The Impact Of Double 11 Tmall Sales On Traditional Retail Sales Is Weakened.

　　 Behind the record of online sales.

In view of the government's opposition to the policy of extravagance and waste, the mass market retailers are reviving. In the past 2012 years, the Chinese government has been restricting luxury consumption and promoting frugality to suppress luxury consumption over the past two years. This trend intensified in the 2014 years and suppressed mass market consumption. Government departments, state owned enterprises and public institutions have distributed food packages, shopping vouchers and prepaid cards for employees on traditional holidays. At present, these benefits have been cancelled, resulting in a sharp decline in sales during the holiday season. Looking ahead, we predict that public consumption will recover from the low base of 2015 years, and high-end consumption will remain low.

Recent rating changes. Among the retailers we have covered, due to the prospect improvement, we recently upgraded the rating of the 0590.HK/ group (HK $23.75) to buy. The rating of Baisheng group (3368.HK/ HK 2.12, hold) was increased from selling to holding, and the Gao Xin retail (6808.HK/ HK 8.30, hold) rating was increased from selling to holding. We maintain a buy rating for 1212.HK/ (HK $14.50).

　　 Alibaba (BABA US/ $114.84, no rating) announced that during the double 11 Shopping Festival, Tmall and Taobao's total merchandise trading volume was 571 billion yuan, an increase of 58% over the same period last year. Behind the record sales, the following changes are worth noting.

1) the growth of passenger traffic is not satisfactory. In previous years, trading volume concentrated at 0-2 in the morning and 10 at midnight, but according to media reports, the peak of a transaction did not come as usual this year, and the volume of trading during the day was also low.

2) growth comes mainly from high priced products. According to media reports, in order to increase the volume of each transaction, Alibaba introduced overseas goods and international brands, and gave more promotional resources to high priced goods. Among the top 10 best sellers in 2014, there were 3 mobile phones and 2 furniture brands, and there were only two brands in 2013. Millet is still a sales champion and sales have increased by more than two times (see chart 2).

3) more offline brands are landing on the Internet. In the 2013 and 14 years, only the best selling women's clothing brands were dominated by simple online brands. For the top 5 most popular brands of other commodities, most of the brand's offline store businesses were larger than their online businesses.

　　 Offline retailer Growth is accelerating.

We believe that the acceleration of growth is mainly due to: 1) integration of online and offline promotions. Business owners with member plans also launched an integrated promotion online and offline. Customers who have accumulated a certain amount of shopping online or offline can participate in promotional activities.

2) the price difference between online and offline has been narrowed. In the past, the price of the same product sold by an online shop was about 30% less than that of a physical store, but according to media reports, some of the products were sold at a cheaper price during the promotion of double 11. During the promotion period, the merchants who run the online and offline stores offer the same price for some of the 11 products. In addition to similar products, the mix of products is changing. Online stores operate more expensive products while offline shops operate more low-priced products.

　　 Online retailers The threat to traditional retailers is weakening. 1) record online sales are mainly driven by high priced goods such as mobile phones and furniture, while the volume of passenger traffic is not exciting; this indicates that the dilution effect on the physical shops is decreasing; 2) more offline brands are landing on the line, and some of the simple online brands are squeezed out of the best sellers list; this indicates that the traditional brands with larger offline markets have competitive advantages; 3) many shopping malls and supermarkets also launched promotional activities on the 11 th day of the 11 month, and achieved a much faster sales growth; this indicates that the entity stores still have opportunities by integrating online operations and providing reasonable prices.

Jewelers can withstand the threat of electricity providers. We believe that the market share of electricity providers not only comes from traditional retailers who lack specialized or differentiated brands, but also traditional producers, because they lack price control over distribution channels. Therefore, we believe that jewelers are relatively defensive because they have their own brands and distribution channels (through self owned stores and well controlled franchised stores); leading jewelers have also set up online shops, offering low price products and replenishment of offline businesses.

Cosmetics retailers in Hongkong may become victims of e-commerce. In the past, mainland customers lacked the channels to buy cost-effective cosmetics. Now the electricity supplier has become the main platform for them to buy cosmetics and skin care products, and it also facilitates overseas direct selling. We believe that this trend will have a negative impact on Hongkong cosmetic retailers, such as Sasa international, which are mainly targeted at mainland tourists.