11.11 Shopping Festival Breaks Records Again - But Pace of Growth Slowed
Supply strains and a general economic slowdown are seen against the backdrop of the massive crackdown on the tech sector, and these factors are weighing on investor sentiment.
CapitalWatch Staff
CapitalWatch Staff
Nov. 11, 2021 20:18
11.11 Shopping Festival Breaks Records Again - But Pace of Growth Slowed

(CapitalWatch, Nov. 11, New York) Chinese e-commerce stocks enjoyed a second day of gains as the nation's biggest annual sales event came to a close. Today, top online retailers posted record sales for 11.11 again, with Alibaba Group in top spot with $85 billion in gross merchandise volume. However, it's been a tough year and the road remains bumpy for these industry leaders. 

The stock of Alibaba Group Holding Ltd. (NYSE: BABA; HKEX: 9988) fared worse than its peers, trading just 3% higher, at $168.89 per share as of midday.

In a blog on its website, Alibaba highlighted other records such as the number of designer brands selling products on its platforms, as well as some achievements on sustainable consumer practices, such as purchases of low-impact and green energy products.

JD.com Inc. (Nasdaq: JD; HKEX: 9618) and Pinduoduo Inc. (Nasdaq: PDD) both rose about 7% as of midday Thursday. JD posted $54.6 billion in sales across its platforms for the festival, which lasted from the evening of Oct. 31 to midnight of Nov. 11. Another Chinese giant with an online retail business, NetEase (Nasdaq: NTES; HKEX: 9999) was up 6%.

To compare with the preceding year, the growth has slowed. A year ago, Alibaba posted 26% sales increase and JD saw 11.11 sales grow 32% from Singles' Day of 2019. This year, Alibaba sees 10% growth and JD sees 31% growth year-over-year.

It's likely that the results of the festival could have been better if it wasn't for the sweeping regulatory curbs. Just ahead of the Double 11 festival, China signaled that its scrutiny of the industry wasn't over with a call to cut text-message marketing. In late October, China's Ministry of Industry and Information Technology (MIIT) summoned company representatives and said to curb texting promo messages to users of the retail platforms or be accused of violating consumer rights, as Reuters reported.

Earlier this year, regulators in Beijing imposed fine after fine on the giants for monopoly practices, and forced an end to exclusive merchant agreements. Alibaba was the worst-hit in the crackdown and fined a record $2.8 billion plus smaller fines for various violations. JD and Pinduoduo were also fined, as well as a smaller discount retailer Vipshop Holdings Ltd. (NYSE: VIPS).

Increased Social Responsibility Amid Xi's Collectivization Push

Meanwhile, Chinese e-commerce giants have signed up to participate in President Xi's collectivization initiative, donated billions of dollars into the fund, and have continued to take actions on social responsibility. This week, Pinduoduo published a blog about coffee growers in the Lujiangba valley in China's southwestern Yunnan province.

"Pinduoduo has been deeply involved in the region's poverty alleviation and rural development efforts, establishing a series of rural coffee initiatives to help farmers learn new skills and improve their livelihoods," the article reads.

Further, "Pinduoduo helped connect the cooperatives with coffee processors and provided marketing support to help these coffee farmers kickstart their sales on the platform. The company also brought many of the area's New Farmers – young agricultural talent - to coffee conventions in Shanghai to learn about the sales and marketing of coffee."

Pinduoduo's special focus in e-commerce is its connection to China's agriculture sector, connecting farmers to consumers and businesses. In fact, the company positions itself as "the world's largest agri-focused platform" and has focused on lower-tier regions in China. And this has helped the founder, ex-Google engineer Colin Huang, to grow Pinduoduo much faster in its own niche alongside existing online retail giants Alibaba and JD.

Founded in 2015, Pinduoduo went public in 2018 and is up 276% since IPO day. To compare, Alibaba is up 80% in all-time trading after its 2014 IPO and JD is up 316% since the 2014 IPO. In March, Huang stepped down as chairman of Pinduoduo – and this did not help its stock. Similarly, JD's CEO Richard Liu passed down the control of day-to-day operations, though he is still the company's chairman and chief executive.

Alibaba, JD, and Pinduoduo are slated to post their September quarter financials on Nov. 18. Pinduoduo has yet to announce the release date.

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