SAN FRANCISCO — Alibaba and other Chinese e-commerce companies hosted the world’s biggest one-day shopping spree Wednesday, capitalizing on an annual event dubbed “Singles Day.” Analysts estimated this year’s Singles Day could bring in as much as $11 billion in sales.
Alibaba said total sales exceeded $5 billion in just the first 90 minutes of the 24-hour sale, which kicked off at midnight Wednesday in Beijing. About 72% of sales were from mobile phones.
“It’s literally a 24-hour orgy of consumption,” said Michael Zakkour, vice president, China/Asia Pacific Practice at global consulting firm Tompkins International.
Alibaba (BABA) shares closed flat at $81.43 in New York on Tuesday. The company has struggled since its much-anticipated IPO in the U.S. last year, although its stock has been rising this fall.
Singles Day is a creation of Chinese online retailer Alibaba, which six years ago took an obscure Valentine’s Day-like holiday that began in the 1990s and turned it into an excuse to go shopping for oneself. In its English materials, the company brands the event as a Global Shopping Festival.
All told, sales in China in this one 24-hour period are expected to be larger than the Black Friday weekend and Cyber Monday combined, said Joel Backaler, an analyst with Frontier Strategy Group.
Singles Day sales started out as Alibaba-specific, but is now used by other e-commerce platforms, such as retailer JD.com, which has about 25% of the Chinese e-commerce market, said Kevin Carter, founder of EMQQ, the Emerging Markets Internet & E-commerce ETF based in San Francisco.
It’s also a big target for U.S. retailers looking to reach Chinese consumers.
Last year, Alibaba said it did $9.3 billion in revenue on Singles Day, shipping 278 million orders in 24 hours.
Singles Day sales contributed 2.5% to Alibaba’s overall sales for the year in 2014, said Sandy Shen, a Beijing-based analyst with the Gartner Group.
Unlike Black Friday in the U.S., which is very much focused on door-buster sales at physical stores, as well as checking out deals online, Singles Day sales still occur mostly online.
“You’ve literally got hundreds of millions of Chinese who are in their homes, in their offices and on their mobile phones buying,” said Tompkins International’s Zakkour, author of China’s Super Consumers. “You’re standing next to somebody on the subway, but you don’t realize they’re dropping about $500 on Singles Day sales on their phone.”
As the celebration becomes ingrained in the culture, retailers are working harder and offering better prices to get consumers to buy, Gartner’s Shen said.
“Some consumers are getting more realistic and only buy when it is a good deal. Quite a number of merchants will inflate the price before giving discounts, and the actual price isn’t that much cheaper,” she said.
That means it’s not always a high profit-margin arena for U.S. companies.
“American firms will have to sacrifice margin since Chinese shoppers expect extremely low prices as they seek out the best deals,” said Frontier Strategy Group’s Backaler.
Sold, but not made, in China
Today, Single’s Day primarily is a Chinese phenomenon. Almost all the marketing in done in Chinese and is aimed at the Chinese market for delivery there.
“It’s a question of the logistics associated with getting you your purchase,” Alibaba’s Paul Kranhold said.
But even if American consumers aren’t shopping during Singles Day, American companies are very busy selling.
“For them, it’s getting their brands inside China and focusing on this huge opportunity,” Kranhold said.
The massive sales on Singles Day help to show the growing importance of China and its rising middle class as a critical global market. China has an estimated 600 million to 700 million middle class consumers, and American companies have been quick to see the potential.
“It’s a huge global opportunity for them. It’s a massive chance for them to engage with the largest and fastest growing consumer class in the world,” Zakkour said.
It’s also a market where buyers often reject locally made goods, giving U.S. companies an in.
“Chinese consumers demand authentic high-quality products as diverse as baby formula, luxury shopping bags and organic produce, because they cannot trust product safety and authenticity domestically in China,” said Frontier Strategy Group’s Backaler, who authored China Goes West, a book about Chinese companies going global.
The event has had a ripple effect in brick and mortar stores in China, with some now holding their own Singles Day sales.
It’s also a cultural event. There was a gala opening in Beijing and a huge, star-studded variety show broadcast on nationwide TV Tuesday night that included American actor Kevin Spacey, whose Netflix drama House of Cards is a huge hit in China.
Singles Day first started among university students in Nanjing in the 1990s, as a day for bachelors to gather with friends and meet new people.
The date, 11-11, was chosen because it’s a grouping of 1’s, or singles. It morphed to include women and be a general “meet possible mates” day.
Alibaba rebranded it as a day for unmarried people to buy items they wanted, and in 2009 launched massive online sales on the day.
Amazon’s global competition
Alibaba represents serious global competition for Amazon. Some see the two CEOs, Jack Ma and Jeff Bezos, in a power struggle to rule the e-commerce world.
But the logistics of delivering around the globe make it hard for Alibaba to really go up against Amazon on its home turf.
“It’s hard for me to envision a time, if I need a box of pens or my wife needs a chair to sit in at a soccer game, that we’d go to Alibaba and not Amazon Prime,” Carter said.
Still, “things change, and things change fast in this space,” he said.
Alibaba may have a hard time gaining a foothold in the U.S., but it’s already working hard to develop markets internationally.
“Jack Ma has a mission in life, which is to become the first truly global e-commerce destination. The company is opening platforms in India and South America. In Russia, its AliExpress is the No. 1 e-commerce platform,” Zakkour said.
Originally posted 2015-11-11 03:09:54.