China

China’s $2.4 trillion shopping festival is more competitive than ever

Government scrutiny of "pick one from two" exclusivity deals has left 618 sellers free to list goods on multiple marketplaces.

The 618 shopping event takes over Chinese ecommerce starting in late May.

The 618 shopping event takes over Chinese ecommerce starting in late May.

Photo: Chan Long Hei/Bloomberg via Getty Images

China's mid-year ecommerce extravaganza known as 618 reaches its peak on Friday. Last year's event, which hauled in an estimated $2.4 trillion in consumer spending, signaled the economy's rebound from the coronavirus. This year's shopping spree is weighed down by a different concern: Beijing's antitrust crackdown on the country's internet giants.

Shoppers are more likely to find the same goods promoted across the biggest online superstores this year. That's because the longstanding practice of demanding exclusivity — known as "pick one from two" (二选一) in China — is under fire.

618 isn't even the largest shopping event in China — that's Nov. 11's Singles Day. But in 2019, 618 became a flashpoint for large marketplaces' exclusivity demands. Guangdong-based home appliance company Galanz took to Weibo to air its grievances: Alibaba's Tmall had removed its promotional banner after the company announced a partnership with Alibaba competitor Pinduoduo. Galanz noted a significant drop in traffic to its store, with searches for the brand name yielding no results on Tmall. The reason? The company said Tmall had asked Galanz to enter a "pick one from two" agreement in early 2019, and Galanz had refused. Galanz sued Tmall in November 2019 for "abusing its dominant market position," but later dropped the case.

This year looks different: Galanz, among many other brands, is promoting 618 across platforms, including JD.com, Tmall and Pinduoduo.

The exclusivity deals involved carrots and sticks. Marketplaces offered subsidies to boost discounts and promised traffic to brands' hot offers. But they also blocked stores and restricted traffic to sellers who didn't play ball. That's all changing: With China cracking down on its domestic Big Tech giants, no one wants to get caught looking like a monopoly.

In early February, the State Council, China's cabinet, finalized antitrust guidelines for "the platform economy," updating their rules for the modern internet age. New guidelines state that if a marketplace "abuses its dominant market position" by requiring brands to exclusively sell products there, that behavior may break the law. Last December, the State Administration for Market Regulation launched an antitrust investigation into Alibaba, China's largest ecommerce player, for its practice of preventing vendors from selling on other marketplaces. Alibaba was fined a record $2.8 billion in April.

As a result, "this year's ecommerce environment is more friendly," Wang Juntao, founder of TNO Water Drop Tea, told the Economic Observer, a Chinese financial publication. "This might be the biggest difference of this year's 618."

It doesn't hurt that this year's 618 extravaganza has been stretched into a near-monthlong affair — not unlike in America, where retailers start Black Friday discounts well before Thanksgiving. Presales began as early as May 24 on JD.com and Taobao. And the festival ends on June 20.

New entrants

What's also different about this year's midyear shopping event — a shopping bonanza JD.com invented in 2010 as an anniversary promotion — is two new entrants vying for consumers' wallets. Sensational short-video services Douyin and Kuaishou, which entered the ecommerce arena with space guns blazing not long ago, made their 618 debuts only last year. Douyin and Kuaishou now are the fourth and sixth largest ecommerce marketplaces in China by gross merchandise value, respectively.

According to a pre-618 survey conducted by the ecommerce-focused publication Ebrun, more than half of the surveyed brands said they would increase their marketing budget for 618 on Douyin. And over 22% said they would increase their promotional spending on Kuaishou. That's the biggest change consumers will see from the antitrust pressure on dominant marketplaces: It may become easier for new entrants to woo brands if sellers don't have to worry about getting punished for a lack of "pick one from two" exclusivity.

Still, size matters. Despite Alibaba's antitrust woes and the rise of social commerce, sellers still put their largest stock on Tmall. Two-thirds of the surveyed businesses considered Tmall their main 618 battleground. And 40% of them expected more than half of their 618 sales would come from Tmall.

During last year's 618 shopping event, total transactions across platforms reached $2.4 trillion, up 42% from 2019, according to Chinese online payment clearing house NetsUnion Clearing Corporation. If pre-618 sales numbers are any indication, this year's total turnover will likely smash records: Alibaba claimed that sales turnover on Taobao generated through livestreaming during the first hour of June 1 was higher than last year's daily average. And on the same day, JD.com claimed that over 4,800 brands saw their sales increase more than fivefold year-over-year.

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