HANGZHOU China - E-commerce giant Alibaba Group Holding Ltd reported more than $9 billion in sales on China’s Singles’ Day today, illustrating the buying power of the Chinese consumer and the importance of the event in the retail calendar.
Real-time figures on a giant screen at Alibaba’s sprawling Hangzhou campus surged past 2013’s record to 57.1 billion yuan ($9.3 billion) just after midnight after Chinese and overseas shoppers snapped up heavily discounted goods online.
The shopping day, similar to Cyber Monday and Black Friday in the United States, comes less than eight weeks after Alibaba’s record $25 billion public share listing in New York.
Founder and Executive Chairman Jack Ma said earlier on Tuesday that Alibaba’s financial services arm, Alipay, also “will definitely go public”, probably in China.
Ma later spoke briefly to reporters, saying he felt a bit nervous” due to the higher pressures and expectations now that Alibaba is a listed company.
China embraces troublesome cult of consumption
China has no more potent symbol of consumer power than “Singles’ Day”. Alibaba, the e-commerce giant that invented the shopping frenzy which takes place every Nov. 11, shifted $2 billion of goods on its websites in the first hour of trading. If consumers kept that up all year, retail sales in the People Republic would be five times bigger than they actually were in 2013. Fortunately, they don’t.
Consumption has replaced investment as the guiding star of China’s economic policy. Years of wasteful investment has created eyesores and a mountain of debt. Economists cheered when consumption rose to 48.5 percent of GDP in the first nine months of 2014, from 45.9 percent a year earlier. Top leaders have praised Alibaba for helping Chinese citizens find their inner spendthrifts.
There’s something to that, since consumption is less volatile than exports or government-mandated investment. People can choose where and when to spend their money. But consumer spending is a poor target, because like investment, it comes in both useful and wasteful forms. Money spent on education or healthcare improves the quality of people’s lives more than a pair of discounted Ugg boots, or a Big Mac.
Consumer spending can even worsen bad outcomes like economic degradation. Anyone who has tasted Beijing’s air would question the logic that a household buying a car, which counts as consumption, is better than a power plant installing an air filter, which would be classified as investment.
Politicians like consumption because it makes the masses feel good. But those benefits can diminish over time. China’s boom in sales of luxury goods owed much to gift-giving to corrupt officials – a kind of feel-good factor the country’s leaders no longer want to encourage. Although retail sales are growing rapidly, a quarterly central bank index of people’s feelings about future income has steadily declined over the past five years.
This doesn’t matter to investors in Alibaba. “Singles’ Day” alone contributed 2 percent of the company’s entire merchandising value in 2013. And only a real party-pooper would begrudge Chinese consumers their yearly spending frenzy. But while China’s future undoubtedly lies with its consumers, the cult of consumption can do as much harm as good.
Alibaba turned Singles’ Day, a Nov. 11 Chinese response to Valentine’s Day, into an online shopping festival in 2009.
It copyrighted the “Double 11” term three years later after recognizing its commercial potential.
“You’re seeing the unleashing of the consumption power of the Chinese consumer,” Joe Tsai, Alibaba’s executive vice chairman, told reporters.
Alibaba had sales of 35 billion yuan during last year’s festival.
The numbers this year were boosted by a “pre-sales initiative” under which merchants advertised prices as early as Oct. 15, taking deposits for the items but only processing full payments and shipping the goods on Singles’ Day itself.
Though the 27,000 vendors that take part can boost their sales and gain customers by being featured on Alibaba’s Singles’ Day shopping sites, some have complained that discounts and cut-throat corporate rivalry undercut the benefits.
Rivals such as JD.com Inc, Suning Commerce Group Co Ltd and Wal-Mart Stores Inc’s Yihaodian have all gotten in on the Singles’ Day act, but Tsai was bullish about Alibaba’s pole position.
“I don’t think any other company in China can create a day like this,” he said.
The “11.11 Shopping Festival” began with just 27 merchants in 2009. This year’s festival is global, reaching shoppers in more than 200 countries, the company said.
Source: Reuters
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