Brands, retailers the biggest losers on Singles Day

While consumers reaped the rewards on Singles Day, at least one retail consultant is questioning the damage done by the US$14 billion 24-hour spendathon.

“The clear winners are consumers, marketplaces and couriers and delivery companies,” explains Richard McKenzie, partner with Oliver Wyman. “However, for sellers and brand owners, the picture is less clear.

“While the event undoubtedly helped top line sales for some, some of those sales are not truly incremental. Additionally, GMV growth on Singles’ Day is much faster than overall GMV growth, meaning the pull forward effect could be exacerbated. In 2014, a significant proportion of sales were returned within 10 to 15 days.”

McKenzie says given the heavy discounting – not to mention the additional advertising and operating costs before and during Singles’ Day – he questions how many sellers and brand owners are making incremental profits.

“For product categories that are purchased on a regular basis, having a competitive offer on Singles’ Day can prevent customers from trying competitors’ products, while not participating could mean losing some customers during the event and in the future. For products purchased infrequently, the bottom-line benefits of heavy discounting on Singles’ Day are unclear.

“For example, in the UK, many retailers initially embraced the Black Friday retail event (similar to Singles’ Day) over the past two years, but some have already declared that they will not participate anymore, for the reasons discussed here.”

McKenzie also points out mall foot traffic declines sharply during such online events.

“Going forward, sellers and brand owners need to carefully consider what they want to achieve from Singles’ Day – beyond a simple spike in sales.

“Leveraging the opportunity to increase brand awareness and consumer stickiness could make participation truly meaningful.”

But given the huge sales revenues and records being set, McKenzie says Singles’ Day is definitely here to stay.