At this time of the year, many investors in the United States are tuned in to the holiday shopping season. How will their favorite retail stocks perform as a result of Black Friday or Cyber Monday sales? Will stocking stuffer demand move the needle? However, investors ought to pay attention to an entirely different shopping catalyst. Alibaba (NYSE:BABA) stock benefits each year from Singles Day.
So what exactly is Singles Day? And how does it affect BABA stock?
At the heart of Alibaba Singles Day is the idea of a 24-hour shopping festival. Think major discounts on top brands. Personal events to incentivize shoppers. Lots and lots of money. In fact, although Black Friday and Cyber Monday receive so much attention as catalysts for the stock market, Singles Day is the largest physical retail and online shopping holiday.
Want to learn more? Dive into the market-moving holiday with these investing facts.
What Exactly Is Singles Day?
Legend has it that Singles Day dates back to 1993, when a group of students at Nanjing University bought themselves presents to celebrate being single. These students chose Nov. 11 because the abundance of “1” in the date ties into singleness.
Since then, the holiday has rapidly expanded, first reaching other Chinese university students and then captivating the vast majority of the country. In fact, estimates for 2020 show that 96% of consumers planned to participate in the Singles Day shopping festival.
As the holiday has evolved, motives have changed. No longer are single students simply buying themselves gifts as an act of self-celebration. Consumers are now drawn en masse to the shopping festival thanks to corporate backing and heavy discounts that incentivize purchases. Singles Day has become the largest physical retail and online shopping festival in the entire world.
This is where Alibaba and BABA stock come into play. Singles Day is not an official holiday, but Alibaba and several of its retail peers host their own popular festivals. Alibaba runs a 24-hour shopping holiday, and it even extended its discounts through the month of November for maximum reach. It leans into its sites Tmall and Taobao to connect with consumers and push products. Similarly, JD.com (NASDAQ:JD) traditionally hosts an 11-day festival.
One of the biggest takeaways for investors is that Singles Day is huge — and it is still growing rapidly. Consider that 96% of consumers in China plan on participating. Then, consider that despite the effects of the novel coronavirus, 39% of those consumers plan on spending even more this year. And when they spend, they spend big. Alibaba brought in almost $60 billion in sales in 2019.
Here is one more fun fact: At the peak of 2020 Singles Day, Alibaba says more than 538,000 orders were being created each second.
Why Does It Work? Customer Engagement.
There is no denying that discounts get shoppers ready to spend. Alibaba and JD.com embrace this fact with Singles Day. Amazon (NASDAQ:AMZN) and Target (NYSE:TGT) leaned into similar perks for their competing online shopping holidays this fall. An heavy discounts are one of the primary drivers of interest in Black Friday and Cyber Monday festivities.
However, Singles Day shows that there are other really important ways to engage customers and make a difference in terms of overall sales. Importantly, these things are even more important in 2020 while the coronavirus limits the opportunities for in-person shopping events.
Essentially, Singles Day is just as much about the entertainment experience as it is about the shopping. Leading up to the event, Alibaba promised to engage consumers with livestreams. As influencer couple Mark Yuan and Zoe Zhang told CNBC, they have hosted livestreams through Taobao to help sell a $43 million townhouse and 700 pairs of designer shoes. These livestreams create events within a shopping festival, and offer shoppers personal feedback. Yuan said that each participant in the livestream was able to ask personal questions about sizing concerns.
Estimates call for livestreaming to take in $125 billion in sales this year in China.
The innovation does not stop there. Singles Day also featured 3D shopping, allowing customers to browse an entire store all on their smartphones. Showcases featured autonomous package-delivery robots, real-time livestreaming translation tech and AI-powered shopping assistants.
We know that consumers want personal, engaging shopping experiences. Alibaba and its Singles Day peers deliver just that. As you consider BABA stock and other retailers, keep this in mind, especially because the coronavirus is only accelerating this shift in shopper behavior.
Alibaba vs. Amazon
U.S. investors are no doubt wondering how Singles Day helps Alibaba rank against e-commerce giant Amazon. To start, you have to understand the scale of Singles Day against Amazon Prime Day. Remember that Alibaba brought in almost $60 billion in sales in 2019? Amazon brought in just under $10 billion. Granted, both companies experienced growth during their 2019 events, even despite international economic weakness. The same appears true for 2020 — experts have commended Amazon for its fall 2020 Amazon Prime Day and its expertise in capitalizing on online shopping demand.
However, Alibaba is operating Singles Day at a completely different scale. Will we see Amazon start to lean into more personalized shopping experiences and Amazon Prime Day events? Perhaps. As you consider BABA stock, it is at least important to keep this in mind.
One last important thing to note is that Alibaba, and the broader Chinese economy, have bounced back much quicker than U.S. companies from the coronavirus pandemic. In fact, experts think the pandemic will have little to no impact on Singles Day sales. Amazon and other e-commerce leaders in the U.S. have seen high demand, but they are operating in a country where economic worries are still heavily weighing on consumer spending.
The Bottom Line
As investors, there is no doubt Singles Day should be on your radar. We already know that 2020 has brought success to Alibaba and many of the brands it partners with. In fact, before the event had concluded, at least 13 brands had brought in 1 billion yuan. Another 342 brands had surpassed 100 million yuan in sales.
Does that mean you should dive straight into BABA stock? Maybe not so fast. Although the company is largely considered a strong long-term investment for its e-commerce, cloud and other divisions, the last few weeks have been rocky. BABA stock initially dipped after delaying the Ant Group IPO. Now, with Singles Day underway, investors are processing another negative headline. For the first time ever, Beijing released draft guidelines outlining anti-competitive behavior.
Afraid for what that means for Alibaba, investors raced out of the stock. As of this writing, shares were just barely in the red, although they closed down 8% Tuesday.
In other words, do your own research. Alibaba is a company that should at least be on your radar right now.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer for InvestorPlace.com.