Five Lessons From Alibaba's Record-Crushing $14.3 Billion E-Commerce Sale

Chinese e-commerce giant Alibaba just logged $14.3 billion of merchandise sold via its platforms in 24 hours, breaking its own record for the world's biggest one-day sale online. To put that number in perspective, it's more than last year's entire annual revenues for Nordstrom ($13.1 billion), Toys "R" Us ($12.4 billion) or J.C. Penney ($12.3 billion). It's also over five times last year's online sales from all retailers during Cyber Monday in the U.S., which Adobe pegged at $2.65 billion. Alibaba's discounting event, which involves thousands of international brands including Nike, Procter & Gamble, Unilever, Costco, Gap, Zara and Estee Lauder, is sometimes called Double Eleven, because it's held on the 11th day of the 11th month. Others call it Singles' Day, because Nov. 11 is a minor holiday in China celebrating the unattached. Here are 5 takeaways about what the numbers mean, which brands sold the most and why marketers aren't always so delighted with the results. Amid slowdown fears, it's a good sign about consumer spending The country's economic growth slowed in the third quarter to 6.9%, the lowest number in six years, and a stock market crash this summer brought questions about whether consumers might cut back. The results of Alibaba's sales event are an encouraging sign, since the number was up 60% in local currency terms from last year's sale result. (About 68% of those sales were on mobile devices, another astonishing number.) Separately on Wednesday, China said general retail sales for October were up 11%. The government has been trying to rebalance the economy, moving from an investment- and export-led model to one driven by consumption. At Alibaba's event in a Beijing Olympics venue, the Water Cube, company founder Jack Ma said China's economy might have "big problems" in the next five to 10 months, and that it's going through a bumpy time. But he said China has 300 million people in the middle class, and he believes that will rise to 500 million in the next 15 years. "The demand for high-quality services, high-quality products is huge," he said. Later, Mr. Ma helped ring the New York Stock Exchange's opening bell remotely, from Beijing. Winning international brands included Uniqlo and Nike The brand with the highest sales figure was Xiaomi, the consumer electronics and smartphone brand founded in 2010, followed by another local electronics brand, Huawei. Third was a Chinese appliance seller, Suning, which Alibaba owns a stake in. For foreign brands, Japanese fashion retailer Uniqlo came in at No. 4; the company is also making a huge brick-and-mortar push in China, opening 100 stores a year. A Danish clothing retailer, Jack & Jones, was No. 12. Nike hit No. 16; the sportswear brand logged a sales bump of 30% in greater China in the most recent quarter as Chinese consumers embraced healthier lifestyles. And yet Double 11 has a big downside for many brands Because brands and merchants must offer steep discounts to participate in the event, their margins suffer. It's something marketing executives complain about privately. Alex Misseri, senior VP-retail and commerce at Razorfish Asia-Pacific, said he didn't know "many or any retailers that actually like these promotions, because they are so deep. They represent 10, 20, 30, 50% of some brands' annual revenue in China. They are not sane, they are not healthy promotions for quite a number of retailers. There is a branding dimension, and they gain market share and brand awareness, but at what cost?" He added: "Some retailers have success selling unsold items from previous collections, or they produce goods specially to discount for the event, but for full-price in-season collections it is never a good operation except for volumes." Alibaba organized a briefing of five brand representatives, including one from P&G and one from Bose; asked about their margins, none of them offered up a number. "Of course we invest in margins, that's clear, because we get something in return," since it drives traffic to the platform, said Jeroen de Groot, president of German wholesaler Metro Cash & Carry in China. "It is a calculation you've got to make internally." He said that for Metro it was a "very good investment. We learned a lot about our customers, and we can also reach out to them in a different way." Alibaba is not the only big player on Nov. 11 Other online shopping outlets have joined in the Nov. 11 sales, including No. 2 e-commerce player JD.com, Wal-Mart-owned grocer Yihaodian and Amazon China. Competition is heating up, especially with JD.com. JD didn't release the value of merchandise sold during its event, so it's hard to compare with Alibaba's number, but it said orders amounted to its past five Nov. 11 events combined. A YouGov survey of 1,091 people found that while 78% of shoppers planned to buy from Alibaba's Tmall platform during the blowout, 62% planned to shop on JD.com. Alibaba is still addressing concerns about counterfeits Alibaba has a business-to-consumer platform, Tmall, where brands set up virtual storefronts. (Alibaba does not actually sell goods itself; it connects merchants and shoppers.) And it has an eBay-like platform called Taobao where counterfeit goods pop up. Days before the big sale, Alibaba's Mr. Ma was quoted by Forbes as saying he would never agree to a settlement with Kering, the parent company of Gucci and Yves Saint Laurent. Kering filed a lawsuit alleging that Alibaba encourages and profits from the sale of counterfeit products on its platforms. Talking with reporters in Beijing, Alibaba's CEO Daniel Zhang brought up the counterfeit issue unprompted, saying the company "spends a lot of resources on ending counterfeits." "We are very clear that we have a responsibility as a platform to fight against counterfeiting," he said. "We will be damaged and the platform will be gone if we cannot deal with the problem, because consumers won't like this."

Five Lessons From Alibaba's Record-Crushing $14.3 Billion E-Commerce Sale

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