Please ensure Javascript is enabled for purposes of website accessibility

Why Alibaba's Record $30.8 Billion in Singles Day Sales Was a Disappointment

By Natalie Walters - Nov 17, 2018 at 8:04AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Chinese e-commerce leader moved a massive amount of merchandise during its tenth annual sales extravaganza.

Alibaba (BABA 3.56%) just wrapped up its tenth annual Singles Day sales event on Nov. 11, and the results present a mixed story for the Chinese e-commerce giant.   

On the one hand, the company set another sales record, moving a gross merchandise value (GMV) of $30.8 billion during the 24-hour extravaganza -- considerably higher than the $25.3 billion in online sales it recorded last year on Singles Day. That total also dwarfs the estimated $4 billion in sales Amazon produced on its most recent Prime Day in July. However, Alibaba's year-over-year Singles Day sales growth failed to live up to prior results. 

Alibaba cofounder Jack Ma raises his arms on stage at an event.

Alibaba's 2018 Singles Day shattered last year's record in online sales. Image source: Alibaba.

The Singles Day number no one wants to talk about

Alibaba's sales for Singles Day grew by 27% in yuan terms year over year, which sounds impressive until you compare it to 2017's 39% sales growth for the event -- or to any other year's rise, for that matter. This was the slowest growth rate for Singles Day sales in the decade that the company has been promoting the event. 

That's a surprising result from a company that has become known for blasting through sales expectations, and for consistently posting annual revenue growth above 50%. However, it's less jarring in context: China's economy grew at its slowest pace since 2009 last quarter, due to the U.S.-China trade conflict and a meltdown in China's stock markets. 

Alibaba Executive Vice Chairman Joe Tsai addressed concerns about the Chinese economy during the event, suggesting that people shouldn't be too worried about the latest metrics because the country's middle-class consumers are still shopping. However, there are differences in buying habits from past years. Currently, Tsai observed, consumers are buying more fast-moving items, such as beauty products. 

An ambitious 'New Retail' plan

Alibaba relayed that the main data takeaway from the event is the appearance of tangible results from its New Retail project, the company's strategic plan to revamp physical stores to allow them to combine the best of offline and online shopping experiences. Specifically, Alibaba has been using its technology and data to help such stores in China lift their sales and stay relevant in the omnichannel world. 

More brick-and-mortar merchants than ever participated in Singles Day, as Alibaba helped businesses create the digitized "smart stores" that allowed them to take part in the shopping extravaganza. About 200,000 smart stores joined the event.  

These New Retail projects have become a focus for Alibaba over the past few years because the company believes its growth path lies in digitizing all retail sales in China. Right now, only about 15% of China's total $5 trillion retail market is online. So if Alibaba doesn't help introduce next-generation digital tools in China's physical stores, then it's potentially missing out on a slice of revenue tied to 85% of retailing in the country. 

In other words, the company is working to make its total addressable market the entire $5 trillion retail market in China. That would provide vast long-term growth potential for both Singles Day sales and, of course, overall annual sales.

While this year's Singles Day sales growth was relatively weak, the factors that weighed on it were primarily outside of Alibaba's control. And if you zoom out, China's economy is still exhibiting strength and is likely to rebound from this temporary setback. If it does sooner than later, next year's Singles Day sales growth may top 40% growth again.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Alibaba Group Holding Limited Stock Quote
Alibaba Group Holding Limited
$120.13 (3.56%) $4.13

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.