China just gave Alibaba Group Holding Ltd. (BABA) an amazing edge on “Singles’ Day” over rival e-commerce companies including JD.com (JD) in the scramble for the wallets of young Chinese adults who increasingly shop online.
What kind of advantage are we talking about?
Well, imagine what retailing would be like if the U.S. government gave Walmart (WMT) the exclusive right to use the words “Valentine’s Day” for all shopping promotions offering discount prices on Feb. 14.
Now thanks to this Singles’ Day boost, Alibaba stock looks like a better buy than ever, while New York-listed shares in its rivals from JD to Dangdang (DANG) are a lot less attractive.
Alibaba Gets to Play on Singles’ Day
Investors playing Chinese Internet commerce stocks will want to think carefully about the implications of the government notice posted on Chinese media websites late Thursday.
The notice reportedly issued by the Chinese government’s State Administration of Industry and Commerce sets restrictions on retail website advertising. It essentially gives Alibaba’s e-commerce websites Tmall, which sells brand-name products, and Taobao, a general marketplace for a wide variety of vendors, the exclusive right to call an annual, wildly popular November 11 sales promotion “Double 11” or “11-11.” (It’s written 双十一 in Chinese).
This exclusivity is exactly what Alibaba and its well-connected Chairman Jack Ma recently demanded. Alibaba stock is thus poised to leave other online retailers in the dust during the annual shopping bonanza this coming Nov. 11, which is celebrated as Singles’ Day in China.
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.
The promotion has been a huge hit ever since, with sales growing annually. Last year, vendors marketing through Alibaba websites sold $5.7 billion worth of goods, including a lot of fashion clothing. The total was about seven times an average day’s sales at Alibaba.
JD and other online retailers have dubbed their own Singles’ Day promotions 11-11 or Double 11. And they’ve also seen sales soar on that day. But until now, Alibaba had no objection to rivals using the promotional slogan.
Last month, Alibaba through its Tmall subsidiary, warned it might take legal action against any Chinese media outlet that accepted advertising from any rival retailer using the Double 11 “brand” in ads or other marketing materials. It claimed exclusive rights to the sales promotion title. Alibaba also asked the government for the sole legal right to the Double 11 expression.
Alibaba’s victory came in the form of the SAIC notice which, according to Chinese media, was sent to JD vendors but not issued publicly.
Alibaba’s stock price has climbed about 60% since the Hangzhou, China-based Internet retail giant set a new IPO record in September, raising some $25 billion. Even before Thursday’s news about the Double 11 decision, some U.S. analysts had predicted shares could top $120.
Those predictions could prove true very soon if, as expected, investors are wowed by higher-than-ever sales pegged to the Double 11 celebration next Tuesday.
That there’s a direct connection between the value of Alibaba stock and its sales achievements on Singles’ Day was recently cited by Mo Dai Qing, director of the online retail office at the China E-Commerce Research Center, in an interview published Oct. 22 by the Communist Party’s China Youth Daily newspaper:
“This is the first Double 11 since Alibaba listed, so its importance is obvious,” Mo was quoted as saying. “Tmall’s Double 11 will eventually become an important indicator for investor decisions, directly affecting the stock’s future direction.”
The news website of the Chinese social messaging company Tencent (TCEHY) late Thursday that a JD source called the government notice a “recommendation” that did not expressly ban the company from using Double 11 in promotions. But the report also called the government’s move an “emergency notice” to JD to immediately change the way discounts are promoted on its website.
The notice was apparently an emergency because the Singles’ Day event is fast approaching.
Alibaba stock holders will soon have more to cheer.
As of this writing, Eric Johnson did not hold a position in any of the aforementioned securities.
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