Monopoly concerns rise after deal

Updated 2017-12-20 12:40:36 Global Times
(Source: iResearch Graphics/GT)

(Source: iResearch Graphics/GT)

Antitrust measures urged as e-commerce battle escalates

As an e-commerce turf war escalates among Chinese Internet giants, monopoly concerns are growing in the world's largest e-commerce market along with fears about its negative impact on the industry and consumers.

The fresh concerns were raised after Internet giants Tencent Holdings and JD.com Inc (JD) decided to invest a combined 3 million in domestic fashion e-commerce platform Vipshop for a 12.5 percent stake, while also pursuing strategic cooperation.

A week ago, Tencent said it was buying a 5 percent stake in Yonghui Superstores Co, a Fujian Province-based supermarket operator.

The move was seen as an escalation of Tencent's battle with Chinese Internet giant Alibaba Group for dominance of the domestic e-commerce market, whose business-to-consumer segment was worth 7 billion in 2016, the world's largest.

In 2017, dozens of deals have been struck by Tencent and Alibaba in industries such as retail to push for vertical consolidation, and these moves will create two market oligarchs, media reports said on Tuesday.

The need to compete with Alibaba is what brought Tencent, Vipshop and JD together, Xue Yu, a market analyst with IDC China, told the Global Times on Tuesday.

"For Tencent, their ambition in e-commerce could be achieved through such strategic investments. For Vipshop and JD, they can achieve complementary advantages, for Vipshop's clothes and JD's consumer electronics and household electrical appliances," Xue noted.

Alibaba and Tencent together have a market share of more than 80 percent and have become dominant in the Chinese e-commerce industry, Li Chengdong, a Beijing-based independent analyst, told the Global Times on Tuesday.

Vendors affected

A Shenzhen-based merchant who has been involved in e-commerce for almost a decade, told the Global Times on Tuesday that he believes Alibaba and Tencent-backed JD.com will tighten their grip over China's e-commerce market in the future.

The leading firms have been growing rapidly in size, making it hard for other companies to tap into the market, said the merchant, who preferred to speak on condition of anonymity.

"The vertical segments will be incorporated into the ecosystems that the biggest firms have established," he said.

Given this competitive pressure, many small e-commerce platforms have been forced to shut down in recent years, Li said, noting that "in the coming years, brand owners and vendors will have to choose a platform for their own growth."

The only way to ease this situation is for the central government to roll out antitrust policies to regulate the e-commerce sector, according to Li.

Some vendors have to choose sides when it comes to which platform they want to work with, domestic financial magazine Caijing reported in July.

However, the veteran merchant said he was not concerned about this.

"They have not forced us to choose between them, and many products have been placed on both platforms," he said. "Like the US, which has eBay and Amazon, the Chinese e-commerce market will eventually form into channels," he said.

Impact on other platforms

In the next few years, despite the dominance of a few big firms, other platforms may continue to exist, Xue forecast, adding that more new players in vertical segments will emerge amid the new retail era.

Tencent, Alibaba, and JD all declined to comment on Tuesday.

Cai Lili, an industry analyst with Beijing-based marketing consultancy firm Analysys, agreed, saying that other e-commerce platforms, such as those focusing on cross-border business, will still earn themselves a position in the industry despite pressure from the domestic giants.

Platforms such as xiaohongshu.com and kaola.com are meeting the market's needs as an increasing number of Chinese people want to purchase products from foreign countries, Cai told the Global Times on Tuesday.

"Clearly, there will be two giant integrated retailing ecosystems competing with each other - competing for customers on one side, and competing for brands to use their channels on the other side - across all segments from luxury to the mass market," Pascal Martin, a partner at OC&C Strategy Consultants, told the Global Times on Tuesday.

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