By the Blouin News Business staff

Let a thousand e-businesses bloom

by in Asia-Pacific.

Alibaba head office building in Hangzhou

Photo Credit: AFP/Getty Images

As China’s 200 or so most senior leaders debate behind closed doors how to rebalance the economy away from investment-driven growth and towards domestic consumption, China’s cyber-consumers are getting on with doing the job for them. In a frenzy of online shopping they spent 35.2 billion yuan ($5.8 billion) on November 11, a date that has become the world’s biggest e-commerce day of the year. It also provides a textbook example of what China’s private sector is capable of unleashing when not hemmed in by large state-owned enterprises.

November 11 is Singles’ Day in China, a faux-tradition invented in the 1990s by lonesome Beijing students, the story goes, as a counterpoint to Valentine’s Day. Five years ago, Tmall, a retail shopping site that specializes in Western brands and is run by China’s largest online retailer Alibaba, highjacked the occasion for a day-long online shopping promotion.

That yielded a modest 50 million yuan in sales, but the idea caught fire. This year, that much business was done in the opening minute. (The sales start at midnight.) More than 20,000 online stores are taking part this year, offering discounts of up to 50%. Alibaba said last year’s full-day 11/11 total of 19 billion yuan was passed by mid-day, and that by late-afternoon it  was honing in on its target of 30 billion yuan. It easily blew past that to end up at 35.2 billion yuan by end of day. By comparison, U.S. consumers spent $1.5 billion (9 billion yuan) during the biggest U.S. online shopping day of the year last year, Cyber Monday.

With more than half a billion Chinese online, Chinese consumers are forecast to spend $290 billion on e-shopping this year, according to Forrester Research, surpassing their American counterparts’ $260 billion. That would put China’s annual online sales at the equivalent of one month’s total retail sales. A recent study by consultants McKinsey estimated that while 60% of online consumer spending was just switching from offline sales, the remaining 40% was spending that otherwise wouldn’t have occured.

Even more encouraging for the leadership, Taobao, Alibaba’s core consumer e-commerce business, says it has seen sales rise rapidly over the past three years in third- and fourth-tier cities and in medium and small towns. Those are places where conventional retail networks are not well established but which will have to drive a lot of the urbanization and domestic consumption on which a successful economic rebalancing would depend.

Alibaba was founded in 1999 by the entrepreneur Jack Ma as a business-to-business web portal. Its business is primarily in China and has been able to expand rapidly as it had no existing competition — particularly no established state-owned competition. It has grown its annual sales across all its businesses to $170 billion (more than the U.S.’s Amazon and eBay combined) and its payments system accounts for half of China’s non-bank online payment market. The lesson all these big numbers should suggest to the leadership? To paraphrase Mao: let a thousand e-businesses bloom.