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COMMENTARY: Singles' Day Sales Show China's Consumers Are Still in a Spending Mood

Alibaba surpasses $1 billion in the first 90 seconds after midnight and exceeds $30 billion total, but economic headwinds persist.

Mark Melnicoe
    Nov 17, 2018 4:30 AM  PT
COMMENTARY: Singles' Day Sales Show China's Consumers Are Still in a Spending Mood

Amid fears of a slowing economy in China came the news this week that Alibaba's sales surpassed $30 billion on Singles' Day.

For the uninitiated, Singles' Day, or Double 11, comes on Nov. 11 and is China's version of Black Friday. Only much bigger.

Alibaba (NYSE: BABA), through its Tmall and Taobao platforms, sold $10 billion worth of items in the first hour of last Sunday – between midnight and 1 a.m. The frenzy continued through the rest of the day and, when the dust settled, Alibaba had sold some $30.8 billion worth of merchandise.

"If you take Prime Day which happened this summer, Amazon reported $4 billion this year, which is a really strong number but in comparison it's kind of cute," Danielle Levitas, executive vice president of market insights at App Annie, which provides mobile data and insights, told CNBC

As the big U.S. shopping season, including Black Friday, approaches this year, it's instructive to look at last year's numbers. On Black Friday and Cyber Monday in 2017, shoppers put out $7.9 billion and $6.6 billion, respectively. Combined, that was less than half of what Alibaba alone sold on Singles' Day this year. Chinese e-commerce rivals such as JD.com and Suning also had big sales promotions.

What does this say about China's consumer economy? Actually, not much. It says that young people remain ready and willing to shop on Singles' Day, which has become a highly promoted extravaganza featuring Alibaba's live streaming of international pop culture celebrities. This year featured Mariah Carey, Allen Iverson, Miranda Kerr, and Cirque du Soleil, among others.

They are used to rev up shoppers just before the opening bell, and sure enough, Alibaba's sales hit $1 billion in the first minute and a half.

A Slowing Market ...

But beyond Singles' Day, consumer sales may be slowing across China. Online retail sales in the third quarter of this year dropped by 12 percentage points compared to the second quarter, according to China's National Bureau of Statistics.     

"While the sales figures are inarguably large, they may still be masking deeper insecurities among Chinese consumers amid an increasingly uncertain economic outlook, exacerbated by the trade confrontation with the U.S.," said a client alert from a Dezan Shira & Associates, a consultancy that advises companies trying to succeed in China's markets.

The company noted that, while the overall numbers were impressive, growth was slower than the previous year and there were fewer sales of high-value goods. Indeed, there seemed to be a pragmatism in shoppers' choices, as they loaded up on discounted cosmetics, health supplements, clothing, mobile accessories and day-to-day consumer goods.

"I just bought some daily necessities because they are cheaper than on other days," Carol Wu, a risk management professional in Shanghai, told me via WeChat.

If that is typical, as seems likely, then retail sales may slow for the next couple of months after people loaded up on Singles' Day. Still, this shows that China's young consumers – the envy of so many global companies – are willing to spend despite the headwinds facing the economy.

... Yet Its Dominance Remains

China's dominance of e-commerce, meanwhile, appears destined to continue.

"China's middle class is significantly bigger than the total U.S. population and the country is more technologically savvy," Levitas told CNBC. "You combine the size of the population, their sophistication, acceptance, and preference for mobile and it's not surprising that the U.S. and something like Prime Day's success will be substantially smaller."

On the other hand, not all Chinese shoppers are so sophisticated. One unidentified man shared on WeChat that, while in a drunken stupor, he accidently bought a live pig, a peacock, and a giant salamander.

According to the South China Morning Post, the man posted screenshots of his sales transactions showing he bought a "live Thailand micropig for 278 yuan ($40), a live blue peacock for 390 yuan and a live wild salamander weighing between 1.4 and 1.6 kilograms for 288 yuan."

Exotic animals aside, Singles' Day helped Alibaba solidify its position as the world's leading online commerce site. The company has cut estimates for its revenue growth by 5 percent for this fiscal year, and its stock has tumbled 16 percent this year. But since its showing on Singles' Day, Alibaba has rallied $16 a share to $156 as of Thursday.

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