Alibaba Group Holding Ltd (BABA) stock was one of the hottest performers on Wall Street yesterday, as shares jumped more than 4%. Given the early numbers from the Chinese retailer’s annual sales holiday “Singles’ Day,” it seems investors were right to be optimistic.
By the end of the day on November 11, local time, more than $9.3 billion of goods had changed hands on Alibaba websites alone, according to the company. A whopping 278 million orders had been shipped. Perhaps you can understand how BABA stock managed to pull off the largest IPO ever back in September.
But before you rush into BABA stock, let’s do a quick primer on just what Singles’ Day is and why it seems to be so darn awesome for Alibaba.
What is Singles’ Day?
InvestorPlace‘s own Eric Johnson explains what the Chinese “holiday” actually is:
“Singles’ Day started about 20 years ago as a reason for unmarried college students to party. Alibaba re-invented it in 2009 as a discount shopping event for young adults, calling the promotion Double 11. The name is a play on the date (11/11) and the idea that 11 represents a single person’s two legs.”
To give you some idea about how incredible Alibaba’s $8.5 billion in gross merchandise value — with four hours to go — is, let’s consider the two biggest days for online shopping in the U.S.: Black Friday and Cyber Monday. Last year, ComScore estimated the total transaction value on those two days combined at $2.9 billion.
Alibaba alone has already more than doubled what the U.S. spent in 2013 on the two biggest shopping days of the year. It’s no wonder investors are going gaga for BABA stock.
But that’s not all, folks. Alibaba competitors, like JD.com (JD), Vipshop Holdings (VIPS), E Commerce China Dangdang (DANG) and others, can’t even use the term Singles’ Day to promote sales on their websites. The Chinese government just gave Alibaba the exclusive rights to use the phrases “Double 11” or “11-11” to promote the Singles’ Day sales holiday.
The move is like if congress “gave Walmart (WMT) the exclusive right to use the words ‘Valentine’s Day’ for all shopping promotions offering discount prices on Feb. 14,” Eric Johnson explains.
Alibaba is certainly reaping the rewards from its successful marketing tactic, and knows how to pull the right strings in Beijing to restrict its competition. On top of that, the investment research firm Jefferies expects the already-massive Alibaba to double its Chinese users in the next 10 years, an expansion that makes a compelling case for BABA stock being a long-term buy.
As of this writing John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid.
