Alibaba and JD smash sales records as Regulation Concerns Loom

Alibaba and proved their dominance over the Chinese online retail industry as they racked up $115 billion from the Single’s Day event.

Nov. 12, 2020

Single’s Day, a Chinese unofficial holiday on the 11th of November that celebrates individuals who are not in a relationship, proved to be a very successful event for e-commerce companies Alibaba (HKG: 9988) and (NASDAQ: JD). Alibaba stated that its gross merchandise value (GMV) totaled $74.1 billion, up almost double from 2019’s figure. E-commerce titan sold over $41 billion worth of goods in the same time period, up more than 33% from last year. These outstanding sales prove how the Chinese economy has taken control over the coronavirus pandemic, whilst many countries are still in the midst of battling the virus and consequent lockdowns. 

The travel restrictions seem to have had a positive effect on Alibaba and sales as Chinese shoppers who would usually buy foreign brands whilst abroad were only able to purchase goods in China this year. Alibaba confirmed that 250,000 brands took part in the shopping event this year, of which 31,000 were from overseas. President of Alibaba Michael Evans stated that $5 billion of the sales from the Single’s Day event came from U.S. brands. 

The company’s record-breaking results were overshadowed by Chinese regulators releasing draft antitrust laws that defined what determines anti-competitive behavior. On Wednesday, Alibaba, Tencent, Xiaomi, and Meituan saw their combined market capitalization drop by more than $280 billion on the Hong Kong Stock Exchange, as traders sold the country’s largest tech stocks. 

China has good relations with its tech leaders, yet it now looks like the government is putting regulations in place to potentially limit the company’s future growth opportunities. The switch in China’s regulatory climate was first kicked off by the sudden postponement of Ant Group’s initial public offering (IPO) last week. Prior to this delay, Ant Group was set to have the largest public offering in history with estimated funding of $34.5 billion. 

Chinese regulators are most likely trying to control the influence Alibaba has over the consumer and financial activity in the country, as it handles more than half of the country’s e-commerce market. The technology company also owns a 33% stake in Ant Group. Ant’s Alipay mobile payment service is also very popular in China, with around 700 million users. 

Chinese e-commerce outlook for investors 

The severity of the outcomes of these regulations on the company’s long-term businesses is still yet unknown, and investors may just have to wait and see. With China being a world leader in terms of retail, manufacturing, and technology, it would be surprising to see the country limit the growth of these e-commerce giants too severely. However, as more governments around the world tighten restrictions on tech monopolies to even out competition, China could be the government to show a strong example by imposing harsh rules. The tech industry in China is expected to experience volatile trading as investors wait for more news on the subject. 

MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here