoria’s Secret, Ray-Ban and Estée Lauder, participated.
• Similarly, in May 2018, about a month before its 618 festival, JD.com announced new partnerships with fashion brands, including Polo Ralph Lauren, Saint James, Cissonne, Lucky Chouette and Shesmiss.

These examples of initiatives undertaken by China’s two Internet giants firms show the different ways retailers and brands can team up to leverage their respective shopping festivals. In E-Commerce Opportunities in China: A Discussion with Alibaba and Coresight Research, we provide further insight on how collaboration with Alibaba is key when entering the Chinese market, But the same recommendations can equally be applied to a collaboration with JD.com.

Investing in IT and Logistics Infrastructure to Cope with Increased Traffic

Retailers need to be ready to accommodate the extra traffic from consumers searching online and for the increase in orders that could weigh on their IT network and fulfillment capabilities, during and after the promotional event.

IT Infrastructure

The higher traffic can be challenging for the IT infrastructure of any company, even for the largest and most technically advanced players. During this year’s Prime Day, Amazon suffered a series of glitches, which made it difficult for some US customers to shop during the early hours of the event. “Sorry, something went wrong on our end, please go back and try again” appeared on the Amazon website. While the company managed to minimize the impact of the disruption on the success of Prime Day 2018, despite the IT glitch, customers in the US ordered more items during the first few hours of the event than they did last year. However, according to an internal document reported by news website CNBC, the glitch highlighted a technical shortcoming that caused Amazon to be unable to handle the increased traffic generated on Prime Day.

Fulfilment Capabilities

Similarly, logistics, warehousing and last-mile capabilities must be enhanced in preparation for the shopping festival to ensure that retailers can successfully process the increased volume of orders generated. Problems with a company’s logistics infrastructure that render it unable to cope with higher order volumes are not unusual. In preparation for the different online shopping festivals such as Singles’ Day and 618, Azoya—a cross-border e-commerce service provider that partners with international retailers to expand their businesses in China—recommends retailers ensure they have sufficient capacity and enough inventory on hand to fulfill expected increase in orders. According to Azoya, international retailers selling to Chinese shoppers saw an influx in orders from Mainland China during Singles’ Day 2017, which, in some cases, took them up to a week to “digest.” The adoption of technology to improve the efficiency and transparency of operations is an effective strategy for retailers to prepare their IT and logistics infrastructure for the higher order volume generated by these online shopping events. Increasingly more companies are turning to technology to streamline their operations, improve their shipping efficiency and increase the visibility of their supply chain in order to cope with the higher-than-usual order volume generated by shopping events such as Prime Day, according to specialist website SupplyChain247. Different technology employed in supply-chain management includes tracking devices powered by radio frequency identification (RFID) to track items through their product cycle or cloud-based software to help partners within the supply chain to collaborate.

Key Takeaways

This year’s Prime Day, Singles’ Day and 618 events showed the impact that these shopping festivals have on the retail industry, and demonstrated that Amazon, Alibaba and JD.com are not the only ones reaping the rewards and facing the challenges created by the success of their respective online shopping events. We highlight three key learning points for retailers that can be drawn from this year’s Prime Day, Singles’ Day and 618 events:

• The online shopping festivals represent huge opportunities for retailers and brands to raise their visibility and to increase conversion, whether they are participating directly in the shopping festival or are simply running concurrent promotions.
• For participating brands and retailers, greater collaboration with the Internet giant running the festival is crucial to maximize visibility and to ensure they are not overshadowed by the large number of deals offered by other participating retailers.
• Retailers need to be able to accommodate the extra traffic generated during the shopping festival by investing in their IT and logistics infrastructure.

Shopping festivals have reached such a scale, making it impossible for other retailers to remain indifferent. This also highlight the need for retailers and brands to adapt their strategies to not only benefit from, but cope with, the wave of consumer demand which, directly or indirectly, they will likely face during these online shopping event. Click here to read more Coresight coverage of Singles Day over the last few years.