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Article / 15 October 2014 at 3:14 GMT

Move over Christmas, for Alibaba's global spending spree

China Watcher / Shanghai
China
  • Alibaba platforms made 35 billion yuan in sales on Singles' Day last year
  • The plan will help Chinese suppliers sell offshore and foreign brands sell in China
  • Timing is an issue, as Singles Day is Remembrance Day in Western countries


By Neil Flynn

In the early 1990s, students from Nanjing University decided to designate November 11 as Singles' Day, because 11/11 looks like four single people. It originally was a day for celebrating being single, where you would go to bars and karaoke clubs with friends, but as with all celebrations nowadays, consumerism has taken over, and Singles' Day is the biggest shopping day in China, similar to Black Friday in the US.

As with all public celebrations, companies take the opportunity to boost their sales, with restaurants, bars, karaoke clubs and online shopping sites offering special promotions. The biggest of all comes from Alibaba, which posts staggering results every year just from 24 hours of shopping. Last year, Alibaba’s two major online shopping platforms Taobao and Tmall generated 35 billion yuan ($5.75bn) in sales just on Singles' Day.

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Single-minded plan ... Alibaba plans to turn China's lucrative Singles' Day retail spree into a global spending binge to rival Christmas shopping habits. Photo: Thinkstock

 
While this is an incredibly lucrative day for online shopping sites, the opportunity is too good to miss for brands, as more and more offer promotions on their products every year. In 2013, Chinese smartphone manufacturer Xiaomi generated over 100 million yuan in sales and sold all 220,000 of their available phones in just three minutes. Singles' Day has become an opportunity for brands to clear their inventory and make room for new stock in preparation for the Christmas and Spring Festival shopping seasons.

Alibaba held a press conference yesterday regarding their plans to turn Singles' Day into a global event, which will begin this year. Alibaba has been working together with both Chinese and overseas brands in order to facilitate this, so that Chinese suppliers can sell overseas and foreign brands can sell to Chinese buyers.

More than 200 overseas merchants from over 20 countries have already confirmed that they will be participating in this year’s event, which will likely see Alibaba reaching Jack Ma’s target of reaching 100 bn yuan within the next few years. Last year’s sales soared by 83% from 2012, so investors will be looking at a lower end forecast of 50 billion yuan.

The results of Singles' Day will be reported immediately as the firm’s Hangzhou headquarters updates sales figures on a huge electronic board for gathered journalists to see. With the event starting at midnight, the reaction in Alibaba’s share price will be seen during the afternoon of November 10 and 11.

This isn’t the first time that a domestic shopping event has been exported. The UK tends to have some Black Friday events, particularly in Walmart’s UK subsidiary ASDA, while Amazon periodically announces certain days where there are significant discounts across the site. But the only real global shopping event is around Christmas, which in theory presents Alibaba with the opportunity to promote a global shopping day in a way Amazon has never done.

One problem with exporting Single’s Day to the rest of the world is that 11/11 is Remembrance Day in many Western countries. So it may not be appropriate for Alibaba to host a shopping extravaganza on such a sombre day. But nevertheless, Alibaba needs to expand outside of China to justify its valuation and hype, and exporting Singles' Day is an important part of that strategy. Even if the event just becomes popular across the emerging economies of south-east Asia, then Alibaba will have access to a huge new customer base with similar spending habits to Chinese consumers, as well as many cheap merchants.

Competition within China’s online shopping market is becoming more intense, so much so that Alibaba has recently announced that it will spend more than $1 bn to develop its market share in China’s rural areas, in order to compete with Tencent’s JD.com, which made a similar announcement last year. International expansion is the key to Alibaba’s long term success, and with Singles' Day, the firm has a quality product to export to the rest of the world.

– Edited by Robert Ryan


Neil Flynn is a trader on TradingFloor.com.

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