China’s e-commerce giants under scrutiny as group-buying boom risks retail shakeout
China’s e-commerce giants have tapped into the market for group buying, which has boomed since the beginning of COVID-19 lockdowns in the country, raising concerns that their expanding market share will force many small retailers out of business.
Group buying involves shoppers banding together to make bulk purchases at lower prices than they could find as individuals. Group buyers usually come from the same local communities to save on delivery fees. A group leader earns commissions for organizing their purchases.
The practice has grown more popular this year, especially with orders for groceries and household items, as many mainland cities were locked down during COVID-19 outbreaks. Group buying in China will amount to 200 billion yuan (US$31 billion) this year, according to an earlier estimate by Goldman Sachs.
The booming market has caught the attention of Chinese official media outlets. In a warning to their group-buying operations, the People’s Daily said in an article last week that large internet companies should have shouldered a greater social responsibility rather than simply immersing themselves in the sales volumes of fruit and vegetables.
E-commerce giants typically leverage their business scale to undercut rivals, raising the risk they will squeeze smaller vendors out of the retail market, said Andy Kwan, the director of ACE Centre for Business and Economic Research, a Hong Kong think-tank.
The central government may impose restrictions if the big internet players become overly dominant and their operations lead to high unemployment or other social problems, Kwan said.
Mainland e-commerce giant
JD.com last week announced plans to invest US$700 million in Xingsheng Youxuan, one of China’s three leading group-buying platforms. Another, Shihuituan, is backed by Alibaba. Other internet companies with investments in group buying include Tencent, DiDi, Meitu and Pinduoduo.
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