By
with contributions from Casey Hall, Tiffany Ap
 on November 10, 2015


BEIJING — Consumers spent $14.3 billion on Alibaba’s shopping platforms for the Singles’ Day shopping festival, beating analysts’ expectations and smashing the Chinese e-commerce giant’s 2014 sales record of $9.3 billion worth of merchandise sold during the 24-hour spending frenzy when retailers offer deep discounts and other promotions in what has become the world’s largest online shopping spree.

This year’s sales figures represent a 60 percent year-over-year increase in gross merchandise volume, or GMV, from the 2014 holiday. Some of the top-performing brands in the fashion-related and cosmetic categories included Uniqlo, Adidas, Nike, Lancôme and L’Oréal. Alibaba said it is applying for the Guinness World Record for selling colossal amounts of somewhat random products, such as nuts and soda. Food items and baby and maternity products were among the top-selling categories.

Since Singles’ Day commenced at midnight local time on Wednesday, sales figures have continued to overwhelm. Within the first eight minutes, shoppers spent more than $1 billion on Alibaba’s Tmall.com and Taobao.com platforms. An hour-and-a-half into the festival, Alibaba said more than $5 billion worth of merchandise was sold, with more than 70 percent of transactions taking place via mobile phones. Around 27 million shoppers made purchases within the first hour.

Sales from Singles’ Day, a somewhat arbitrary holiday that allegedly came about a few decades ago when college students decided to buy each other gifts because they did not have significant others, surpass those from Black Friday and Cyber Monday combined in the U.S. Alibaba is credited with turning Singles’ Day, also known as Double Eleven because it is held on Nov. 11, into an online shopping bonanza.

Last year, Alibaba went big for Singles’ Day, hosting an event at its headquarters in Hangzhou, a city near Shanghai, with dozens of foreign journalists. Founder Jack Ma turned up unexpectedly after final sales figures were released to briefly speak to media.

This year, the company went even bigger.

Hundreds of media attended a more than 24-hour-long public relations blitzkrieg held at the Water Cube, a swimming venue built for the 2008 Beijing Summer Olympics. On Tuesday night, for the first time, Alibaba hosted a four-hour-long gala broadcast live on domestic TV.

Ma briefly appeared at the end of the variety show alongside British actor Daniel Craig. Another surprise of Tuesday evening’s gala included a Singles’ Day promotion video with Kevin Spacey in character as Frank Underwood in “House of Cards,” which is incredibly popular in China. On Wednesday night, just before final sales figures came in, Ma joined Tom Farley, chief executive officer of the New York Stock Exchange, to open the market with a ringing bell ceremony broadcast live from the Water Cube.

While Alibaba may have created the Singles’ Day shopping spree, it is no longer the only e-tailer taking part.

JD.com, Alibaba’s main rival, said it had received more than 200 million orders, more than 70 percent via their mobile site as of 5 p.m. on Wednesday local time. Popular search terms for China’s second biggest B2C e-commerce platform included mobile phone and winter clothes.

Though luxury e-tailers have traditionally been hesitant to jump on the Singles’ Day bandwagon for fear of depreciating their brand value in the Chinese market, some high-end and designer brand e-commerce platforms held promotional sales for the first time this year.

Farfetch.com, which recently set up a dedicated China team, offered 22 percent off and free shipping on orders of more than $100 to domestic consumers, for example.

The Italian fashion e-tailer Yoox Net-a-porter Group also took part for a second year. Yoox.com president Luca Martines said Chinese customers are showing a “growing appreciation” for their participation.

A number of key themes emerged in terms of Alibaba’s future strategy and challenges during this year’s Singles’ Day. Executives stressed how important the e-commerce giant sees itself in terms of playing a role in China’s economic growth, which, with gross domestic product increasing around 7 percent this year, is a key concern among leaders who bank much of their power on sustaining prosperity for lower and middle classes who live in a country with gaping wealth disparity.

Ma, Alibaba’s founder, a rock star among many Chinese, said while the nation’s economy “might have big problems” in the short term, he believes that within the next decade or so, it “will be good.”

“This festival might be a little contribution to domestic demand, but it does not represent the Chinese economy,” Ma said during an unexpected appearance in front of journalists on Wednesday evening at the Water Cube. “But it shows the strong potential, the strong power of domestic demand. We hope we can be the first engine to drive China’s economy forward.”

Executives revealed Alibaba would launch a second online shopping spree sometime before the upcoming Chinese New Year holidays, which this year will be in February.

“For the real economy, we are very honored to provide a platform to create dreams for many people,” Ma said.

Alibaba’s Singles’ Day extravaganza was held for the first time in Beijing, where the company is establishing what it calls its “second headquarters” outside of Hangzhou.

Daniel Zhang, the firm’s ceo, said the decision to move the event to Beijing was partly to reach more of the northern Chinese market and also because it is more international, falling inline with the company’s key mission to gain more exposure overseas and to expand Singles’ Day globally. Executives said they hope the sales event will spread within the next couple of years to Tokyo, Paris, New York and other major cities.

For the 2015 holiday, Alibaba highlighted the 5,000 brands from more than 25 countries taking part, some of which already have a physical presence in China and some of which are utilizing Tmall Global, a new e-tailing platform that enables foreign brands with no China operations to sell directly to the Mainland market. Around 33 percent of total buyers purchased from international brands or merchants during this year’s shopping festival, Alibaba said.

