Alibaba Singles Day is muted this year as China’s economy slows and tech crackdown continues – .

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Alibaba Singles Day is muted this year as China’s economy slows and tech crackdown continues – .



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But the tone of this year’s windfall is much more cautious than it has been in previous years, as businesses face rising inflation in a slowing economy and regulatory crackdown on their businesses. operations.

Alibaba (BABA) kicked off the first Singles Day Shopping Festival on November 11, 2009. The event, also known as Double 11, is tied to the informal anti-Valentine’s Day holidays in China that celebrate people who are not in a relationship. The date – 11:11 – was chosen because it is written as four ones, or singles.

Since that first occurrence, Singles Day has become a shopping spree seen not only by Alibaba, but also by other e-commerce companies that offer their own big discounts and promotions. The deals take place over several days or even weeks. It has also spread outside of China, with Alibaba’s Southeast Asian subsidiary Lazada offering deals in Singapore, Malaysia, Indonesia, Thailand and Vietnam.

It’s an incredibly lucrative event: Last year, Alibaba raked in around $ 75 billion in total sales. Rival JD.com (JD) said at the time that it had reached $ 41 billion in sales.

An inflation puzzle

Alibaba and JD.com could yet hit new sales records this year. Citi analysts recently predicted that Alibaba’s total gross merchandise volume (GMV) would reach up to 578 billion yuan ($ 90 billion) in the first 11 days of November, an increase of 15% from compared to last year.

But this rate of growth would be much slower than in recent years. Last year, Alibaba saw a 26% jump in this metric from the previous year. Citi analysts also expect JD.com’s GMV growth for the buy period to slow to 22% to 26% from 33% last year.

While Citi analysts wrote in a recent report that promotional campaigns have “started with strong consumer demand,” they added that they are “cautious” that general sentiment could be affected by a “weakening.[ing] underlying economy. ”

China’s economy is growing at the slowest pace in a year as energy issues, shipping disruptions and the deepening real estate crisis wreak havoc on the world’s second-largest economy.

Inflation, for its part, has increased, threatening to erode consumer profit margins and purchasing power.

The cost of goods leaving Chinese factories rose another record high last month – China’s producer price index jumped 13.5% in October from a year ago – and there are now signs that rising costs are being passed on. China’s consumer price index rose 1.5% in October from a year ago, double the rate the previous month and the fastest rate of increase since September 2020.

“On the one hand, soaring input costs have drastically reduced the profit margin for downstream manufacturers, which in turn limits the space to offer a big discount this year,” said Alicia Garcia Herrero, chief economist for Asia-Pacific at Natixis, a French investment bank. “On the other hand, domestic consumption has not yet returned to pre-pandemic levels.[s] and even online retail sales, which remained relatively resilient in 2020, slowed. “

The misfortunes of repression

This year’s shopping event is also being held in the shadow of a sweeping government crackdown on private companies.

Ecommerce businesses have not escaped this scrutiny and, in many ways, have been at the center of it. Alibaba was hit earlier this year with a record fine of $ 2.8 billion for acting as a monopoly, and the company has lost hundreds of billions of dollars in market value as Beijing’s reforms take shape .

JD.com, Tencent, Pinduoduo, Meituan and other companies have also been investigated or fined for alleged anti-competitive behavior.

Many companies have also rushed to donate billions of dollars of their own profits to government social causes, as President Xi Jinping has made it clear his priority is to redistribute wealth and achieve “common prosperity”.

Alibaba has pledged to donate 100 billion yuan ($ 15.6 billion) by 2025 to support Beijing’s “common prosperity” campaign. Pinduoduo said in August that he would donate all of his profits for the June quarter to rural development projects in China, and expects to donate a total of 10 billion yuan (1.5 billion dollars) to such causes. JD.com unveiled a plan late last year to “revitalize rural China” using the cash and its logistics infrastructure.

Singles Day has entered Beijing’s sights. On Saturday, the State Administration of Market Regulation – the country’s antitrust regulator prohibits e-commerce platforms from participating in unfair practices during the holiday shopping season, such as “raising the prices of items before they go on sale”.

Last week, the Ministry of Industry and Information Technology, which oversees the internet industry, summoned Alibaba, JD.com, Pinduoduo and Meituan and warned them against spamming consumers with messages marketing on Singles Day.

“Large internet platforms appear to be more cautious in marketing and promotions this year to refrain from violating antitrust regulations,” said García Herrero of Natixis.

Support Beijing

Companies are also rushing to support government initiatives to strengthen social equality or reduce carbon emissions, two of Xi’s main political goals. Particular attention has been paid to the climate, with China even pledging this week to step up its climate ambitions in an agreement with the United States. (However, China is still the world’s largest consumer of coal, and has not previously signed a statement at COP26 committing to phase out the use of coal.)

Alibaba said it will no longer focus on pure sales figures usually the title of each year – to sustainability and inclusiveness.

“This year’s Festival marks a new chapter for 11.11”, Chris Tung, chief marketing officer of the Alibaba group, said in a statement. « We believe we need to harness the power of 11.11 to encourage sustainable development and promote inclusion among consumers, merchants and partners in our ecosystem. “

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The company said it would showcase energy-efficient products on its services and distribute 100 million yuan ($ 15.6 million) in “green” coupons to encourage people to buy more sustainable products. She also wants to reduce the carbon footprint of the event by recycling the packaging she uses.

The company has 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 to older people with an updated interface and voice assist technology.

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

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