Alibaba Group reaped $14.3 billion in sales during Singles’ Day, a 60 percent increase from last year’s tally. The most significant number from yesterday’s annual shopping bonanza, however, is not how much Chinese consumers spent, but what devices they used to make purchases from Alibaba’s marketplaces.
According to the company, which runs China’s largest e-commerce marketplaces, more than half, or 69 percent, of gross merchandise volume (or total sales) were made on mobile devices like smartphones, compared to 42.6 percent last year.
Its mobile business’ strong growth is an important coup for Alibaba because the company has invested heavily in mobile, at times sacrificing revenue in order to improve monetization rates. Back in January, after Alibaba issued disappointing earnings for the last quarter of 2014, chief financial officer Maggie Wu admitted that Alibaba’s focus on mobile had resulted in “near-term growing pains.” That quarter, mobile GMV accounted for 42 percent of Alibaba’s GMV.
Alibaba’s investments, however, began to pay off by the next quarter. By the first fiscal quarter of 2015 mobile accounted for more than half, or 55 percent, of total GMV for the first time, which meant that more shoppers were using smartphones instead of PCs to complete purchases. In Q2 2015, its last reported quarter, mobile sales climbed to 62 percent of GMV.
Focusing on mobile is crucial for Alibaba because most of China’s Internet users, or 88.9 percent, now go online through their smartphones, compared to just 42.5 percent on laptops and 68.4 percent on desktop PCs, according to a July report by the China Internet Network Information Center, a government agency.
Furthermore, Alibaba’s mobile messaging app, Laiwang, has failed to take off, so building attractive shopping apps and sites may help the company ward off competition from Tencent’s WeChat, which has become a smartphone staple for many Chinese consumers.
WeChat not only enables text messaging and voice calls, but is also building its own mobile commerce business (including a payments service that competes with Alibaba’s Alipay). With over 650 million monthly active users, WeChat may poise a serious challenge to Alibaba, especially in areas like O2O (online-to-offline) commerce.