On Wednesday afternoon, executives from international retailers discussed taking part in Singles’ Day promotions.

For some, it was the first time.

Jeroen de Groot, an executive with the German supermarket chain Metro’s China operations, said while deep discounts for the holiday may not mean big margins, participation is an investment to raise brand awareness.

“You get something in return,” de Groot said. “Driving traffic to our platforms. This is a calculation we must make internally. We see the results coming in today, and it seems to be a very good investment. We’re learning a lot about our consumers and how to reach out to them in different ways.”

Alibaba executives dismissed speculation that the event was held in Beijing to curry favor with the government. Earlier this year, Alibaba faced a flurry of scrutiny from regulators here over the alleged selling of fake or grey-market products on Taobao.com, its consumer-to-consumer platform. Alibaba has long made the case that it has launched widespread programs to get rid of counterfeits.

Executives seemed more forthcoming about the existence of fake products on Taobao.com and the challenges of getting rid of them. Alibaba has faced litigation from foreign luxury conglomerates recently that claim the e-commerce giant is not doing enough to get rid of fakes.

“We are not the origin of counterfeits,” Zhang said. “We are just a platform. We are very clear that we have the responsibility as a platform to fight against counterfeits. We will be damaged, and the platform will be gone if we cannot deal with his properly.”

An executive with Bose, also taking part in Singles’ Day, said the audio equipment maker has “had a pretty good support” from Alibaba in terms of curtailing grey market products for sale on Taobao.com.

While hosting its Singles’ Day gala in Beijing may garner more attention as more Chinese and foreign media are based in the capital, analysts say they also suspect political motivations.

“There has been increasing scrutiny of the e-commerce sector by regulatory authorities,” said Mark Natkin, founder of the Beijing-based Marbridge Consulting, a think-tank following China’s tech industries. “There’s definitely an advantage to get a little closer to the regulators.”

Others said the gala in Beijing is a move to change Alibaba’s image.

“Alibaba has consistently tried to move away from the image of cheap, dirty and fast Chinese e-commerce company and project a different image to the world and to China — an image of cool, glamorous and a reliable marketplace,” Andrea Fenn, founder of Fireworks, a Chinese luxury consultancy, said. “You have Jack Ma and Daniel Craig and Kevin Spacey pulling ridiculous stunts — stuff that even highly educated foreign audiences would be amused by.”

Fenn added: “They want to make it a respectable, serious entertainment event.”

Which also coalesces with Alibaba’s future. The company has been investing heavily in entertainment, including its most recent purchase of Youku Tudou, a Chinese online video site similar to YouTube, for $3.6 billion. Executives have said a core strategy moving forward is selling more products and services via entertainment offerings as well as gaining deeper understandings of consumer behavior from more sophisticated advertising offerings.

The Singles’ Day gala showcased the combination of “entertainment with business,” Zhang said. “Consumers are also audiences. Our gala combined the two identities into one, and then they connected themselves with our selling platforms.”

Alibaba continually highlighted transactions made via mobile phones, which, by the end of the sales event at midnight, accounted for $9.8 billion in sales, or more than 68 percent of total GMV. The e-tailer offered numerous promotions only available via mobile purchases, some of which began weeks before the holiday to encourage shoppers to switch from buying on PCs to buying on cell phones.

“The bulk of Internet traffic growth is coming from mobile,” Natkin, the Marbridge Consulting founder, said. “If you can’t demonstrate that you are convincing Internet users to access your platform via mobile and then make a purchase via mobile, then you are communicating that your growth story is going to be in decline.”

Omnichannel retailing is another growth area. This year, Alibaba is expanding into online-to-off-line, or O2O. More than 1,000 retail brands with 180,000 brick-and-mortar stores across China are extending discounts to physical locations in partnership with the e-commerce giant as part of an experiment to bridge e-commerce with physical shopping experiences.

“The omnichannel is very recent,” said Fenn, the Fireworks luxury consultancy founder. “When it comes to how they prepare for this Singles’ Day, I’ve seen a lot of talk about how to involve off-line stores of brands that have [online] stores on Tmall or Taobao, but it’s not clear yet how it’s played out. I have not seen a lot of off-line activity in terms of discounts today, so I think either they haven’t been able to implement it or hasn’t been significant.”

Alibaba’s mind-blowing Singles’ Day results have not come without criticism. Some analysts have said the company wrangles merchants into deals, restricting them from offering similar promotions on other e-commerce rivals. Repercussions of selling with the competition allegedly include little marketing exposure from Alibaba, analysts and industry insiders said.

Earlier in November, JD.com, second to Alibaba in China’s e-commerce market, filed an official complaint with the Chinese government charging Alibaba with illegally strong-arming merchants into agreeing to exclusivity arrangements for Single’s Day promotional activities.

When questioned, Zhang said Alibaba has “open platforms” and that the company is “always very transparent and straightforward” with letting merchants know “how to serve their customers better.”

It is clear Alibaba’s leadership believes Singles’ Day is already having and will continue to have global ramifications.

“This is a great day. It symbolizes the great power of China’s domestic consumption,” Ma said on stage with the president of the NYSE. “This is a great opportunity for the world. If we can make full use of this huge demand, the world is going to change.”

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