Mariah Carey was there, as was retired basketball star Allen Iverson and Australian supermodel Miranda Kerr. A Chinese pop group called CY Girls performed a song called Wanna Buy, Wanna Buy.
The title offers the best clue to where all the celebrities had gathered: the Shanghai gala for Singles’ Day, the shopping bonanza held each year on November 11 by Alibaba. The glamorous Kerr took to the stage to launch sales of her skincare label KORA on the e-commerce giant’s Tmall platform.
One person who was notably absent, however, was Jack Ma. The founder of Alibaba has long been a fixture at the annual gala and he is known for his showmanship (kicking off his company’s 18th anniversary party last year, Ma dressed up as Michael Jackson and did a dance routine). But as Alibaba celebrated the tenth anniversary of its bargain-driven event this year, Ma made only a cameo appearance in a pre-recorded video that showed him diligently wrapping packages.
Perhaps he wants to take a backseat after announcing in September that he will relinquish his role as company chairman next year. “Ma Yun, who created Singles’ Day and singlehandedly changed the way Chinese consumers shop, is about to retire. It feels like Singles’ Day is never to be the same again. But more importantly, his retirement signals that it is the end of an era. At least, using big discounts to lure consumers is now officially a thing of the past,” reckoned Phoenix News.
The idea of Singles’ Day was actually inspired by Black Friday in the US, although Alibaba picked November 11 to launch its year-end shopping frenzy. Initially the shopping festival was more popular among college students and young graduates, who celebrated being single (or not) by going to shopping malls. During its inaugural edition in 2009, only 27 Chinese brands took part and their promotional push resulted in just Rmb50 million of sales on Tmall.
This time round, even without Ma’s star power, 180,000 global and Chinese brands participated and sales topped Rmb213.5 billion ($30.8 billion) in a single day. That easily toppled last year’s $25.8 billion. In comparison, CNBC noted that Amazon’s Prime Day in July is estimated to have generated about $4 billion in sales globally. Online sales during Black Friday last year totalled $5 billion.
Despite setting a new sales record, analysts noted that the event’s growth rate fell from 39% to 27%, the smallest increase to date. As Singles’ Day has become a barometer of consumer sentiment, some suggest that the relatively smaller increase is further proof of a trend being dubbed as “consumption downgrading” (see WiC425). Others wondered if the stellar growth in the e-commerce industry, partially driven by price discounting in the past, has finally hit a wall.
Nevertheless, Joe Tsai, Alibaba’s executive vice chairman, told reporters that he is optimistic about the outlook. “There are 300 million [in China’s] middle class. In the next 10 to 15 years, that number will double to 600 million,” he said on November 12, the day after the shopping extravaganza. “That number is not going to stop, trade war or no trade war. Any kind of short-term economic effects, we believe, will be cyclical.”
Tsai may be optimistic about middle-class growth but it hasn’t stopped Alibaba’s management from trying to reduce its reliance on online retailing through diversification. When the Hangzhou-based company announced its third quarter results early this month its non-core businesses contributed 15% to its revenues, compared with just 9% two years ago.
Among these new growth engines, cloud computing reported a 90% increase in revenue to Rmb5.7 billion in the quarter. Nevertheless, the division is still a relatively small business, accounting for 7% of total revenue in the quarter versus 5% in the same period the year before. The division is in expansion phase, and not just in China: it recently opened a new data centre in the UK.
Many of Alibaba’s newer businesses are bleeding cash. Cloud computing recorded a net loss of Rmb230 million during the period. The digital entertainment division, including streaming site Youku Tudou, was Rmb3.8 billion in the red. This partly explains why Alibaba’s New York-listed shares took a 4% dive on November 12.
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