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Alibaba's $25 Billion Sales Day Shows Its Best Days Are Yet to Come

By Natalie Walters - Nov 18, 2017 at 6:47PM

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Alibaba is on fire.

Alibaba's (BABA -0.84%) Singles Day selling event is in its ninth year, but obviously has not lost its luster. 

The Chinese e-commerce giant reported $25.3 billion in gross merchandise volume (GMV) during its annual massive sales event on Nov. 11. That's $2.3 billion more than Alibaba was expected to do in sales, according to a prediction from global consulting firm Olive Wyman. 

But the most important takeaway is that Alibaba increased Singles Day sales by 39% over last year, when it reported $17.79 billion in GMV.

The word Alibaba lit up in orange in a nighttime photo of Alibaba's offices in China

Alibaba's Singles Day sales growth reflects the overall impressive revenue growth the company continues to report each quarter. Image source: Alibaba

Alibaba's growth

For comparison, Amazon (AMZN 0.73%) sold an estimated $1 billion worth of goods this past summer on its annual sales day, known as Prime Day. That's a 60% increase from the previous year, but the event is only in its third year, so that kind of growth is to be expected this early on. 

That growth number reminds me of a similarly impressive number that seems almost too good to be true: Last quarter, Alibaba reported a 61% year-over-year growth in quarterly sales to $8.3 billion. That's on top of the 56% revenue growth from the previous quarter. 

But it doesn't stop there. Alibaba also revised its revenue growth for the 2018 fiscal year to between 49% and 53%, up from its previous prediction of 45% to 49% growth. 

Enthusiasm for Alibaba's potential is also shown in its stock price. In 2017 so far, the stock has risen 107% to $181.79 per share. 

Bottom line: Alibaba has room to run

Generating $25.3 billion in sales on one day is impressive and all the evidence says that number will continue to tick up each year. 

First, consider Alibaba's growing gross merchandise value (GMV), or the total value of merchandise sold in a certain time period. This past year, Alibaba's GMV came in at $547 billion, up 18% from the year prior. But the company isn't scaling back anytime soon. This summer, Alibaba reiterated its goal to hit $1 trillion in GMV for 2020. To reach $1 trillion in the next three years, GMV will need to increase 82.8% from this past year's figure. 

Second, Alibaba's revenue growth from its core e-commerce businesses continues to grow at a healthy rate as the Chinese middle class grows and consumption rises. According to McKinsey & Co, by 2022 more than 75% of China's urban consumers will be classified as middle-class. 

Third, Alibaba's cloud business is on fire. For the last quarter, Alibaba reported 99% year-over-year growth in cloud sales to $447 million. For comparison, Amazon Web Services sales grew 42% to $4.58 billion. Alibaba has the largest cloud business in China and the third largest across the globe. 

Alibaba president Michael Evans told the South China Morning Post in a recent interview that the company is relying on its cloud business to be a "key service provider and enabler in the markets where Alibaba is targeting to grow." 

Fourth, Alibaba is consistently increasing engagement on its app. Earlier this month, Alibaba reported 549 million monthly active users (MAUs), vs. the 529 million MAUs reported in the previous quarter. Better engagement with the content on its apps means more purchases on its e-commerce platforms. 

Last but not least, Alibaba is getting serious about its "new retail" strategy, which involves revamping physical stores to utilize the best of the offline and online shopping experiences. While physical stores are sometimes talked about as if they were outdated, that is far from the truth. Only about 15% of China's total $5 trillion retail market is online, Alibaba Vice Chairman Joe Tsai said in the company's latest earnings call. The other 85% of the country's commerce still happens in physical stores.

Alibaba is an enormous company, but its potential for future growth -- on Singles Day and everyday -- is even bigger. 

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