O Alibaba unveiled another year of record sales figures for Singles Day, the world’s biggest annual shopping event, which takes place on November 11th. But its momentum is seriously waning as the economy grows. China weakens and Beijing tightens its grip on the tech industry.
The company said total gross goods volume (GMV) reached 540.3 billion yuan (US$84.5 billion) in the first 11 days of November, culminating in the holiday last Thursday.
The figure is an 8.5% increase from the previous year – far less than the upper limit of a forecast recently made by Citi analysts, who expected an increase of up to 15%, or 578 billion yuan (US$ 90 billion). It is also below the bottom of the analyst’s forecast, about $86 billion.
This year’s number is a big slowdown from the 26% jump recorded by Alibaba last year, compared to 2019.
Analysts at Citi wrote on Friday that while this year’s numbers were worse than expected, “it wasn’t entirely unexpected” due to stiff competition, a slowing economy and dwindling consumer sentiment.
Alibaba’s smaller rival, JD.com, fared better, posting 349.1 billion yuan ($54.6 billion) in sales by GMV. That was 28.6% higher than a year ago – albeit still slower than the 33% growth rate it achieved last year.
Headaches With Inflation
Alibaba launched the first Singles Day Shopping Festival on November 11, 2009. The event, also known as Double 11, is related to China’s informal anti-Valentine’s Day holiday, which celebrates people who are not in relationships . The date – 11th of 11th – was chosen because it is written as four units, or singles.
Since that first occurrence, Singles Day has exploded into a shopping frenzy seen not only by Alibaba but also by other retail companies. e-commerce that offer their own discounts and promotions. Deals take place over several days or even weeks.
The event has also spread outside of China, with Lazada, Alibaba’s Southeastern subsidiary. Asia, offering business in Singapore, Malaysia, Indonesia, Thailand and Vietnam.
It’s an incredibly profitable event, but consumer sentiment could be taking a hit this year because of the headwinds facing the Chinese economy.
O START (Gross Domestic Product) is growing at the slowest pace in a year as energy problems, shipping disruptions and an ever-deepening housing crisis affect the world’s second-largest economy.
A inflation, in turn, has risen, which threatens to erode consumer profit margins and purchasing power.
The costs of goods leaving China’s factories rose by another record last month – the China Producer Price Index was up 13.5% in October from a year earlier – and now there are signs that they are affecting the whole world. jail.
China’s Consumer Price Index rose 1.5% in October from a year earlier, twice the rate of the previous month and the fastest pace of increase since September 2020.
“On the one hand, rising input costs have significantly reduced downstream manufacturers’ profit margins, which in turn limits the scope for offering a big discount this year,” said Alicia Garcia Herrero, chief economist for Asia- Pacifico from Natixis, a French investment bank.
“On the other hand, domestic consumption has not yet returned to pre-pandemic levels, and even online retail sales, which remained relatively resilient in 2020, have slowed down.”
A Chinese government-wide crackdown on private companies has also cast a shadow over this year’s Singles Day.
Last year, Beijing launched a comprehensive campaign against a wide range of industries, and e-commerce companies are under particularly severe scrutiny.
Alibaba was hit earlier this year with a record fine of $2.8 billion for behaving like 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 were also investigated or fined for alleged anti-competitive behavior.
As the pressure mounts, many companies rush to donate billions of dollars of their own profits to government-based social causes after the president Xi Jinping made clear its priority of redistributing wealth and achieving “common prosperity”.
Alibaba has pledged to donate 100 billion yuan ($15.6 billion) by 2025 in support of Beijing’s “common prosperity” campaign. Pinduoduo said in August that it would give all June quarter earnings to rural development projects in China, and expects to donate a total of 10 billion yuan (US$1.5 billion) to these causes.
JD.com unveiled a plan late last year to “revitalize rural China” using cash and its logistics infrastructure.
Singles Day has also entered Beijing’s sights. On Saturday (6), the State Administration for Market Regulation – the country’s antitrust regulatory body – prohibited e-commerce platforms from participating in unfair practices during the Christmas shopping period, such as “raising the prices of items before placing them. them for sale”.
Last week, the Ministry of Industry and Information Technology, which oversees the industry of internet, convened Alibaba, JD.com, Pinduoduo and Meituan and warned them against sending spam marketing messages to consumers during Singles Day.
“The big Internet platforms seem to be more cautious in marketing and promotions this year to avoid violating antitrust regulations,” said García Herrero of Natixis.
Businesses are also rushing to support government initiatives aimed at increasing social equity and reducing carbon emissions – both among Xi’s main political goals.
The climate has been a particular focus, with China this week even pledging to step up its climate ambitions in a deal with the USA. China, however, is still the biggest consumer of coal in the world and has not previously signed a declaration in the COP26 pledging to eliminate the use of ore.
Alibaba said it would shift the focus from pure sales numbers – usually each year’s headline – to sustainability and inclusion.
“This year’s Festival marks a new chapter for 11/11,” said Chris Tung, marketing director for Alibaba Group, in a statement. “We believe we must use the power of 11/11 to encourage sustainable development and promote the inclusion of consumers, traders and partners across our ecosystem.”
The company said it will feature energy-efficient products in its services and distribute 100 million yuan ($15.6 million) in “green” vouchers designed to encourage people to buy more sustainable products. She also wants to reduce the event’s carbon footprint by recycling the packaging she uses.
The company also said it wanted to support “vulnerable populations”, and its Taobao app introduced a “senior mode” option. The new feature is designed to be more accessible to consumers. seniors with an updated interface and voice-assisted technology.
JD.com also announced that this year’s Singles Day will be “the biggest where renewable energy is used and where [a JD.com] will push for a reduced carbon footprint.”
(Translated text. Click here to read the original version, in English)
Reference: CNN Brasil