By Paul Goodwin, Chief Analyst of Cabot China & Emerging Markets Report
Global retail is a matrix of consumer confidence and disposable income pulled by the constantly changing forces of advertising, marketing and the weather. In the U.S., it used to be that Black Friday, the day after Thanksgiving, was the make-or-break day for many retailers, putting them into the black for the year and setting the tone for the entire holiday shopping season.
Black Friday and Cyber Monday still lead the way, but retailers are now pushing holiday-style discounts and sales into October in a search for growth. In 2013, as more and more retailers pushed the traditional boundaries by opening for business on Thanksgiving itself, Black Friday spending fell for the first time since 2009, forcing retailers to extend deep discounts to generate sales, even though that would ultimately hurt their profit margins.
Online sales, on the other hand, reached record rates, with more shoppers taking to their mobile devices and spending more per purchase. Researchers noted that iOS shoppers (those using iPads or iPhones) made bigger purchases than Android users, and tablet users produced about twice as much in online sales compared to smartphone shoppers despite making up only 14.2% of all online traffic (as compared to smartphones, which drove nearly 25% of traffic).
This kind of microscopic analysis of sales trends is a deadly serious business, and analysts who can make sense of the torrent of data can command big bucks.
What does this have to do with China? Well, although China has neither a Black Friday nor a Cyber Monday, it does have a unique, relatively new shopping tradition that puts its two U.S. competitors in the shade. It's called Singles Day.
November 11 is always the date for Singles Day (the Chinese name, Guanggun Jie, means "bare sticks holiday," a reference to the four "ones" of the date, and also an image of branches with no fruit), a day when Chinese single people, mostly young, hold parties and other events to meet new friends, often with the hope that a romance might ensue.
It used to be that Singles Day was thought of as a day for single men to buy electronic gadgets for themselves, presumably because they lacked a romantic partner to buy something for them. But the concept has morphed a bit to resemble Valentine's Day, a day for finding and celebrating romance and gift giving, as well as a day for dedicated shopping.
The significance of Singles Day for retailers is in the numbers. On November 11, 2012, Taobao, Alibaba's (NYSE:BABA) online marketplace, sold about $3 billion of goods. The 2013 Singles Day produced $5.57 billion in sales for Alibaba, more than twice the total for American retailers on Cyber Monday!
Alibaba has been as important to the growing scale of Singles Day as Hallmark was to Valentine's Day cards. Retailers now build entire campaigns of ads and promotions combined with special prices to encourage buying. It's become an occasion that everyone talks about and an increasing number of Chinese participate in.
With the Alibaba IPO on the horizon - the two-week investor road show is expected to kick off after the Labor Day holiday - many investors are watching closely to see how institutional fund managers will prepare. The thinking is that the whales will want to free up some capital to put into BABA, and that may mean bad news for marginal or underperforming Chinese or U.S. stocks.
If funds wind up ditching their weaker holdings, could that have a major effect on U.S. and Chinese stocks that end up in the crosshairs?
Well, since the Alibaba IPO is estimated to raise between $16 and $20 billion, the effect could be significant. Some analysts are predicting that Baidu (NASDAQ:BIDU) and Tencent Holdings (OTCPK:TCEHY) could feel the pinch. When a company like Alibaba generates 80% of China's entire online sales, that kind of tough arithmetic becomes necessary.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.