Singles Day: Alibaba sales hit a record high, but growth slowed

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But as China’s economy is weak and Beijing has strengthened its control of the technology industry, its momentum is severely slowing down.

Alibaba said that in the first 11 days of November, gross merchandise volume (GMV) reached 540.3 billion yuan (84.5 billion U.S. dollars) and peaked during the holiday on Thursday. This is an increase of 8.5% over a year ago-well below the top end of the most recent forecast given by Citi analysts, who expect an increase of up to 15%, or 578 billion yuan ($90 billion). It is also below the low end of analysts’ forecasts, which is about $86 billion.

Compared with 2019, this year’s figures have significantly slowed down from the 26% released by Alibaba last year.

Citi analysts wrote on Friday that although this year’s data was worse than they expected, given the fierce competition, economic slowdown and weak consumer confidence, “this is not entirely unexpected.”

Smaller competitors Jingdong (Jingdong) It performed better, with sales of 349.1 billion yuan (US$54.6 billion) calculated by GMV. This is an increase of 28.6% from a year ago-although still lower than the 33% growth rate achieved last year.

Inflation headache

Alibaba (Baba) The first Singles’ Day Shopping Festival was launched on November 11, 2009. The event, also known as Double 11, is related to China’s informal, anti-Valentine’s Day holiday, which aims to celebrate people who are not in a relationship. The date-11.11-was chosen because it was written as four one or singles.

Since its first occurrence, Singles’ Day has swelled into a shopping frenzy, not only Alibaba, but also other e-commerce companies that offer substantial discounts and promotions. The transaction takes place within days or even weeks. It also expanded beyond China, with Alibaba’s Southeast Asia subsidiary Lazada offering transactions in Singapore, Malaysia, Indonesia, Thailand and Vietnam.

This is an incredibly lucrative event, but due to headwinds facing the Chinese economy, consumer confidence this year may take a hit.

Due to the impact of the energy crisis, shipping disruption and the deepening real estate crisis on the world’s second largest economy, GDP growth is the slowest in a year.
At the same time, rising inflation rates are likely to erode profit margins and consumers’ purchasing power.

The cost of goods leaving Chinese factories last month soared at another record rate—China’s October producer price index rose 13.5% from a year earlier—and now there are signs that higher costs are gradually declining. China’s October consumer price index rose 1.5% year-on-year, twice the increase in the previous month, and the fastest increase since September 2020.

Alicia Garcia Herrero, chief economist for the Asia-Pacific region of the French Foreign Trade Bank, said: “On the one hand, high input costs have significantly squeezed the profit margins of downstream manufacturers, thus limiting the substantial amount of profit this year. Room for discounts.” Investment Bank. “On the other hand, domestic consumption has not yet returned to pre-epidemic levels[s] Even online retail sales, which remain relatively resilient in 2020, have slowed down. “

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Suppress the dilemma

The government’s full-scale crackdown on private enterprises also cast a shadow over this year’s Singles Day.

Beijing launched a full-scale crackdown on a wide range of industries last year, and e-commerce companies have received particularly severe scrutiny.

Earlier this year, Alibaba was fined a record 2.8 billion U.S. dollars for acting like a monopoly. As Beijing’s reforms began to take shape, the company’s market value has shrunk by hundreds of billions of dollars.

Companies such as JD.com, Tencent, Pinduoduo and Meituan have also been investigated or fined for suspected anti-competitive behavior.

With increasing pressure, after President Xi Jinping clearly proposed to redistribute wealth and achieve “common prosperity”, many companies scrambled to spend billions of dollars from their profits for government social undertakings.
Alibaba has pledged to donate 100 billion yuan (15.6 billion U.S. dollars) by 2025 to support Beijing’s “shared prosperity” movement. Pinduoduo said in August that it will use all of its June quarter profits for rural development projects in China and expects to donate a total of RMB 10 billion (US$1.5 billion) to these projects. At the end of last year, JD.com announced a plan to use capital and logistics infrastructure to “rejuvenate China’s rural areas.”
Singles’ Day has also entered the sight of Beijing. On Saturday, the State Administration for Market Supervision and Administration-the country’s antitrust regulator-prohibited e-commerce platforms from engaging in unfair practices during holiday shopping, such as “raising prices before products go on sale.”
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Last week, the Ministry of Industry and Information Technology, which is responsible for overseas business in the Internet industry, summoned Alibaba, JD.com, Pinduoduo and Meituan to warn them not to send marketing messages to consumers during Double Eleven.

Natixis’ García Herrero said: “This year, large Internet platforms seem to be more cautious in marketing and promotion to avoid violating antitrust regulations.”

Support Beijing

Companies are also eager to support government initiatives aimed at promoting social equality or reducing carbon emissions-these are Xi Jinping’s highest policy goals. Climate has always been a focus of special attention, and China this week even pledged to increase its climate ambitions in an agreement with the United States. (However, China is still the world’s largest coal consumer, and it did not sign a commitment to phase out the use of coal at COP26 earlier.)

Alibaba said they will shift the focus from pure sales data—usually the annual headlines—to sustainability and inclusiveness.

“This year’s festival marks a new chapter for 11.11,” Alibaba Group Chief Marketing Officer Chris Tung said in a statement. “We believe that we must use the power of 11.11 to encourage sustainable development and promote the inclusiveness of consumers, businesses and partners in our ecosystem.”

According to sources, Xi Jinping said that China is ready to cooperate with the United States, and Biden plans to hold a meeting next week.

The company has the final say Energy-saving products will be showcased in its services and “green” vouchers worth 100 million yuan (US$15.6 million) will be issued to encourage people to buy more sustainable products. It also hopes to reduce the carbon footprint of its activities by recycling the packaging it uses.

The company also stated Want to support “vulnerable groups”, Taobao APP introduced the “advanced mode” option. The new features are designed to make it easier for seniors to use through an updated interface and voice-assisted technology.

Jingdong also announced that this year’s Singles’ Day will be “the biggest festival using renewable energy, and it’s also the biggest festival. [JD.com] Will promote the reduction of carbon footprint. “

Paul R. La Monica of CNN Business contributed to this report.

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