China’s annual online shopping frenzy has raked in more than $38 billion in sales for tech giant Alibaba.
Starting out as a celebration of singledom among Nanjing students on 11/11 each year, the e-commerce firm has turned the fanfare into the world’s largest online shopping festival.
This year’s sales of $38.4 billion topped last November’s total by around 25%, bypassing the previous record after 16.5 hours of trading. The company’s 500 million regular users had been adding cash to their online wallets ahead of the holiday deals, with most of the sales coming through Alibaba’s online platforms Taobao and Tmall.
What began in 2009 as a collaboration between just 27 retailers in a bid to promote online shopping, has now morphed into a 200,000 merchant strong emblem of Chinese consumerism.
The figures are staggering (Alibaba reported taking $1 billion in just over one minute yesterday) but away from the blinding numbers and Taylor Swift opening concert there are a couple of things for investors to look at here.
First is the clear adoption of online trading in China, as well as the use of mobile platforms.
With growing internet availability across the country, even towards remote areas, more people are switching to mobile-first interaction. Young consumers are leapfrogging the traditional desktop PC and going straight for digital apps, meaning companies are diverting efforts to optimising this experience even over retail stores.
And while popular Western tech names like YouTube and Facebook are blocked in China, their app usage throughout the day spreads much further than their own social networks.
A young Chinese professional will likely start the day by checking ‘WeChat’ for the latest news, and messages. Then it could be ‘MoBike’ to rent a bicycle for a ride to the office. ‘Eleme’ lends a helping hand to deliver lunch to work, with ‘Didi’ on hand for a taxi home at the end of the day. Then it’s time for dinner, using ‘Dianping’ to find a nice restaurant, and ‘Alipay’ to pay for it. Firms’ capability to become the go-to app for certain purchases opens up a massive opportunity for a sticky customer base, like Alibaba’s.
Second is what yesterday tells us about the state of the Chinese consumer. China’s GDP growth is slowing and the ongoing trade war with the US will certainly not help. However, with a growing middle class and disposable income still hitting the online tills, there is seemingly no large-scale effect on the average person from the international fall-out just yet. One trend noticed this year was the move towards Chinese brands among young shoppers. Growing interest in the country’s own brands among young people means less of a reliance on the big American sportswear conglomerates. As ‘Made in China’ changes meaning for this generation, shifts in spending patterns could be even more pronounced next year.
For investors looking to take part in the growth of the Chinese middle class, one way is through the Fidelity China Consumer Fund. Alibaba is currently the top holding, with a range of entertainment, tech and insurance names also in the top ten.
The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
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