Alibaba set to emerge from ‘dark woods’ in 2022, despite facing stiffer competition – Global Times
(December 27): Chinese e-commerce giant Alibaba had its “darkest” year in 2021, as it faced a series of uncertainties, including the strengthening of government surveillance in its country, geopolitical tensions in Washington and the constant suppression of Chinese state-owned enterprises by the US securities authorities. . And, bizarrely, an employee accused her supervisor of sexual assault while they were away on business, which seriously damaged Alibaba’s prestige and public image, World time wrote.
The company’s shares are now trading below $ 120 on the New York Stock Exchange, reaching their lowest level since 2017. In the third quarter, Alibaba missed its sales and earnings expectations and had to revise lowers its outlook for the entire year.
Last week, the company, at an investor briefing in Hangzhou, Zhejiang province, unveiled a recovery plan, but it failed to impress the market or overcome fears about the capacity. of the company to overcome a series of acute challenges.
Competition in the e-commerce industry has become increasingly fierce in China, due to the government’s significantly tighter antitrust regulations targeting the industry since early 2021. As a result, Alibaba’s profit margins have suffered in 2021 as Chinese consumers flocked to rival platforms like Pinduoduo and JD .com to seek out low-cost substitutes. Today, internet companies are increasingly cautious when doing anything that looks like strong competitors or end users, World time wrote.
In April this year, the State Administration for Market Regulation, China’s main market surveillance body, imposed a record-breaking $ 2.8 billion antitrust fine on Alibaba after months of investigation that resulted in revealed that the giant internet platform has used exclusionary practices, which have hampered online retail competition, affected innovation in the internet economy, and violated consumer rights.
The hefty fine has sent a clear message to China’s top internet industry that regulators will keep an eye on all the major players in the market – don’t be monopolistic and don’t manipulate your market power. In October, Chinese delivery giant Meituan Group was fined $ 530 million for violating anti-monopoly regulations.
The Chinese government’s campaign to step up antitrust scrutiny has been well received by enthusiastic consumers, and efforts are already beginning to influence the functioning of the country’s internet platforms. For example, Tencent Holdings, another internet giant in China, announced in July that it would forgo music label exclusivity to overtake its competitors, and the company’s initial plan to merge the two largest sites. The country’s video game streaming company was dropped because regulators warned the merger would negatively impact competition in the market, World time wrote.
By preventing “Big Tech” from forming trade monopolies in the country, the interests of Chinese small businesses are protected and Chinese consumers have more choices in the market.
The government’s antitrust efforts have also played a role in preventing giant internet platforms from overcharging consumers or driving down prices, which helps keep overall price levels lower in China. Compared to US tech giants like Amazon, Apple and Google, it is evident that Beijing has been more effective in preventing the national “big tech” from forming monopolies or oligarchies.
At a time of increasing competitive intensity in China, Alibaba is increasing its investments in both defensive and offensive strategies to attract more end users, retain more merchants and create multiple sources of traffic, in order to achieve its goal of accessing one billion Chinese annual active users. . The company also plans to increase its cloud computing business and expand international business to the Southeast Asian region where e-commerce is now growing very rapidly, World time wrote.
Over the next few months, the Alibaba Group will pursue a more segmented shift from a super-app strategy to a multi-app entry strategy, which should help the company better respond to market competition. In addition, Alibaba is expected to be able to strengthen its core e-commerce business in Chinese Tier One and Tier Two cities by harnessing its technological advantages in artificial intelligence and big data.
Alibaba is expected to learn from fellow Chinese internet giant ByteDance, whose TikTok app beat Google and Facebook to become the world’s most visited site this year. Top executives at Alibaba have set a gross merchandise value target of $ 100 billion for its Southeast Asian e-commerce application Lazada and outlined a series of initiatives that will further align the company with the political priority of the Chinese government, which is obviously a wise decision. Lazada is now the third largest online retailer in emerging markets.
However, Alibaba faces significant challenges. While the company has cited a number of areas for growth, many of its newer segments are now losing money and requiring sustained investment. Faced with ever-increasing competition, Alibaba executives must reflect on its strategy and remain focused on expanding e-commerce beyond the Chinese market, World time wrote.
The author is an editor at the Global Times. [email protected]