Alibaba records record sales for Singles Day, but growth is slowing

But its momentum is seriously slowing as China the economy weakens and how Beijing has tightened its grip on the tech industry.

Alibaba said that the total gross merchandise volume (GMV) reached 540.3 billion yuan ($ 84.5 billion) during the first 11 days of November, culminating with the holiday on Thursday. That’s an 8.5% increase from the previous year, much lower than the upper end of a forecast recently given by Citi analysts, who had expected an increase of up to 15%, or 578 billion yuan ($ 90,000). millions). It is also below the lower limit of analysts’ forecast, about $ 86 billion.

This year’s figure is a big slowdown from Alibaba’s 26% jump last year, compared to 2019.

Citi analysts wrote on Friday that while this year’s figures were worse than they predicted, “it was not entirely unexpected” given stiff competition, the slowdown in the economy and weakening consumer confidence.

Smallest rival JD.com (JD) it fared better, recording 349.1 billion yuan ($ 54.6 billion) in sales from GMV. That was 28.6% more than a year ago, although it is still slower than the 33% growth rate it reached last year.

Inflation headaches

Alibaba (SLIME) launched the first Singles Day Shopping Festival on November 11, 2009. The event, which is also known as Double 11, is linked to China’s informal holiday against Valentine’s Day that celebrates people who do not they are 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 turned into a shopping frenzy observed not only by Alibaba, but also by other e-commerce companies offering their own huge discounts and promotions. The offers are carried out 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, but consumer confidence may take a hit this year due to the headwinds facing China’s economy.

GDP is growing at the slowest rate in a year in which energy problems, shipping disruptions and a deepening housing crisis are taking their toll on the world’s second-largest economy.
Inflation, meanwhile, has risen, which threatens to erode profit margins and consumers’ purchasing power.

The cost of products leaving China’s factories rose at another record rate last month (China’s producer price index rose 13.5% in October from a year earlier) and now there are signs that costs higher are leaking. China’s consumer price index rose 1.5% in October from a year earlier, double the rate from the previous month and the fastest rate of increase since September 2020.

“On the one hand, rising input costs have significantly reduced the profit margin for downstream manufacturers, which in turn limits the space to offer a big discount this year,” said Alicia GarcĂ­a Herrero, chief economist for Asia. Pacifico from 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 resilient in 2020, have slowed. “

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Afflictions of repression

A radical government crackdown on private companies also cast a shadow on Singles’ Day this year.

Last year, Beijing launched a broad campaign against a wide range of industries, and e-commerce companies have come 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 the Beijing reforms take shape.

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

As the pressure mounted, many companies rushed to donate billions of dollars of their own profits to government-based social causes, after President Xi Jinping made clear his priority of redistributing wealth and achieve “common prosperity”.
Alibaba is committed 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 its profits for the June quarter to rural development projects in China, and hoped to donate a total of 10 billion yuan ($ 1.5 billion) for such causes. JD.com released a plan late last year to “revitalize rural China” using money and its logistics infrastructure.
Singles Day has also entered Beijing’s sights. On Saturday, the State Administration for Market Regulation – the country’s antitrust regulator – banned e-commerce platforms from engaging in unfair practices during the Christmas shopping period, such as “raising the prices of items before putting them up for sale.”
China & # 39;  s & # 39;  unprecedented & # 39;  The repression surprised private companies.  A year later, you may have to cut back on business a bit
Last week, the Ministry of Industry and Information Technology, which on the outside of the internet industry, summoned Alibaba, JD.com, Pinduoduo and Meituan and warned them against spamming consumers with marketing messages during Singles Day.

“The big Internet platforms appear to be more cautious in marketing and promotions this year to refrain from violating antitrust regulations,” said Garcia Herrero of Natixis.

Supporting Beijing

Businesses are also rushing to support government initiatives aimed at advancing social equality or reduce carbon emissions – both among Xi’s main political goals. The weather has been a particular focus, with China this week even pledging to increase your climate ambitions in an agreement with the United States. (China, however, remains the world’s largest coal consumer and did not previously sign a statement at COP26 pledging to phase out the use of coal.)

Alibaba said they would shift the focus from pure sales figures, usually the headline for each year, to sustainability and inclusiveness.

“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 harness the power of 11/11 to foster sustainable development and promote the inclusion of consumers, merchants and partners across our ecosystem.”

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The company said so It would showcase energy-efficient products in its services and hand out “green” coupons worth 100 million yuan ($ 15.6 million) aimed at encouraging people to buy more sustainable products. He also wanted to reduce the event’s carbon footprint by recycling the packaging it uses.

The company said so too wanted to support “vulnerable populations” and its Taobao app has introduced a “senior mode” option. The new feature is designed to be more accessible to seniors with an updated interface and voice-assisted technology.

JD.com also announced that this year’s Singles Day would be “the largest one that uses renewable energy and that [JD.com] will drive a reduced carbon footprint. “

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

Reference-www.cnn.com

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