Selloff or Market Correction? Either Way, Here's What to Do Next!See Overvalued Stocks

Katy Perry Drafted in as Singles’ Day Aims to Beat $38 Billion Record

Published 10/11/2020, 18:50
Updated 10/11/2020, 19:54
Katy Perry Drafted in as Singles’ Day Aims to Beat $38 Billion Record
AAPL
-
NTES
-
MAR
-
NKE
-
BABA
-
ACCYY
-

(Bloomberg) -- Alibaba (NYSE:BABA) Group Holding Ltd. kicked off the world’s biggest shopping binge on Wednesday, an annual frenzy of consumption for hundreds of millions of people that this year will also serve as the best barometer so far of China’s post-pandemic recovery.

Sales were off to a brisk start at the opening of a 24-hour sale. The company, one of the world’s biggest online commerce sites, said sales totaled 372.3 billion yuan ($56.3 billion) after just the first 30 minutes on Nov. 11, including revenue from an additional shopping window earlier this month.

Singles’ Day debuted in 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 features a record number of brand names from Apple to Nike betting that -- after months of Covid-enforced abstention -- China’s 400 million-strong middle class is ready to spend on everything from Hainan beach-side vacations to takeaway coupons and electronics.

Alibaba, Asia’s largest company, blew past last year’s record $38 billion at the beginning of the Singles’ Day, as it added three extra days to the annual festival earlier this month after the pandemic forced Chinese consumers -- who already buy about 30% of the nation’s retail purchases online -- to become more reliant on e-commerce. Homebound consumers turned grocery delivery into the industry’s hottest arena, anchoring an unprecedented surge in online activity during the nationwide lockdown. Domestic travel is accelerating, propping up Alibaba businesses such as Fliggy, while a raft of new smartphones launched during the quarter is expected to tap pent-up demand for electronics.

A strong start to this year’s sales fiesta -- also known as “Double 11” -- may bode well for China’s economy, providing further evidence that consumer spending, so far a laggard in the recovery, is strengthening.

“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,” said Jonathan Cheng, head of China retail at Bain & Co. “For this year, with Covid, it’ll become more important. And if you look at China, which is the first one to be coming out of Covid, it’s gonna be an indicator for other countries as well.”

The brainchild of co-founder Jack Ma and Chief Executive Officer Daniel Zhang, Single’s Day was intended to be an antidote to the sentimentality of Valentine’s Day. It takes its name from the way the day is written numerically as 11/11, which resembles “bare branches,” a local expression for the unattached. Along the way, the company created the world’s largest shopping festival that has helped to propel Alibaba into a Goliath.

It’s also become an annual showcase for Alibaba’s cloud services as well as affiliate Ant Group Co.’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 last week.

Alibaba’s U.S.-traded shares were down 6.9% at 12:34 p.m. in New York.

Livestream Gala

In a nod to the pandemic, Alibaba scaled back on live events this year and is instead relying on increased online promotions such as celebrity livestreams to draw hundreds of millions of shoppers to its e-commerce platforms. Popstar Katy Perry is scheduled to appear at an online event Tuesday, four years after she pulled out from Alibaba’s annual live extravaganza to mark the shopping festival. Alongside the usual 24-hour sales period on Wednesday, 2020’s event featured an additional window for consumers to make purchases from Nov. 1-3.

Shoppers can purchase heavily discounted goods like cosmetics, clothing and groceries from its Taobao and Tmall platforms and 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 (NASDAQ:NTES) Inc. last year -- is participating for the first time, offering goods from 89 countries to consumers.

Foreign consumer brands have long relied on Alibaba to gain access to the Chinese middle class. That’s especially true this year, given how most economies elsewhere are grappling with a resurgence in the pandemic. During the first 111 minutes of sales on Nov. 1, Nike Inc (NYSE:NKE). and Apple Inc (NASDAQ:AAPL). were among 100 brands that reported 100 million yuan ($15 million) in transactions. And Estee Lauder’s flagship store on Alibaba’s Tmall platform was the first to surpass 1 billion yuan in sales, the e-commerce company said. International hotel groups Marriott International (NASDAQ:MAR) Inc. and Accor SA (OTC:ACCYY) also passed the 1 billion yuan transaction mark for the first time.

Read more: Magic Johnson Selling Gels Shows Why Alibaba Escaped Trump

Sales Discounts

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

As with previous years, Alibaba and its e-commerce rivals rolled out ever-larger promotions to entice consumers. Over the entire Single’s Day event, merchants could end up forking over a record 30 billion yuan in discounts and subsidies to goose sales across Tmall and Taobao alone, CLSA Ltd. analysts led by Elinor Leung estimated.

Those discounts may be the 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 a year ago and growth may have accelerated to 5% in October, as travel and other consumption picked up during the golden week holiday at the start of the month.

But overall retail sales are still 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 no more than 0.5 percentage point of GDP growth in the third quarter and a full recovery in consumer confidence may only come in 2021, according to Australia & New Zealand Banking Group economist Xing Zhaopeng.

“Singles’ Day should see spending higher than a year ago but keep in mind 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 should watch sales activity closely in December to see if this is a genuine pick-up or consumers are simply stocking up and staying cautious.”

(Updates with sales tally in the second paragraph.)

©2020 Bloomberg L.P.

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2024 - Fusion Media Limited. All Rights Reserved.