Alibaba reached $38B GMV on Singles’ Day, which is also known as 11.11 because it falls on November 11. That’s once again a new record BUT it’s important to remember a few things.
Alibaba doesn’t actually make money from transactions, its revenue is based on advertising slots that sellers buy to reach eyeballs. Increased GMV is usually good for the company because it means business is generally trending up – it can, like all metrics, be gamed – but there’s no direct correlation between Singles’ Day sales and Alibaba income.
So why did it in the first place?
Today, the sale appears to function more like an exercise in marketing and new user acquisition/existing user re-engagement. Alibaba spends a lot promoting the sale, so it is almost certainly making a loss overall – but for that spend it gets massive attention and that might kickstart future sales, new downloads and registrations, etc.
Related, it’s worth noting that while consumers get deals during the sale, the party bearing the cost of the discount is very often vendors themselves. Alibaba pushes them to compete with other sellers, so some effectively slash their margins – or post small losses on some items – in a strategy that is likely also about generating new customers with repeat purchase potential.
Finally, Singles’ Day is huge – I’d suggest a large chunk is gamed as pre-sales – but the sheen is coming off and growth is slowing. Co-founder Jack Ma even admitted
that the company had missed expectations this year. That gives us something to chew on.