(Bloomberg)—Alibaba Group Holding Ltd. kicked off its annual Singles’ Day shopping bonanza, logging $1 billion in gross merchandise volume within the first two minutes and $8.6 billion in sales within the first hour.
Shoppers from at least 192 countries and regions swarmed the e-commerce giant to scoop up discounted lobster, iPhones and refrigerators. The Chinese company hosted a star-studded gala enlisting tennis star Maria Sharapova and American rapper Pharrell Williams to pump sales. As the event got underway, 93% of transactions were done via mobile.
Analysts are expecting another record day on Alibaba’s platforms, with Citigroup Inc. predicting a 31% rise in transactions to 158 billion yuan. While that’s only half of last year’s growth rate, it still dwarfs other events such as Black Friday and Cyber Monday. Billionaire founder Jack Ma is using this year’s event as a testing ground for his plans to revamp China’s $4 trillion traditional retail sector with technology, an experiment that could help the behemoth gain an edge in China’s saturated retail market.
Nov. 11 emerged as a counter-cultural antidote to the sentimentality surrounding Valentine’s Day. It takes its name from the way the date is written numerically as 11/11, which resembles “bare branches,” a local expression for the unattached.
Now, it’s become an excuse for people to shop and binge on entertainment shows. Hangzhou-based Alibaba is using the occasion to test the limits of its cloud computing, delivery and payments units—businesses that could benefit from roping in traditional retailers as customers.
To that end, Alibaba teams fanned out across the nation ahead of Nov. 11 to help outlets—some 600,000 mom-and-pop convenient stores and some 1,000 brands—upgrade their computer systems. Those retailers, many in prime city locations, will become delivery and storage centers.
To connect a tenth of China’s 6 million convenient stores to the internet, Alibaba uses an app called Ling Shou Tong, meaning “connect retail.” Convenience stores are provided suggestions on what to procure and how to display merchandise. The goods are shipped from dedicated Alibaba warehouses, obviating the middlemen they would otherwise have dealt with. In theory, that improves their profit.
The company is also converting 100,000 retail outlets into so-called smart stores. Brands including Levis and L’Oreal are taking part. If one shop runs short on certain inventory, customers can track availability at other locations. They can also get goods delivered to their home.
It’s early days in Alibaba’s grand retail experiment, but if it works, it could deepen a lead over Jeff Bezos’ Amazon.com Inc., No. 1 in the Internet Retailer 2017 Top 500, in the fragmented world of physical retail. Ma’s company spent billions buying into grocers, shopping malls and even department stores years before Amazon announced its $13.7 billion acquisition of Whole Foods Market Inc.
Alibaba is already starting to see the initiative trickle into the top line. Revenue from new retail—mainly its Hema supermarkets and Intime department store—more than quintupled in the September quarter. As with convenience stores, Alibaba is trying to franchise the Hema model that combines a supermarket, restaurant and fulfillment center in a single location on its technology platform.