Chinese e-commerce giant set a new sales record during China's Black Friday sale equivalent leaving everyone else in the world far behind. Too good to be true sales make American and Chinese authorities suspicious.
Singles' Day, a Chinese twist of Valentine's Day for people without partners, has been turned into the biggest 24-hour sale in China by Alibaba (NYSE: BABA) back in 2009. Ever since then, the online retailer has been setting new sales records year after year reaching the highest sales volumes in the world. This year, Jack Ma, Alibaba's executive chairman and founder, had promised to outperform last year's record-high sales of $14.3 billion within the 24-hour festival, and, halfway through the day today, he did it.
Singles' Day is celebrated on 11 November and it has become the icon of the online shopping craze in China. And Alibaba's take on the Chinese version of the famous American Black Friday is very impressive. This year, Alibaba has gone particularly big on Singles' Day with organizing a big Gala event featuring such celebrities as Kobe Bryant, David Beckham and Scarlett Johansson as the company's ambassadors. On top of that, Alibaba launched a Pokemon Go-style shopping app called "Catch the Tmall Cat" that invited the consumers to stroll through the malls following a cat bringing them to special discounts that can be used on the big sales day, all done with the use of augmented reality. The company said the app was a big success with over 100 million consumers participating in the game in seven shopping malls across the country.
"While Americans grit their teeth and click their way through same-same marketplaces, Chinese online shoppers are getting a technology upgrade: during Alibaba’s 11.11 sale, they’ll be able to browse Macy’s aisles through a virtual-reality rig and chase virtual cats in their shopping apps, à la Pokemon Go. Shopping has been a chore. In the Chinese market, it’s more of a sport," said Deborah Weinswig, Fung Global Retail and Technology's managing director.
Alibaba mentioned a particular interest of Chinese shoppers in popular brands from Europe and the United States like Apple (NASDAQ: AAPL), Nike (NYSE: NKE), Adidas (OTC: ADDYY), New Balance and Philips (NYSE: PHG) among others. According to the company's live microblog, the top-selling brands of the sale's first hours were Apple, Onor and Meizu, among the mobile phone providers, Nike, Adidas and New Balance for sports equipment, Camel, Skechers (NYSE: SKX) and UGG for shoes as well as Haier (HK: 1169), Midea (CH: 000333), Philips and Siemens (ETR: SIE) for appliances.
A few months before the big day, Jack Ma made a statement that he expected Alibaba to beat last year's 24-hour sales record of whooping $14.3 billion. After 15 hours of shopping today, the $14.3 billion line was crossed, with almost 9 more hours left to grow that number even further. Yet another today's impressive number is Alibaba's sales volume achieved within the first hours of shopping after the grand opening at midnight. Reuters reported that the company reached $5 billion in sales in the first 60 minutes of the sale, which is a third faster than last year.
"Back in 2013, 35 billion yuan ($5.1 billion) was our one-day GMV (gross merchandise volume). Now we can achieve it in one hour," said Alibaba Group's CEO Daniel Zhang.
This comparison with the 2013's sales results points at China's rapidly growing switch to online shopping, especially via smartphones. Several e-commerce experts present at the event commented that China was showing an example of a completely new and adventurous way of shopping. Michael Zakkour, Vice President for Tompkins International, said that the world's retail model “needs to be blown up and re-invented … and that’s the beauty of what Alibaba is doing”, as reported by Alibaba's microblog. Alibaba said that so far, 83% of purchases on Singles' Day were completed via smartphones.
The volume of sales at Chinese Singles' Day is far higher than that of the American Black Friday. According to the latest estimates, Alibaba's Singles' Day sales are more than 3 times higher than the sales of Black Friday and Cyber Monday combined.
However, adds Reuters, the growth rate of this year's sale was slower than in 2015 due to even bigger price cuts on products. Other important factors that contributed to the lower sales growth are the recent strength of the U.S. dollar, making the sales amounts smaller in dollar terms, an increase in offerings in Chinese domestic online retail market from Alibaba's main competitor JD.com (NASDAQ: JD) and others, as well as problematic personal income growth this year. In addition to that, despite keeping the customers happy with discounts, Chinese packaging firms, responsible for discounted or even free deliveries on Singles' Day sale, complained about struggling with slim profit margins and large sales volumes.
Sales results raise questions
Prior to the big sale day today, Alibaba had received warnings from both the American Security Exchange Commission as well as China's State Administration for Industry and Commerce that the organizations would be monitoring merchant's practices during the high-competition shopping festivals including Singles' Day. Due to the growing popularity of the online shopping sales in China, the authorities have become suspicious whether e-commerce giants use fair practices during such high-competition and high-profit events.
The eye-popping figures of Alibaba's Singles' Day sales have raised questions among short sellers saying that the company was counting sales from fake transactions and canceled orders, reports the New York Post. Alibaba's main competitor, JD. com, also received similar allegations referring to marketing fake products and using manipulative advertising. Amazon (NASDAQ: AMZN), who just recently launched Prime in China, have received a warning as well.
“The SAIC will strengthen market supervision … monitor and manage online marketplaces according to law, and together with the majority of industry players, jointly create an online market environment of fair competition and an environment for online consumption that is safe and secure,” wrote China's State Administration for Industry and Commerce, as reported by Financial Times.