By Laura He, CNN Business
Singles Day – the world’s largest annual shopping event – has kicked off in China and promises to generate tens of billions in sales for the country’s largest e-commerce companies.
But the tone at this year’s Bonanza is much more cautious than in previous years as companies gr -ple with rising inflation in a slowing economy and regulatory crackdown on their businesses.
Alibaba launched the first Singles Day Shopping Festival on November 11, 2009. The event, also known as Double 11, is linked to China’s informal anti-Valentine’s Day holiday, which celebrates people who have no relationships. The date – 11/11 – was chosen because it is written as four ones or singles.
Since that first event, Singles Day has grown into a shopping frenzy watched by not only Alibaba but other e-commerce companies offering their own high discounts and promotions. Deals take place over several days or even weeks. It has spread outside of China as well, with Alibaba’s Southeast Asian subsidiary Lazada having stores in Sing -ore, Malaysia, Indonesia, Thailand and Vietnam.
It’s an incredibly lucrative event: Last year, Alibaba had total sales of around $ 75 billion. Rival JD.com said at the time that it had sales of $ 41 billion.
An inflation headache
Alibaba and JD.com could still set new sales records this year. Citi analysts recently forecast that Alibaba’s total gross merchandise volume (GMV) will hit up to 578 billion yuan ($ 90 billion) in the first eleven days of November, up 15% year over year.
But that growth rate would be much slower than in recent years. Last year, Alibaba saw a 26% increase in this metric over the previous year. Citi analysts also expect JD.com’s GMV growth to slow to 22% to 26% for the shopping period, compared to 33% last year.
While Citi analysts wrote in a recent report that advertising campaigns “started with strong consumer demand,” they added that they are “cautious” that general sentiment is being “weakened”[ing] underlying economy. “
China’s economy is growing the slowest in a year as energy problems, ship disruptions, and a deepening housing crisis take their toll on the world’s second largest economy.
Meanwhile, inflation, has risen, which threatens to undermine profit margins and consumer purchasing power.
The cost of goods leaving China’s factories rose another record rate last month – China’s producer price index rose 13.5% year over year in October – and there are now signs that the higher costs are easing. China’s consumer price index rose 1.5% yoy in October, twice as fast as the previous month and the fastest increase since September 2020.
“On the one hand, the sharply rising input costs have significantly reduced the profit margin of the downstream manufacturers, which in turn limits the scope for offering a large 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 the pre-pandemic level[s] and even online retail sales, which remained relatively robust in 2020, have slowed. “
This year’s shopping event is also overshadowed by extensive government action against private companies.
Ecommerce businesses did not esc -e this scrutiny and have been at the center in many ways. Alibaba was fined a record $ 2.8 billion earlier this year for acting like a monopoly, and the company lost hundreds of billions of dollars in market value as Beijing’s reforms took sh -e.
JD.com, Tencent, Pinduoduo, Meituan and other companies have also been investigated or fined for alleged anti-competitive behavior.
Many corporations have also rushed to donate billions of dollars of their own profits to government social causes as President Xi Jinping makes clear his wealth redistribution priority Achieve “common prosperity”.
Alibaba has pledged to donate 100 billion yuan ($ 15.6 billion) by 2025 to support Beijing’s campaign for “shared prosperity.” Pinduoduo announced in August that it will donate all of its earnings for the June quarter to rural development projects in China and expects to donate a total of 10 billion yuan ($ 1.5 billion) to such causes. At the end of last year, JD.com unveiled a plan to “revive” rural China with money and its logistics infrastructure.
Singles Day has arrived in Beijing’s attractions. On Saturday, the State Administration of Market Regulation – the country’s antitrust agency – E-commerce platforms excluded from participation unfair practices during the Christmas shopping season, such as “price increases on items before they go on sale”.
Last week, the Department of Industry and Information Technology, which employs the Internet industry overseas, called Alibaba, JD.com, Pinduoduo and Meituan warning them not to spam consumers with marketing messages during Singles Day.
“The major Internet platforms seem to be more cautious with marketing and advertising this year in order not to violate the antitrust regulations,” said García Herrero of Natixis.
Support for Beijing
Businesses are also rushing to support government initiatives aimed at promoting social equality or reducing carbon emissions – both of which are one of Xi’s key policy goals. A particular focus was on the climate, with China even promising this week to reinforce its climate ambitions in an agreement with the United States. (However, China is still the largest consumer of coal in the world and has not previously signed a declaration at COP26 pledging to phase out its use of coal.)
Alibaba announced that it would shift the focus from pure sales figures – usually the headline every year – on sustainability and inclusion.
“This year’s festival starts a new ch -ter for November 11th. on” Alibaba Group’s chief marketing officer Chris Tung said in a statement. “We believe we need to harness the power of 11/11 to promote sustainable development and promote inclusion for consumers, retailers and partners across our ecosystem. “
The company announced that it will showcase energy-efficient products in its services and issue “green” vouchers worth 100 million yuan ($ 15.6 million) to encourage people to buy more sustainable products. She also wants to reduce the event’s carbon footprint by recycling the packaging used.
The company also said it wants to support “populations at risk,” and its Taobao -p has introduced an option for senior mode. The new feature is designed to be more accessible to older people with an updated user interface and voice technology.
JD.com also announced that this year’s Singles Day “will be the biggest using renewable energy and one that [JD.com] will push a reduced carbon footprint. “
The CNN Wire
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