China’s Crackdown on Tech Companies Adds Fuel To Fire

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The tone at this year’s Single’s day is a lot more cautious than it has been in prior years, as companies contend with rising inflation in a slowing economy and a regulatory crackdown on their operations, reports CNN.

Largest online marketing event

Singles’ Day has been viewed as the largest online marketing event of the year. It is heavily advertised for weeks ahead of time with brands and merchants offering deep discounts to attract consumers looking for bargains.

But shoppers say deep discounts of what is also called “Double Eleven” are now a thing of the past and experts are predicting lower sales as the economy slows.

This year, Alibaba, the e-commerce platform that pioneered the online shopping festival more than a decade ago, decided not to showcase a running tally of its real-time gross merchandise volume (GMV) — defined as the amount of transactions racked up across its platform — on its site for Nov. 11.

Crackdown on tech companies

Chinese regulators have cracked down on technology companies, investigating giants like Alibaba and food delivery firm Meituan over alleged anti-competitive practices.

Earlier this year, Alibaba was fined a record $2.8 billion for violating antitrust rules. Ahead of Singles’ Day, Alibaba, rival JD.com and Meituan were among companies asked to curb excessive marketing text messages sent to consumers during the festival.

Last week, 16 e-commerce platform operators — some of which are linked to Alibaba and Meituan — were also summoned by regulators in the southern province of Guangdong and warned over “unfair competition.”

Platforms are also reining in the marketing hype to align themselves with Chinese President Xi Jinping’s calls for “common prosperity,” which includes curbing excess and advocating for more equitable distribution of wealth and resources.

This year’s shopping event is also being held under the shadow of a sweeping government crackdown over private business.

E-commerce firms have not escaped that scrutiny, and in many ways have been at the center of it. Alibaba was hit earlier this year with a record $2.8 billion fine for behaving like a monopoly, and the company has shed hundreds of billions of dollars in market value as Beijing’s reforms take shape.

A lot of companies have also rushed to donate billions of dollars from their own profits to government-based social causes, as President Xi Jinping makes clear his priority to redistribute wealth and achieve “common prosperity.”

GMV tally

“The decision not to publish a live GMV tally suggests China’s major e-commerce platforms believe this consumption display is incongruent with current ‘common prosperity’ themes,” said Michael Norris, research strategy manager at the Shanghai-based consultancy AgencyChina.

Online retailer JD.com also did not publicly stream a running tally of sales this year. But it did hold a media event Thursday, where a counter showed that as of 2 p.m. local time shoppers had spent over $48 billion.

An inflation headache

Alibaba and JD.com may still reach new sales records this year. Analysts at Citi recently forecast Alibaba’s total gross merchandise volume (GMV) to reach as much as 578 billion yuan ($90 billion) through the first 11 days of November, a 15% increase compared to last year.

But that rate of growth would be a lot slower than in years last. 

China’s economy is growing at the slowest pace in a year as energy woes, shipping disruptions and a deepening property crisis take their toll on the world’s second largest economy.

Inflation, meanwhile, has risen, which threatens to erode profit margins and the purchasing power held by consumers.

The cost of goods leaving China’s factories surged by another record rate last month and there are now signs that the higher costs are trickling down. China’s Consumer Price Index rose 1.5% in October from a year ago, double the rate of the previous month and the fastest pace of increase since September 2020.

“On the one hand, the soaring input costs have significantly squeezed the profit margin for downstream manufacturers, which in turn limits the space to offer a large discount this year,” said Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis, a French investment bank. 

Supporting Beijing

Companies are also rushing to support government initiatives intended to boost social equality or to reduce carbon emissions — both among Xi’s top policy goals. 

Climate has been a particular focus, with China this week even pledging to ramp up its climate ambitions in an agreement with the United States. 

Alibaba’s contribution

Alibaba said they would shift focus from pure sales figures usually each year’s headline — to sustainability and inclusiveness.

“This year’s Festival marks a new chapter for 11.11,” said Chris Tung, chief marketing officer of Alibaba Group, in a statement.We believe we must leverage the power of 11.11 to encourage sustainable development and promote inclusiveness to consumers, merchants, and partners across our ecosystem.”

The company said it will showcase energy-efficient products on its services and give out 100 million yuan ($15.6 million) worth of “green” vouchers meant to encourage people to buy more sustainable products. It also wants to reduce the event’s carbon footprint by recycling the packaging it uses.

The company also said it wants to support “vulnerable populations,” and its Taobao app has introduced a “senior mode” option. The new feature is designed to be more accessible for the elderly with an updated interface and voice-assisted technology.

JD.com ‘s contribution 

JD.com also announced this year’s Singles Day will be “the largest one where renewable energy is used, and one where [JD.com] will push for a reduced carbon footprint.”

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Source: CNN