Alibaba (BABA) founder and executive chairman Jack Ma managed to clock in $9 billion in sales before midday, surpassing last year's record with 12 hours still remaining.
You may not have heard of it but Singles' Day -- which started in the 1990s and was commercialized by Chinese e-tailer Alibaba in 2009 -- is the biggest shopping day in the world. The day has become not only the world's largest shopping day, but emblematic of a large shift in how Chinese consumers, particularly the growing middle class population, spend money.
And Alibaba will be launching their biggest "Singles' Day" on Nov. 11 (11/11) starting at midnight and running for 24 hours.
Last year brought in new records: Alibaba generated $9.3 billion in sales with 2.85 million payment transactions processed per minute by Alipay, Alibaba's e-payment provider. To put it in perspective, last year, cyber Monday sales in the U.S. brought in $2.7 billion in sales. Robert Peck of SunTrust Robinson Humphrey predicts Alibaba could generate about $12 billion in sales this year, an increase of almost 30% over 2014.
But the biggest change this year? Singles Day will be more global, with Chinese consumers buying a much larger assortment of international products.
Over 40,000 merchants will feature more than 6 million products compared to last year's 27,000 merchants. And many more American brands will be participating. Besides last year's names, including Nike (NKE), Apple (AAPL), Proctor & Gamble (PG) and Costco (COST), this year will also include Macy's (M), Estee Lauder (EL), Huggies, Disney (DIS), Topshop, Uniqlo and Coke (KO) -- which will create a special bottle and products for this year's Singles' Day. For some of these foreign companies that don't have a physical bricks-and-mortar presence in China, it's an opportunity to test their brand's resonance there.
"The Chinese middle class is about 300 million now and will grow to 500 million in 2020, which represents the largest middle class in the world -- one that is moving from the country to the city," says Savio Chan, CEO of US China Partners.
Shopping as 'national sport'
The Chinese economy has shifted from investment/export-led growth model to one driven by consumption. "There are fewer entertainment options in China relative to the United States -- including fewer sporting events. In China, shopping, eating and singing karaoke are key entertainment choices -- and shopping is almost like a national sport," says Chan. At the end of 2014, consumer expenditures accounted for 36.7% of China's GDP, according to Euromonitor.
"The structural shift in the economy from industrial production to consumption, together with the Internet revolution, has brought about disruptive changes to many industries in China, especially in the consumer retail sector," according to a Goldman Sachs report.
The Chinese market is an enticing one for retailers, as China is already the largest online retail market globally at $455 billion in sales in 2014. And online retail sales in the country accounted for just 11% of total retail sales in 2014, with only one in four people shopping online. Goldman Sachs forecasts China's online sales will hit 22% of total retail sales in 2020. Additionally, the top 20 retailers in China -- including e-commerce giants like Alibaba and JD.com (JD) -- together account for 12.5% of the market share, compared with 41% in the U.S., according to Goldman. This fragmentation provides an opportunity for e-tailers.
China also has a higher savings ratio than developed markets, with 40% of total earnings being saved vs. an average 12% in developed markets, according to Goldman. Chan says the one-child policy that has been in place hasn't hampered spending because grandparents and parents have been "trying to give the best of technology, education, and food to the one child." Recently announced easing of this policy will further fuel spending, he says.
Mobile will be an important driver for this year's Singles' Day, with two campaigns driving sales. First, the "shake shake" campaign will offer special promotions and coupons for users who shake their phones. Second, the "Blue Stars Program" will allow customers to scan QR codes to verify authenticity of featured products from particular merchants.
This year O2O (online to offline) -- a strategy to integrate brick-and-mortar locations with online purchases -- is a big priority for Singles' Day as well. Over 180,000 stores in 330 cities across China will participate, giving consumers more delivery options and access to more products. By synchronizing online and offline resources, Alibaba will be like a "master maestro," according to Chan, providing Chinese consumers with a more integrated and interactive shopping experience.
Alibaba has risen about 40% since its lows at the end of September, aided by its strong last quarter -- which clocked in sales of $3.5 billion -- and in anticipation of Singles' Day. The stock has been volatile over the last year over concerns about the macro economy in China and growing competition. But analysts have raised sales projections and have more optimism the company can capitalize on China's favorable demographics.
Despite the strong performance, Alibaba traded down 2% on Tuesday morning, following a 40% run into Singles Day for the stock, aided by its strong recent quarter after a year of volatility.
This story has been updated to include new sales figures released by Alibaba.