Singles Day………and $25 Billion

Leave it to Jack Ma and Alibaba for the shopping frenzy of its so-called “Singles Day” in China, to break records once again.   It seems that Alibaba has booked over $25 billion in sales for this years Singles Day online shopping day that has always rivaled Black Friday and Cyber Monday here in the United States.

The record-breaking day began right out of the starting gate, as the amount of sales was over $1 billion within several minutes of and over $10 billion in an hour.   Halfway through the day the sales figures had reached last years total of slightly less than $17 billion or an approximate 37% increase from the prior year.   Keep in mind this amount is more than the GDP of some countries. Or by way of comparison Cyber Monday last year in the United States was just over $3 billion in goods sold.

What does this mean for China? For the world? First, keep in mind that an event so hyped as Singles Day gets shoppers from all around China that may not normally shop online.   The pricing on Singles Day is the attractive feature not unlike Cyber Monday here in the United States. Bargain hunters troll the web looking for things at lower prices in desirable purchases and every day consumables. So these features add to the overall sales figures that are not normally shoppers of this nature.

For China this is more in line with the thinking behind companies such as Alibaba.   There are over 300 million middle-class in China that have disposable income to buy things.   Consumable goods sales are being fueled by this part of the Chinese economic structure.   Additionally, strength in the Chinese Yuan also contributed to the increased amounts spent.

But as China braces for the delivery of over 1.5 billion packages from these sales where is the future taking online sales? Sales are increasing year over year for Singles Day but the growth is slowing.   Last year the figures rose by almost one third but was not comparable with the over 50% increase in 2015.

Chinese retailers such as Alibaba have some competition now and have to spend more capital to attract consumers. This is also giving rise to the increased push for Chinese retailers to sell outside of China.   It is also creating the need for these companies to look at brick and mortar businesses to move into the full retail concept.

Alibaba itself has invested into what it calls “smart stores” where items were displayed for this year’s event. You could buy the items in the store or online but all sales of course went through the online platform. This helped increase the growth in the sales for this year’s event.

What is certain is that consumer spending is increasing online as it has over the past decade. What is indeterminate is how much growth these companies can continue to expect given the rising competition, which is going to erode profits on a global scale.   Online sellers are being forced to adapt to changing economics or innovate even further.

Time will tell what the formal outcome will be but there is still room to grow most especially in China.

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