阿里掀起网购狂欢
Alibaba:swinging singles

By Lex, November 12,2014

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American capitalism could not bear a holiday devoted only to gratitude – a notoriously hard concept to monetise.

So after Thanksgiving comes Black Friday – and the country shops.

China’s Singles’ Day (named for all the ones in the date, 11/11) was for romance. That did not set registers ringing, either.

Alibaba charged into the breach a few years ago with a Singles’ Day sale. The results make the Americans cramming into Walmart look like timid socialists.

This Singles’ Day, the total volume of merchandise bought through Alibaba was Rmb57.1bn ($9.3bn), blowing past last year’s $5.9bn. Total US retail sales for the entire four-day Thanksgiving weekend of 2013, online and in stores, were roughly $57bn.

Alibaba, a marketplace operator rather than a retailer, takes up to 5 per cent of each transaction – no discount on Alibaba’s merchant fees for Singles’ Day, thank you. So the day’s discounts of at least 50 per cent compresses revenues, especially considering that before the big day some sales are put off (one merchant has said that in the two weeks before Singles’ Day its online sales drop 80 per cent). Alibaba has not disclosed the revenues it makes from Singles’ Day. The big winners, other than consumers,might be the delivery companies.

Given all this, and that Alibaba’s $300bn market capitalisation is about 50 times net income, profitability matters. Alibaba’s shareholders will have to wait for the next earnings report for clues to whether Singles’ Day 2014 was an economic success as well as a promotional one.

Cash flow, in particular, bears watching. Capital expenditures tripled in Alibaba’s latest reported quarter, to $550m, as the company spent money on data centres, land rights and construction. Cash flow after capital spending therefore grew much more slowly than profit (even putting aside the $775m Alibaba lent to its merchants in the quarter).

Chinese consumers are proving their buying power and Alibaba is proving its selling power. Earnings power will determine whether investors keep clicking buy, buy, buy.