Alibaba on the right track to break previous Singles’ Day sales record of $38bn

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Alibaba Group kicked off the world’s biggest shopping binge on Wednesday, an gross annual frenzy of consumption for vast sums of people that year may also serve as the very best barometer up to now of China’s post-pandemic recovery.

Sales totalled 372.3 billion yuan ($56.3bn) within the first thirty minutes on November 11 following the company added a shopping window earlier this month and included other additional services in its tally. That allowed Alibaba, among the world’s biggest online commerce sites, to easily blow past last year’s total haul of $38bn over a 24-hour period.

However the strong sales have already been overshadowed by concerns that regulators are seeking to curtail the growing influence of Alibaba and other Chinese peers. Shares of Alibaba, the major of the country’s tech firms, sank 7.4 per cent in early Hong Kong trading on Wednesday, taking losses to practically $100bn since Beijing this week unveiled new antitrust regulations governing the increasingly dominant internet companies.

Double 11 has historically served as a very accurate indicator for what’s happening in the following year for retailers, brands as well as consumers

Jonathan Cheng

Singles’ Day debuted in '09 2009 and has grown over a decade into a nationwide marathon of frantic bargain-hunting that dwarfs sales events like Black Friday and Cyber Monday in both intensity and size. 2020’s edition includes a record number of brand names from Apple to Nike betting that - after months of Covid-enforced abstention - China’s 400 million-strong middle income is ready to devote to everything from Hainan beach-side vacations to takeaway coupons and electronics.

Alibaba has been benefiting after the pandemic forced Chinese consumers - who already buy about 30 % of the nation’s retail purchases online - to accelerate their shift to e-commerce. Homebound consumers turned grocery delivery into the industry’s hottest arena, anchoring an unprecedented surge in online activity through the nationwide lockdown. Domestic travel is accelerating, propping up Alibaba businesses such as for example Fliggy, while a raft of new smartphones launched through the quarter is likely to tap pent-up demand for electronics.

The strong begin to this year’s sales fiesta - generally known as “Double 11” - may bode well for China’s economy, providing further evidence that consumer spending, up to now a laggard in the recovery, is strengthening.

“Double 11 has historically served as a very accurate indicator for what’s happening in the next year for retailers, brands along with consumers,” said Jonathan Cheng, head of China retail at Bain & Co. “Because of this year, with Covid, it’ll are more important. And if you look at China, which may be the first someone to be appearing out of Covid, it’s gonna be an indicator for other countries aswell.”

The brainchild of co-founder Jack Ma and chief executive Daniel Zhang, Singles' Day was designed to be an antidote to the sentimentality of Valentine’s Day. It requires its name from what sort of day is written numerically as 11/11, which resembles “bare branches”, an area expression for the unattached. On the way, the business created the world’s major shopping festival that has helped to propel Alibaba into a Goliath.

It’s also become an annual showcase for Alibaba’s cloud services and also affiliate Ant Group’s Alipay mobile wallet. A record event would be another feather in the cap for Ant, which could do with a win after tightening regulatory scrutiny that torpedoed its initial public offering the other day.

In a nod to the pandemic, Alibaba scaled back on live events this season and is instead counting on increased online promotions such as celebrity livestreams to draw vast sums of shoppers to its e-commerce platforms. Popstar Katy Perry performed at an online event on Tuesday, four years after she pulled out from Alibaba’s twelve-monthly live extravaganza to mark the shopping festival. Alongside the most common 24-hour sales period on Wednesday, 2020’s event featured yet another window for consumers to create purchases from November 1 to 3.

Shoppers can buy heavily discounted goods like cosmetics, clothing and groceries from its Taobao and Tmall platforms and also have them shipped via the company’s Cainiao logistics service, and book flights to domestic tourist hotspots on the Fliggy travel website. Kaola - purchased from NetEase this past year - is participating for the very first time, offering goods from 89 countries to consumers.

Foreign consumer brands have long relied on Alibaba to get usage of the Chinese middle income. That’s especially true this year, given how most economies elsewhere are grappling with a resurgence in the pandemic. Through the first 111 minutes of sales on November 1, Nike and Apple were among 100 brands that reported 100 million yuan ($15m) in transactions. And Estee Lauder’s flagship store on Alibaba’s Tmall platform was the first ever to surpass 1bn yuan in sales, the e-commerce company said. International hotel groups Marriott International and Accor also passed the 1bn yuan transaction mark for the first time.

Expectations are high for Alibaba. Revenue in the September quarter grew at the slowest on record for the time, with customers putting off purchases on its Taobao and Tmall platforms in anticipation of deep bargains ahead. “The performance of Singles' Day may be a far more important benchmark to look at, rather than the third quarter result,” said Steven Zhu, an analyst with Pacific Epoch.

Much like previous years, Alibaba and its e-commerce rivals rolled out ever-larger promotions to entice consumers. Over the complete Singles' Day event, merchants could conclude forking out an archive 30bn yuan in discounts and subsidies to improve sales across Tmall and Taobao alone, CLSA analysts led by Elinor Leung estimated.

Those discounts could be key to enticing consumers, which have only just started to loosen their purse strings, to keep spending. China’s retail sales climbed 3.3 % in September from this past year and growth may have accelerated to 5 % in October, as travel and other consumption found through the golden week holiday in the beginning of the month.

But overall retail sales remain down for the year - shrinking about 7 % in the first nine months from the same period in 2019 -and it remains to be seen if strong spending during national holidays and one-off shopping events like Singles’ Day will translate into a sustained recovery. Private consumption accounted for only 0.5 percentage points of gross domestic product growth in the 3rd quarter and a complete recovery in consumer confidence may only can be found in 2021, according to Australia & New Zealand Banking Group economist Xing Zhaopeng.

“Singles’ Day should see spending greater than this past year but remember retail sales were growing at 8 % before Covid-19,” said Shaun Roache, Asia-Pacific chief economist at S&P Global Ratings. “If Singles’ Day is much better than expected, we have to watch sales activity closely in December to see if this is an authentic pick-up or individuals are simply stocking up and staying cautious.”

Source: https://www.thenationalnews.com

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