The Chinese government is in no mood to let the scandals and problems in the big-tech go on as usual. However, this very regulatory scrutiny and the crackdown by concerned agencies have changed the landscape of the Chinese e-commerce business. Companies like JD.com and Pinduoduo are thriving, but industry leader Alibaba Group Holding is suffering the brunt of the losses, according to earnings released as reported by Asia Nikkei.
While all three businesses are subject to the same regulatory framework, Alibaba has been under increased scrutiny for its business operations, which has benefited its competitors, particularly JD. Last quarter, JD’s revenue increased by 26% year over year. Its overall sales are higher than Alibaba’s, despite the fact that Alibaba has three times the transaction volume due to different business methods. JD’s retail business had a 23 per cent increase in operating profit.
Perhaps the only possible and most obvious reason is the government’s pinpointed scrutiny on Alibaba. In April, regulators punished Alibaba with a record fine of 18.2 billion yuan ($2.8 billion) for breaking antitrust laws, saying that the conglomerate had been pressuring merchants on its platform for years to avoid doing business with competitors like JD.
Without these restrictions, Alibaba’s monopolised brands like Starbucks and the portfolio of luxury group LVMH Moet Hennessy Louis Vuitton were free to set up shop on JD, which had 531 million customers at the end of June, up roughly 30% from the previous year. Will this be good or bad for the overall market and for the concern of deteriorating confidence of international investors will be interesting to watch going ahead.