The Holiday that Jack Ma Built

By: Frank Holmes | Thu, Nov 13, 2014
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Jack Ma: Rock Star Retailer

One hour into the Singles Day sale, Jack Ma's Alibaba had already sold $2 billion worth of merchandise. By the end of the 24-hour promotion, the Chinese retailer had exceeded expectations by generating more than $9 billion, a record.

Let that sink in for a moment. Nine. Billion. Dollars. In a single 24-hour period.

That's more than the combined online revenue from last year's Black Friday and Cyber Monday, the top two shopping holidays here in the U.S.

Alibaba also broke the Guinness World Record for both the highest e-commerce sales and the most cell phones sold online within a one-day period.

When you compare the company's Singles Day haul to that of Cyber Monday, which follows Thanksgiving weekend, the results are startling.

Alibaba Generates More Online Revenue on Singles Day than the entire US Market does on Cyber Monday

The data also illuminates the urbanization and changing spending habits of China. In a country of 1.35 billion people, about half have Internet access; of those, about half shop online, more than 300 million. Because of the one-child policy, China's gender ratio has tilted decidedly male in recent years--so much so that by 2020, the country is expected to have 35 million more men than women.

That's a lot of single guys.

It was for these men (and women) that Singles Day was first conceived.


From 1111 to $$$$

Legend has it that four such men attending Nanjing University in the early 1990s came up with the idea of celebrating bachelorhood. There was no special day for singles as there was for lovers and spouses. They settled on November 11, or 11.11, allegedly to emphasize the date's composition of ones and because in Mandarin Chinese, "one" sounds like "single."

According to Xian Liang, portfolio manager of our China Region Fund (USCOX), "11-11" also looks like "bare branches," which is a common nickname for bachelors. The reason for this is because "human" is written thus:

Whereas "husband" typically looks like this:

So if you stay unmarried, you basically resemble a set of bare branches.

Single's Day

Over the years the festival became more popular among the Chinese youth who even adopted fun traditions like eating youtiao--basically donuts that resemble the number one--for breakfast. Young women were soon invited to participate. And most important of all, people were encouraged to buy gifts for their lonely-hearted friends.

What started off as a tongue-in-cheek festival for randy young men was quickly evolving into a real, monetizable event.

Chinese retailers had already been clamoring for such a holiday in November, historically a dry period for sales. As demand for apparel, jewelry, handheld electronics and other discretionary goods ramped up, they realized that Singles Day, also called Bachelors' Day and Double 11 Day, was a perfect fit.


Enter Alibaba

Jack Ma might not have been the first to call the promotion "Double 11," but he was certainly the first to secure exclusive rights to use the expression on his e-commerce sites. As a result, Taobao.com and Tmall.com, both subsidiaries of Alibaba, became the de facto sales destinations for all things Singles Day.

Between 2009 and 2013, Double 11 sales rose a meteoric 5,740 percent, and this year, Alibaba amassed a fortune that exceeds the combined GDPs of several third-world countries. Consumers from over 217 countries made transactions on Tmall before midnight.

Alibaba sells $2 billion in one hour on Singles Day sale

Indeed, we're seeing a new tectonic shift in the online marketplace ecosystem and payment service industry. This shift is led not by eBay or Amazon.com so much as it is by Alibaba and other Asian e-commerce merchants. It will be interesting to see what Alibaba has in store for next Singles Day. Those 300 million online shoppers will soon become 400 million, then half a billion.

Understandably so, many American retailers want a slice of Jack Ma's Christmas pie. Conventional wisdom might say that because we already have Black Friday and Cyber Monday within the same 30-day period, there's neither demand nor room for a third sales event. But of the 217 countries that placed orders on November 11, Hong Kong, the U.S. and Russia ranked as the top three regions in terms of volume. Clearly the demand and opportunity is there. Alibaba's success shows that its business model is attractive not just to Chinese but also global consumers. This is where the money wants to be.

And not just on Singles Day, but every single day.

 


 

Frank Holmes

Author: Frank Holmes

Frank E. Holmes
Chief Executive Officer
Chief Investment Officer
U.S. Global Investors

Frank Holmes

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

The company's funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper's top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper's top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of "The Goldwatcher: Demystifying Gold Investing."

He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron's, The Financial Times and other publications.


Please consider carefully a fund's investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

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