Summary
BABA will showcase its robust e-commerce platform, superior product offering and unrivaled logistics system this week.
The scale of the operation is simply unmatched by the other global e-commerce players.
BABA remains my top pick, followed by Tencent. Cautious on BIDU.
Alibaba (NYSE:BABA) will go big in this year's Single's Day on November 11th by showcasing once again its market power in China's domestic e-commerce sector, cross-border capabilities, logistics network and the strength of its e-commerce ecosystem. Unlike last year when Single's Day was solely focusing on China, this year's Single's Day will be global and the volume of the shipment is expected to be double that of last year's with over 700m packages. (see - China eCommerce: Can't Take The Heat? Get Out Of The Kitchen!). BABA's Cainiao logistics partnerships allow the e-commerce giant to quickly scale its global footprint, facilitating the movement of goods and cross-border e-commerce. (see - Alibaba: Scaling Up Logistics In The U.S.and Alibaba: Scaling Up The Logistics). This is highly supportive of my view that cross-border e-commerce will be a medium-term driver for BABA as it continues to dominate China's e-commerce space. I reiterate BABA being my top pick in China's internet space. My pecking order remains long BABA and Tencent (OTCPK:TCEHY) while short on Baidu (NASDAQ:BIDU).
This year's Single's Day is quite important in that it will give investors a sense of the sustainability of the GMV growth we saw in the September quarter (see - Alibaba: The Best Remains The Best). Last year, BABA generated over $9.3b in GMV via its mobile payment platform Alipay. The platform attracted over 27k merchants that received 278m orders in a period of one day. Interestingly, about 43% of the total GMV was processed via mobile.
This year's Single's Day will feature more than six million products from over 40k merchants and more than 30k brands from 25 countries, including those in the US, Europe, Japan and Korea. For the first time, Macy's (NYSE:M) (see - Alibaba Going Global Part II: Connecting East And West) and Costco (NASDAQ:COST) (see - Alibaba Benefits From Costco Going To China) will join the festival along with Uniqlo which recently switched to TMall from rival JD.com (NASDAQ:JD). As part of the omni-channel strategy, over 1,000 retail brands with 180k offline retail locations across approximately 330 Chinese cities will participate in this event. The integration of online and offline platforms delivers a much superior shopping platform to customers and provides valuable data to BABA which can later leverage to enhance its advertising products.
Mobile will play a bigger role in driving GMV this year. Recall that mobile monetization and take-rate both showed solid growth last quarter. Given the increased mobile penetration and the shift in consumer shopping preference of using mobile devices, investors can expect mobile to account for more than half of the total GMV this year.
Finally, BABA's Cainiao logistics partnerships are perhaps the most important platform to make this year's Single's Day a global event. In short, over 3,000 logistics partners around the world will participate in this event, deploying more than 1.7m delivery personnel, 400k delivery trucks, 5k warehouses and 200 airplanes that handle more than 700m packages on that day. More important, Cainiao has set up 49 international and cross-border delivery partners and 74 warehouses capable of supporting 4m cross-border packages per day. The scale of this logistics network simply cannot be matched by that of JD, Amazon (NASDAQ:AMZN) or eBay (NASDAQ:EBAY), and highlights BABA's shrewd logistics business model that leverages partnerships rather than wholly-owned to quickly scale up its global footprint, connect with consumers and establish a high barrier to entry for the competing e-commerce platforms.
Conclusion, remain bullish on BABA. The cross-border e-commerce theme is certainly taking off and BABA remains the best positioned among the Chinese e-commerce players to capitalize on this trend.
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