Alibaba And Singles Day Make Black Friday Look Small And Show The Future Of Retail

Singles Day may be an invented holiday, but Nov. 11 in China gives an indication of how retail will evolve globally over the next decade. And Alibaba is the company to watch.

The numbers posted by e-commerce giant Alibaba on Singles Day — a holiday created as an antidote to China's Valentine's Day, which has caught on big time — in 2017 are mind-boggling. Alipay, the company’s payments system, processed $25B of payments, more than four times what the entire U.S. spent on Black Friday weekend and Cyber Monday in 2016.

That is 1.5 billion individual transactions, 325,000 orders per second, at the day’s peak. Cainaio, the logistics company owned by Alibaba, processed 812 million delivery orders.

The opportunity for brands is clear, and Alibaba said 167 companies each generated more than $15M in sales, 17 companies surpassed $75M, and six companies surpassed $150M.

But as important as the numbers Alibaba posted was the way it posted them, because this gives an insight into how the worlds of online and physical retail will intertwine.

"More than $25B of orders in one day is not just a sales figure," Alibaba Chief Executive Daniel Zhang said in a statement. "It reflects how merchants and consumers alike have now fully embraced the integration of online and offline retail."

Ahead of Singles Day, Alibaba, founded by Chairman Jack Ma, sent an army of technicians across China to help more than 600,000 independent retailers — mom-and-pop stores, convenience stores and independents selling everything from clothes to hardware  — upgrade their computer systems.

Those stores were able to sell goods through one of Alibaba’s online platforms, Tmail.com, and now serve as delivery and storage centres for goods sold on Alibaba.

Convenience stores use an Alibaba app that helps manage these sales and deliveries, but also gives store owners advice on what they should be stocking to maximise profits and how their wares should be displayed.

This is part of Alibaba's wider effort to have deeper links into the world of physical retail. It is also working on the conversion of 100,000 retail stores into Alibaba-linked smart stores. If customers go into a shop and cannot find a product, they can find other stores nearby that might sell it, or have it delivered at home.

“Alibaba plans to use these retailers to reach the elderly and children, who largely aren’t engaging with Tmail online,” said Henry Mason, managing director of consumer insights firm Trend Watching.

“This move demonstrates that the future of retail is not a simple battle between online and offline. It is far more nuanced than that. As Alibaba in China and Amazon in the U.S. have noted, a purely online presence is not enough.

"Because despite the proclamations of many online-obsessed, future-focused trend watchers, there are still hundreds of millions of consumers who aren’t pressing Amazon Dash buttons or using WeChat to order toilet paper via drone delivery on a daily basis.”

Alibaba also has a chain of department stores called Intime, which double as fulfilment centres.

Alibaba’s Singles Day numbers also highlight how smartphones will play an increasing role in retail, both online and offline — 90% of the payments Alibaba took were from mobile phones.

“In major Chinese cities you hardly see cash machines anywhere,” Value Retail Chairman Scott Malkin said. “You pay for goods using your phone everywhere, whether it is at the street food stall or in the store.”

Of course, the innovations being pushed by Alibaba will not be replicated exactly in other markets. The company has the advantage of working in a market which, because of the rapid pace of economic development and recent political history, does not have the pre-existing infrastructure and methodology of Western countries.

“If you don't have legacy companies like Marks & Spencer operating then you can go straight to what people want,” Malkin said.

Its methods will not be adopted wholesale, but the way Alibaba is creating a platform that connects physical stores and online retailing is a development that will surely be replicated around the globe.