Bottom line: Alibaba’s Singles Day sales this year are likely to meet its targets, growing by at least 20-30 percent, but the company should put less emphasis on such figures in the future and focus more on creating a high quality shopping event.
It’s only a third of the way into the day as I write this, but e-commerce leader Alibaba (NYSE: BABA) is making sure I have more than enough data to last me the entire day as we kick off this year’s edition of its popular November 11 Singles Day online shopping extravaganza. The company began putting out figures as soon as the clock struck midnight, and has been issuing a steady stream of data ever since showing just how successful the spending fest has become.
I’ll review some of the early figures shortly, and admit they’re quite impressive in numbers-obsessed China. But that said, I’ve also heard from friends about the huge behind-the-scenes pressure that Alibaba is putting on its partners to meet their sales targets for the holiday, which in turn will help it post the impressive gains it’s seeking for its own sales.
Putting that kind of pressure on people to reach targets certainly isn’t unique to China, and is especially common in company sales departments. The difference is that Chinese workers and officials have a strong history of responding to such pressure by finding ways to inflate their sales figures through artificial means, sometimes to the point where the actual numbers they report become almost meaningless.
That kind of pressure resulted in an earlier scandal several years ago at Alibaba in its B2B division, and more recently we’ve seen something similar at online real estate services site SouFun (NYSE: SFUN). (previous post) Accordingly, I would advise Alibaba to tone down its emphasis on numerical targets for this important day in the future, and instead focus more on creating a high quality Singles Day shopping experience that it can truly be proud of and perhaps someday hope to export.
$5 Billion in Sales
Now that I’ve finished my preaching, let’s look at a few of the figures that Alibaba has put out so far. We’ll begin with the headline number that saw 31.8 billion yuan ($5 billion) worth of goods, or gross merchandise value (GMV), change hands over Alibaba’s platforms in the first 90 minutes of Singles Day. (company announcement) Alibaba added that much of the buying was paid for using its affiliated Alipay service, which settled 24.8 billion yuan worth of transactions in the first hour of November 11.
To put that in perspective, Alibaba generated $112 billion in GMV for the entire second quarter of this year. That means that the figure for the first 90 minutes of Singles Day alone equaled about 4.5 percent of Alibaba’s GMV volume for the entire second quarter, quite an impressive figure, especially considering that people were doing their shopping in the middle of the night when most would usually be sleeping.
Alibaba kicked off the festival by revealing it posted $1 billion in GMV transactions in the first 8 minutes of Singles Day, in what looks like a bid to give newspapers something to put in their November 11 editions before their early morning deadlines. We’ll undoubtedly have regular updates throughout the day from Alibaba’s Singles Day headquarters in Beijing, where it’s staging an extravagant event featuring celebrities and other entertainment. People reading this may think I’m being a bit of a Scrooge, and I’ll admit I’m not a big shopper and will be quite happy when Singles Day is finished.
Like everything else it does, Alibaba and its founder Jack Ma are creating huge hype and expectation around this year’s Singles Day as they try to bring some excitement back to the company after a piracy scandal early this year. I have little doubt the company will meet whatever sales target it has set for the holiday, meaning GMV will most likely rise at least 20-30 percent from last year’s $9.3 billion. That may bring some short-term lift to its stock, though investors will also be watching closely to see how much of the sales ultimately filter down to Alibaba’s profits in its next quarterly earnings report.
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