The Chinese e-commerce giant Alibaba is exerting pressure on merchants to provide highly discounted prices on its online platforms during this year’s Singles Day extravaganza, according to three industry insiders. This move is part of Alibaba’s efforts to increase sales and counter a decline in its market share.
The sources, who assist numerous brands in managing their stores on Alibaba’s Tmall and Taobao platforms, reported that they received instructions to offer the most attractive prices of the year for the upcoming major shopping event. Failure to do so could result in a loss of the traffic and support typically provided to participants in the event.
Alibaba’s declaration of providing 80 million products at their most reduced prices for this year’s extended Singles Day event, starting from late October and continuing until November 11, is coupled with an unconventional push to compel merchants to comply with its directives, according to the sources.
This approach indicates Alibaba’s response to competition from platforms like Douyin and Pinduoduo, a subsidiary of PDD Holdings (PDD.O). These competitors have significantly altered the landscape of Chinese e-commerce by consistently offering discounted and lower-cost items throughout the year, leveraging techniques like live-streaming. Their methods have diminished the exclusivity of significant events like Singles Day.
Josh Gardner, the CEO of Kungfu Data, a company involved in managing online stores, particularly in fashion and performance-wear categories, explained, “Alibaba has taken an exceptionally aggressive stance on pricing this year. Their message is essentially, ‘we offer the lowest prices on the internet, no exceptions.’ They’ve enlisted the support of all their merchants, like us, with a warning that if they discover any of their merchants offering equivalent or lower prices on any other platform, they will be removed, along with all their listings, from the event.”
The two anonymous sources declined to disclose their identities as they were not authorized to discuss the event’s preparations with the media.
Alibaba’s Taobao and Tmall Group did not provide a comment in response to a request.
Three e-commerce consultants interviewed by Reuters suggested that Alibaba’s demands do not appear to exhibit anti-competitive behavior. One consultant mentioned that some of Alibaba’s competitors are also imposing similar requirements on their merchants.
The State Administration for Market Regulation in China did not respond to a request for comment.
Ashley Dudarenok, the founder of digital consultancy Chozan, pointed out that certain brands, while complying with Alibaba’s demands for the best prices, may simultaneously introduce a special line of products on platforms like Douyin to meet the competition.
Douyin, owned by ByteDance, declined to comment.
Alibaba’s intensified sales efforts coincide with a period of reduced consumer confidence in China.
This year’s Singles Day event is the first since Alibaba Group divided into six business units. The unit housing Taobao and Tmall businesses is the only one remaining under Alibaba Group’s control after the spin-off of the others.
There are indications that Alibaba’s aggressive approach is yielding positive results. During the commencement of pre-sales last Tuesday, turnover for over 1,300 brands surged by more than 200% year-on-year in the first hour, according to Taobao and Tmall Group.
Consultancy firm AlixPartners has released an early estimate forecasting an 18% growth in total spending across all major Chinese platforms, compared to the 2.9% growth recorded in 2022, as reported by data provider Syntun.
The relevance of the Singles Day event has come into question.
While Alibaba reported $85 billion in sales for Singles Day in 2021, it has refrained from disclosing gross merchandise value since then. Additionally, the company has reduced its promotion of the event in the media due to a government crackdown on Chinese technology companies.
This renewed effort in 2023 is aimed at preserving Alibaba’s lead in the Chinese e-commerce market, which has eroded as rivals have gained ground. According to data published in a Credit Suisse report from January, Alibaba’s share of China’s total e-commerce market has declined from nearly 70% in 2019 to around 40% currently.
Industry insiders have noted that Douyin has been reshaping Chinese consumer behavior through daily live-streams that often offer lower prices than regular online stores. As a result, the exclusivity of mega sales events like Singles Day has been diluted to some extent, as indicated by the views of respondents in recent social media polls who expressed that Singles Day is no longer as essential as it used to be.
For instance, Meara He, a 21-year-old student from Wenzhou, mentioned that she frequently shops using Douyin live streams, and this year, Singles Day is less significant to her. She explained, “In the past, I would wait for Double 11 (Singles Day) and do some shopping, but this time I just plan to buy products that I need.”
Reported by Casey Hall in Shanghai and Sophie Yu in Beijing; Edited by Brenda Goh and Muralikumar Anantharaman