Record High Double 11 Sales Highlight Shift to Omnichannel Retail and Advances in Logistics Technology

Retail sales during this year’s ‘Double 11’ online shopping festival in Mainland China set a new record, with the country’s major e-commerce platforms reporting RMB 760 billion worth of sales on November 11, an increase of 63% y-o-y on last year’s figure. A total of 2,321 million individual logistics orders were received, a rise of 80% y-o-y.

The festival, also known as ‘Singles’ Day’, is now held in several other Asian countries, particularly those in Southeast Asia, and is a closely-watched barometer of consumer sentiment. With retailers across a number of categories still recovering from the aftermath of the pandemic, this year’s event saw a significant uptick in participation, including debuts from several hundred established luxury brands. Tmall data show 2.5 million retailers joined its event this year, an increase of 25% y-o-y.

Figure 1: Double 11 sales revenue and logistics orders 2020 vs 2019

This year’s strong sales confirm the recovery of Mainland China’s retail market, which has been supported by the containment of the pandemic, the improving economic outlook, ‘revenge spending’ by consumers and the localisation of consumption.

What does it mean for real estate?

Retail

The pandemic has accelerated the shift to omnichannel retailing, with a recent survey of retailers by CBRE finding that more than two-thirds of respondents plan to increase investment in online retailing and delivery apps in the coming years.

The wider adoption of omnichannel strategies will continue to have a significant impact on the retail property market. Store network expansion will be led by omnichannel retailers, many of whom will command an advantage over traditional brick-and-mortar groups due to their more extensive supply chain capabilities and stronger in-store sales.

New-to-China brands will increasingly utilise online platforms to gauge market interest before committing to establishing a footprint on the ground. This should translate to a steady flow of new physical stores by new market entrants from overseas over the next couple of years, with prime locations in gateway cities expected to be keenly sought after.

CBRE expects the focus of brick-and-mortar stores to shift towards providing an experiential environment for shoppers to view and try products, rather than simply being a point of sale. Retailers are advised to allocate larger areas to product display and testing, while reducing the volume of space dedicated to cashiers.

CBRE also recommends landlords add omnichannel amenities to their shopping malls, such as livestreaming studios and click-and-collect points. With shopping centre space in major tier I and tier II cities of Mainland China now totalling just under 100 million sq. m., there are opportunities for property owners to designate last mile pick-up points for consumers to collect their online orders.

Logistics

With Double 11 the first in a series of shopping festivals due to take place before year’s end, and Chinese New Year occurring in mid-February 2021, CBRE expects to see a sharp increase in short-term warehouse leases by e-commerce companies and 3PLs over the coming months. Warehouse net absorption in Mainland China is forecasted to increase by 10% q-o-q in Q4 2020 and by a further 5-10% q-o-q in Q1 2021, adding to the strong recovery witnessed over the past six months.

The adoption of ‘smart’ supply chains and warehouses by occupiers and developers is leading to unprecedented levels of efficiency in order management and delivery. At this year’s Double 11 event, Tmall delivered its first parcel just 5 minutes after the order was placed online, and is predicted to further reduce the time required to fulfill its first 100 million orders to just 2.2 days or less compared to 2.4 days in 2019 and 2.6 days in 2018.

This dexterity is being made possible by a range of technologies collecting and analysing big data on consumer behaviour. These include artificial intelligence, which is being deployed to forecast the volume and type of commodities purchased and delivered in individual markets.

As delivery speed is now a critical factor in buyer satisfaction, logistics occupiers are displaying robust demand for warehouses and urban logistics facilities in core locations, further driving up rents in major cities.

This is driving stronger investor interest in modern urban logistics facilities. Given the scarcity of developable land and completed logistics assets for sale, some experienced investors are redeveloping or retrofitting older industrial facilities in attractive locations of tier I and tier II cities into high end warehouses. Around RMB 11.6 billion worth of investment deals for this asset class were concluded in the first nine months of 2020, with volumes expected to increase further in the coming years.

Figure 2: Number of orders and delivery time of Double 11 sales