How young consumers fueled Alibaba's 90% in mobile Singles Day sales

Three hours before November 11, Jimei Xie, a graduate student in Wuhan, China, posted on social media, “I’m ready.” Cat food and cosmetics products awaited on the shopping cart of her Taobao app, a main e-commerce platform of Alibaba (BABA).  

When the clock struck midnight, she checked out nine items costing a total of about $100. Millions of Chinese consumers like Xie just spent a jaw-dropping $25.4 billion on Alibaba’s shopping bonanza, Singles Day. Now in its ninth year, the world’s largest shopping holiday on November 11 broke its record, growing 43% from last year’s $17.8 billion.

The $12.8 billion in total online sales in the US during Black Friday and Cyber Monday pales in comparison — but Singles Day isn’t all about sales, according to its CEO.

“Alibaba’s focus isn’t solely on driving up 11.11 GMV [gross merchandise volume]. The company also wants to understand the evolution of customers’ buying habits and their lifestyles in order to predict their needs before even they do,” Daniel Zhang, Alibaba’s CEO, said over the weekend. “To do so means that Alibaba is not only meeting customer demand, but also creating demand.”

Young and mobile

Much of that demand is coming from China’s growing middle class and mobile-savvy customers.

Joe Tsai, the co-founder and executive vice chairman of Alibaba Group, says about 80% consumers on Alibaba’s shopping app are younger than 25. “They’re very very mobile. 90% of the GMV we generate is from mobile,” Tsai Said in an interview with Yahoo Finance. “Being young and being mobile, that’s what defines a Chinese consumer.”

Alibaba’s co-founder, Joe Tsai, with Yahoo Finance’s Julia La Roche.

When this year’s Singles Day event kicked off, real-time data showed mobile transactions accounted for as much as 97% of the total sales in the first minute. For the entire day, mobile transactions accounted for 90% of sales. For many consumers, it’s easier to use the integrated mobile payment system Alipay on their smartphones than to try to log on from a computer. Alipay says it completed 325,000 transactions within one second at peak.

Among the 750 million internet users in China, 95% of them used a mobile device to access the internet in 2016. China’s online retail sales are growing by 30% a year with mobile payment transactions surpassing $23.8 trillion, Chinese President Xi Jinping said on Saturday.

Alibaba’s New Retail strategy

As online sales keeps booming, Alipay is also eying brick-and-mortar stores. Alibaba’s New Retail strategy, which rolled out this year, aims at integrating online and offline shopping experiences. Alibaba partnered with malls and set up pop-up stores, where consumers can learn about the products and have the option to order online in the app.

Joe Tsai says Alibaba will not disclose separate sales numbers from online platforms and physical stores because “there is no distinction between the two.”

Although China’s online retail sales are growing by 30% every year, physical stores still dominate total retail sales in China by 85%, according to Alibaba. Alibaba’s movement into the physical space is nascent compared to its e-commerce empire, but it shows the ambition to reshape the future of retail by leveraging its technology and influence.

“We see our efforts in offline stores have been well received this year,” Zhang said. “Setting up a New Retail chain is not something Alibaba is eyeing. Instead, the goal is to capitalize on Alibaba’s technology to empower brick-and-mortar shop owners to go digital.”

Reporting by Krystal Hu.