Singles Day ignites online retail frenzy(2)

Logistics bottleneck

Singles Day has transcended its original function as a day of celebration for the great unloved. It became a day of crazy online shopping when Alibaba launched its first sales campaign on that day in 2009.

Since then, sales at TMall on Singles Day have snowballed from 50 million yuan ($8.2 million) in 2009 to 19.1 billion last year, and are poised to top 30 billion this year. Nothing comes free and blossoming sales bring burgeoning problems: The Singles Day sales spike has called into question the ability to get the goods to the buyer's door.

More than 72 million parcels went out last year and couriers were overwhelmed. It's all very well for Alibaba's founder Jack Ma to brag about a 260 percent rise in sales,but he was soon deluged with embarrassing snaps of inadequate distribution centers overbrimming with parcels.

Alibaba admits that last year, less than half the parcels they sent to the Chinese mainland were delivered within three days. Some orders arrived weeks, or even months, later.

Adversity breeds invention and so Jack Ma formed a new venture in June with retailer Intime, conglomerate the Fosun Group and a host of couriers, to ride the wave of rising demand for delivery services.

The venture, Cainiao, which means "rookie" in Chinese, is absorbing as much as 100 billion yuan in investment to shore up an underdeveloped logistic network in China.

Progress will be tested on Singles Day, as Alibaba draws on data collected over years to analyze and forecast the flow of goods. This will help couriers make decisions on where to dispatch extra hands to handle sudden surges in cargo.

Largest online retail market

As online retailers and conventional stores square off in the world's largest Internet community (a netizen population of 564 million at the end of last year), online retail sales have risen steeply, reaching 1.3 trillion yuan in 2012, accounting for 6.3 percent of the retail market and likely to expand to 7.4 percent this year, according to China e-Business Research Center. This compares with 5 percent logged for the United States in the same period

A study by the McKinsey consultancy found that 60 percent of China's online consumption represents a switch from offline, while the remaining 40 percent is new demand that would otherwise be nonexistent without online stores. The Internet has either unearthed or bred consumption that lain dormant or been hidden. All this spending is exactly what is required to propel the economy through consumption rather than through export and investment.

With an estimated $296 billion in online retail sales, China will soon surpass the United States as the world's largest online retail market.

"Integrating online and offline retail is not a change of Alibaba's marketing strategy, but rather a change in era." Alibaba's Wang said.