By Casey Hall and Sophie Yu
SHANGHAI (Reuters) - China's Alibaba (NYSE:BABA) is pressuring merchants to offer rock-bottom prices on its marketplaces in this year's Singles Day extravaganza, three industry sources said, as the e-commerce company seeks to boost sales and stem a drop in market share.
The sources, who help dozens of brands operate their stores on Alibaba’s platforms, said they were told to offer the best price of the year on Tmall or Taobao for the blockbuster shopping event, or risk losing the traffic and support given to event participants.
While Alibaba has announced that it will offer 80 million products at their lowest prices this year during Singles Day, which began in late October and stretches till Nov. 11, the push to get merchants to toe its line is unusual for the company, they said.
The strategy points to how Alibaba is fighting back against rivals such as Douyin and PDD Holdings' Pinduoduo who have changed the landscape of Chinese e-commerce in recent years by selling lower-cost and discounted items year-round, relying on approaches like live-streaming and taking the shine off mega events like Singles Day.
"Alibaba came out this year and is being super aggressive on price. They're like 'lowest prices on the internet, period'," said Josh Gardner, CEO of Kungfu Data, which helps operate online stores in categories including fashion and performance-wear.
"They leveraged all their merchants like us saying, 'If we catch you doing equal or less pricing on any other platform, we will remove you and all your listings from the event'."
The two other sources did not wish to be named as they had not been authorised to speak to media about the event's arrangements.
Alibaba's Taobao and Tmall Group did not respond to a request for comment.
Three e-commerce consultants whom Reuters spoke to said the company's demands did not appear to show anti-competitive behaviour, with one saying some of its rivals were also making similar stipulations to merchants.
China's market regulator, the State Administration for Market Regulation, did not respond to a request for comment.
Ashley Dudarenok, founder of digital consultancy Chozan, said that some brands who are selling on competing platforms might meet Alibaba's demands by giving it the best prices but simultaneously launch a special line of products on Douyin, for example.
Douyin, owned by ByteDance, declined to comment.
Alibaba's stepped up sales effort comes at a time when Chinese consumer confidence remains at a low ebb.
This year's Singles Day event is also the first since Alibaba Group split into six business units. The unit encompassing the Taobao and Tmall businesses is the only one that will remain under the control of Alibaba Group after it spins off the others.
There are indications that Alibaba's push is paying off.
When pre-sales, where consumers can put down deposits on items, began last Tuesday, turnover for over 1,300 brands jumped more than 200% year-over-year in the first hour, Taobao and Tmall Group said.
Consultancy AlixPartners has put out an early estimate tipping 18% growth in total spend across all major Chinese platforms. That compared with the 2.9% growth in 2022, according to data provider Syntun.
EVENT'S RELEVANCE QUESTIONED
Alibaba reported $85 billion in sales for Singles Day in 2021, but has not released gross merchandise value since and has also toned down on promoting the event among media due to a government crackdown on Chinese technology companies.
The renewed efforts this year come as Alibaba looks to preserve its e-commerce lead in China which has shrunk as rivals have gained ground. The company's share of China's total e-commerce market has fallen to around 40% now from near 70% in 2019, according to data published in a Credit Suisse (SIX:CSGN) report from January.
Industry executives said that Douyin has been reshaping Chinese consumer behaviour with daily live-streams that often offer lower prices than regular online stores.
"While the Singles Day festival remains a major shopping event in China, the daily accessibility of discounts and promotions via live-streaming has diluted the exclusivity of these mega sales events to some extent," said Melody Zhao, an e-commerce executive at Hua Gui Food Group, which sells food and beverage products across several e-commerce platforms.
This view is supported by recent polls on social media where the majority of respondents said Singles Day was no longer necessary.
Meara He, a 21-year-old student from Wenzhou, says she often shops using Douyin live-streams and this year, "doesn't care" about Singles Day as much.
"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," she said.