People walk at the headquarters of Alibaba in Hangzhou. The company has flexed its e-commerce muscle by logging a record $14.3bn in sales during its Singles’ Day promotion, providing a bright spot for its prospects amid concern about Chinese consumer spending.
Bloomberg
Hong Kong
Alibaba Group Holding flexed its e-commerce muscle by logging a record 91.2bn yuan ($14.3bn) in sales during its Singles’ Day promotion, providing a bright spot for the company’s prospects amid concern about Chinese consumer spending.
The event, which generated a 60% sales increase from a year earlier, was part of Chairman Jack Ma’s strategy to transform Alibaba’s online marketplaces into platforms for international trade. A third of buyers made purchases from merchants and brands outside of China during the one-day promotional event. Ma has set a goal of getting 50% of the company’s revenue from beyond China.
The success of Singles’ Day demonstrated how e-commerce companies can manufacture consumer demand through promotion, a strategy Amazon.com Inc used in July with its first “Prime Day.” It also highlighted how US companies can pursue growth in China, said Keith Anderson, vice president of strategy and insights at the Boston research firm Profitero.
“Alibaba is a pathway for growth for American and European brands,” Anderson said. Nike sneakers and Levi’s jeans were among the top-selling items, according to Alibaba.
The company’s shares failed to get a boost in the US as some investors stayed focused on the health of the Chinese economy and the strength of the country’s consumers, who remain Alibaba’s lifeblood. Shares declined 1.9% to $79.85 at the close Wednesday in New York.
“Singles’ Day was a big success for Alibaba,” said Gil Luria, an analyst at Wedbush Securities in Los Angeles. “However, I do not believe we can extrapolate from that strength to the entire Chinese economy.”
Ma raised the stakes this year by moving the event headquarters for Singles’ Day to Beijing, bringing in more foreign brands and enlisting Hollywood celebrities Daniel Craig and Kevin Spacey to add glamour to the shopathon. Tapping into rising disposable incomes has paid off for China’s biggest e- commerce emporium as it captures more of the country’s surging smartphone use with restaurant deliveries and video streaming.
“Chinese consumers have a lot of money in their hands,” said Chen Xingdong, chief China economist at BNP Paribas SA in Beijing. “Online retailers need to customize their products to serve these increasingly savvy urban consumers.”
China’s retail sales accelerated in October, overcoming the slowest economic growth in 25 years. Retail sales climbed 11%, the quickest gain this year and beating the median projection of economists, as the nation’s leaders seek to re- balance the economy toward consumption and services.
“The consumers that can create and lead demand will survive,” Ma said Wednesday night. “In the next 15 years, China’s economy will be good.”
Taking Singles’ Day festivities to China’s political, economic and media hub came after Alibaba’s roller-coaster first year as a public company. A record offering was followed by a record fall below the initial price, allegations the company wasn’t doing enough to fight counterfeits on its platforms, and the replacement of its chief executive officer.
Ma kicked off the event with a four-hour variety show that included a performance by “American Idol” finalist Adam Lambert and an appearance by Craig, star of the James Bond films. “House of Cards” star Spacey made a YouTube video.
Singles’ Day, a Chinese twist on Valentine’s Day, was invented by students in the 1990s, according to the Communist Party-owned People’s Daily. When written numerically, November 11 is reminiscent of “bare branches,” the Chinese expression for bachelors and spinsters.
The Singles’ Day promotion was started by Alibaba in 2009 and copied by rivals, morphing into China’s version of Cyber Monday. For the first six years, results were tabulated in Alibaba’s hometown of Hangzhou, in eastern China.
Alibaba estimated that 1.7mn deliverymen, 400,000 vehicles and 200 airplanes would be deployed to handle packages holding everything from iPhones to underwear. Mobile devices accounted for 69% of Wednesday’s transactions, Alibaba said in a statement.
“The sales on Singles’ Day shows the power of the Internet and that China still has considerable consumption potential,” said Zhu Qibing, a Beijing-based analyst at China Minzu Securities Co. “Alibaba’s success is a success of its platform, and it’s hard to replicate. ”
