Update released on January 5, 2021

It has now been confirmed that Alibaba’s billionaire co-founder Jack Ma is not missing. According to CNBC’s David Faber, who spoke to someone familiar with the matter, Ma is just lying quietly. Not a bad strategy for now as China’s antitrust investigation into the tech giant continues. On the flip side, however, news that he is likely to hold back in Hangzhou has pushed Alibaba Group’s shares higher.

Update released on January 4, 2021

Speculation about the whereabouts of Alibaba founder Jack Ma is mounting, and many claim he has disappeared. The high-profile businessman has reportedly not appeared in public or on social media since October 2020.

Ma’s blatant criticism of the government resulted in his Ant Group going public for $ 35 billion. Since then, the multi-billionaire has disappeared and not even featured in the last episode of his own talent show Africa’s Business Heroes. His suffering continued when the state regulator launched an antitrust investigation into the Alibaba Group on December 24th. Read on below to learn the research’s implications for luxury.

Original article published on December 28, 2020:

The central theses:

  • News last week that Chinese regulators opened an investigation into “alleged monopoly practices” by Alibaba sent stocks of the tech giant – and its rivals Tencent Holdings Inc., Meituan and JD.com – into free fall, with the companies nearly $ 200 billion has been lost losing in value since last Thursday.

  • Many analysts believe Beijing is on the verge of a stronger crackdown on technology in 2021, with a focus on e-commerce in general and practices like predatory pricing in particular.

  • Therefore, younger platforms like Pinduoduo and Bilibili could take the opportunity to court luxury brands.

One of the biggest news from the Chinese market in recent months was the announcement last week that Chinese regulators have launched an investigation into “alleged monopoly practices” by Alibaba. The reveal has driven shares of Alibaba – and its rivals Tencent Holdings Inc., Meituan, and JD.com – into freefall, with the companies losing nearly $ 200 billion in value since last Thursday.

Over the course of 2020, Beijing central government gradually tightened the leash of major tech companies amid concerns about its expansive growth in media, games and education. One area of ​​particular concern to Chinese government agencies is that China’s largest tech companies (Alibaba and Tencent) have become highly vertically integrated ecosystems spanning everything from e-commerce and social media to film and television production. sales include.

With Alibaba firmly in their crosshairs, some commentators have predicted that Beijing is on the verge of a stronger – albeit targeted – technical crackdown for 2021, with a focus on e-commerce in general and practices like predatory pricing in particular. And it gave Alibaba an early example. As Nomura analysts put in a note today: “We think” [China’s State Administration for Market Regulation] You may want to use BABA’s case as a precedent to send a message to the rest of the industry that this time around the agency is determined to address the pricing issue.

Ultimately, Beijing’s recent crackdown on the country’s tech champions could amount to a show of force (remembering it holds the cards) and paying some fines or policy changes, but nothing more. However, since the central government is most focused on Alibaba, it has already caused some reputational damage and is likely to have an impact on the luxury industry. In the past few years, Alibaba has gone to great lengths and invested heavily to attract major global luxury brands to its Tmall Luxury Pavilion platform – efforts that have finally started to pay off in the past two years. Currently, the platform has more than 200 leading luxury and designer brands – up from 150 before the Covid-19 outbreak – and has acted aggressively to fend off competition from rival JD.com, which also claims to be home to more than 200 luxury brands.

But as brands prepare for a pivotal 2021 after a challenging 2020 defined by COVID-19, many are wondering if putting too many eggs in the Alibaba basket is too big a risk. Some brands in the Tmall Luxury Pavilion are already closely associated with Alibaba in several branches of its ecosystem: They sponsor streaming programs on Alibaba’s own Youku, collaborate with celebrity livestreamers on Taobao Live, or accept Alipay through their online or brick-and-mortar stores worldwide.

Presumably, Alibaba’s competitors are watching with a mixture of concern and excitement. While JD.com and Tencent are more likely to lean on the affected side given the breadth of their technology offerings and, in the case of Tencent, their involvement in media production, younger platforms like Pinduoduo and Bilibili could take the opportunity to court luxury brands. KeyBanc Capital Markets analyst Hans Chung said the biggest beneficiaries of this antitrust investigation could be JD.com and Pinduoduo. He noted that the investigation “mainly focuses on exclusive agreements with merchants on the Tmall platform prohibiting them from opening stores on competing platforms”. He added that, “Given its customer size and size, Pinduoduo could be of benefit if the unfair practices [return on investment] are attractive for retailers. ‘”

Given that it already has agreements with big luxury brands, JD.com could win as brands may want to invest less in Alibaba and more in other platforms over the next year. But Pinduoduo is an interesting choice for Chung. Five-year-old US-listed Pinduoduo is a social e-commerce platform rated higher than HSBC, Uber, or Sony (and twice as much as Baidu), with the stated goal of becoming “a combination of Costco” and Disneyland . “Pinduoduo fueled its explosive user and sales growth initially with a laser-sharp focus on price-sensitive consumers in suburban cities, who allegedly have more free time and a strong demand for social commerce and shoppable entertainment.

Unlike Tmall and JD.com, which spent years cultivating relationships with reluctant luxury brands before gradually getting them on board, Pinduoduo has no official partnerships with any luxury brand or group. And the company’s audacious way of doing business is likely to rub some in the wrong direction, especially those that would rather destroy unsold goods than reduce them. So while Pinduoduo could benefit from more spending on cheaper items from consumers in lower cities, it may not see interest from more premium brands.

Ultimately, we have to wait and see if a growing platform like Pinduoduo can grab the attention of more luxury brands or if those brands stick to the status quo and continue doing business with Alibaba across their ecosystem. Or maybe they will invest more in platforms with strong ecommerce growth potential like Bilibili (which in 2020 benefited from the diversification of content commerce between luxury auto makers and beauty brands).

But just a touch of antitrust investigation against a powerful company like Alibaba is sending shock waves across China’s tech industry. And for any luxury brand that has invested heavily in e-commerce and online marketing in China, what happens in the next few weeks will have a big impact on their planning for the year ahead.