Tech drives China's online retail boom

Thought of the day

China’s Alibaba shattered global retail records with its 11 November Singles’ day sales. They reached USD 25.3bn in 24 hours, up 40% from last year and four times the combined figure for Black Friday, Cyber Monday and Thanksgiving in the US last year. Add in sales from domestic competitors like JD.com, and the impressive size of China’s online retail market becomes apparent.

But the methods used by top Chinese e-commerce firms to achieve these sales may be as important for investors as the scale of demand:

  • Mobile first: 90% of Alibaba’s total transactions were executed via mobile devices, up from 82% last year. Alibaba’s apps have improved the browsing, search and payment process for users.
  • The art of automation: Alibaba delivered 56 billion AI-powered personal recommendations to customers on Singles’ day, and 410m personalized ads. Automated AI chat bots handled 95% of customer inquiries on the day.
  • An international affair: Singles’ Day transactions came from 225 countries and regions. Roughly 40% of the 140,000 participating vendors and brands were international, too. In total, 167 international merchants surpassed CNY 100m in sales, and six managed more than CNY 1bn. The best-selling brand wasn’t Chinese - but Apple, the US tech giant.

So we believe that the use of next-generation tools and techniques underlines the growing ability of Chinese firms to move up the value chain and spread their international influence. This is especially true of the Chinese tech sector, which accounts for 40% of the MSCI China index, and is a key factor in our overweight on China within our Asia tactical asset allocation.

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