Date
15 December 2018
A screen shows Alibaba Group's sales surpassing 213.5 billion yuan for this year's Singles Day global shopping event in Shanghai on Sunday. Photo: Reuters
A screen shows Alibaba Group's sales surpassing 213.5 billion yuan for this year's Singles Day global shopping event in Shanghai on Sunday. Photo: Reuters

What Alibaba’s Double 11 event tells us about China’s economy

Alibaba Group established a new record for its “Double 11″ global shopping festival on Sunday with sales surging 27 percent from the previous year to 213.5 billion yuan (US$30.66 billion).

The e-commerce giant’s top honchos along with its decidedly exhausted staff were quite happy with the results, but its shares failed to join the celebration, dropping 1.4 percent to close at US$142.82 in New York on Monday.

Analysts said investors were doubtful about the accuracy of the sales figure, suspecting that it could have been inflated by fake orders and accounting tricks. 

Also, despite the record amount, the sales growth rate actually fell from 39 percent to 27 percent, marking the smallest increase in the event’s 10-year history, according to Reuters.

The 24-hour shopping spree coincided with worldwide celebrations of Armistice Day, which seemed to suggest that while world leaders and other dignitaries led the commemoration of the end of the First World War a century ago, most Chinese and singles all over the world were lazing in front of their computers and smartphones to order all the goods that they wanted to buy on this particular day to take advantage of the discounted prices.

The call of commerce could have been more powerful than the burden of history on Sunday.

So how did Alibaba come up with the gross merchandise value of the festival? Previously, the calculation was limited to transactions on the group’s online shopping platforms such as Taobao.com and Tmall.com on Nov. 11.

But starting this year, Tmall modified its accounting rule and included a pre-sale period. Buyers could pay the deposit in advance, and all transactions from about a month ago were credited to the Singles’ Day sales.

This is probably the reason why in the first hour after midnight, when the event began, Alibaba was already able to record about US$10 billion in sales.

Chief executive Daniel Zhang said 2018 has been a successful year for Alibaba. He noted that China’s economy is undergoing a transformation, from export-oriented to one focused on consumption, and the group is aggressively grabbing the opportunities that this brings.

This year’s Double 11 surpassed the results of the festival in previous years after Alibaba rolled out its online-to-offline ecosystem. The group is extending its online shopping dominance offline through a series of acquisitions of offline retailers such as RT-Mart and Suning.

Its new retail strategy links Alibaba’s online traffic to physical stores and vice versa, thereby boosting sales.

This “new retail” is actually a key element in this year’s Double 11 festival.

Zhang, in an interview with the group’s news website, explained how more brick-and-mortar merchants were joining this year’s event through newly upgraded and digitized “smart stores”.

The online-offline strategy enabled retailers to reach out to shoppers, particularly in the rural areas, and allowed them to join the festival. Around 200,000 smart stores joined this year’s Double 11 event.

Zhang stressed that traditional retailers need to go digital in order to join the “new retail” phenomenon and provide a unique shopping experience for their customers.

Currently, only about 17.5 percent of country’s commerce is carried out through online channels. This implies a huge room for growth through the digitization of the retail sector.

After the festival, Zhang said, retailers should endeavor to achieve a seamless online-offline shopping experience for their customers. This “new retail” strategy will lead to the creation of a single customer base, not separate online and offline clients, with a common inventory and stocking system.

In a commentary, the People’s Daily, the official Communist Party mouthpiece, said Double 11 has produced one of the world’s largest consumer databases, which could be a potent tool to drive consumption as the new growth engine of China’s economy.

So the Double 11 event should be seen not just a gauge of Alibaba’s sales performance but also an indication of the passion of China’s efforts to transform its economy.

– Contact us at [email protected]

CG

EJ Insight writer

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