Alibaba Deals with Falling Economy in China

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The economic turmoil that is taking place in China currently, seems to be affecting just about everything. Including online sales, according to Alibaba. According to the company, sales are slowing down, even though they are seeing more engagement on their platforms, such as their mobile apps and social media.

In the past month, Alibaba has seen their share price drop by around 20%. This has led many consumers to worry about government interference into this crisis, which could mean lowering the value of the yuan.

According to Jane Penner, the head of investor relations of Alibaba:

“I think given the stable trends in Chinese wage growth, job creation, and household net assets, we believe the consumers still have the willingness and ability to spend That said, we are observing some negative impact of the spending. We think this is more due to psychology than to an ability to spend.”

This news comes after Alibaba has already posted some less than great numbers in the past. A surprise too many. The second quarter for 2015 showed that this was their slowest growth period in the past three years, which is making many people wonder if the e-commerce bubble in China has finally popped?

Alibaba doesn’t seem to think so, yet they are putting a lot of faith into Singles’ Day in November. Last year, Alibaba had a record $9.3 billion in revenue on Single’s Day. In addition to looking forward to this, Alibaba does have some plans in effect to deal with the lagging economy.

They do intend to expand the C2C marketplace Taobao, something that many people are looking forward to. In addition, they are working on ways of reducing the number of counterfeits and fake transactions that seem to take place online. Already, Alibaba has reported that they spend around $16.1 million per year in order to battle counterfeits. When coupled with their lower earnings this year, many believe that this may spell disaster for the company. However, Penner stated:

“[Counterfeit spending will] impact our GMV near term, but it makes our business more sustainable and competitive in the long-term and we think that makes it well worth doing.”

While some businesses may see losing money as a sign that they must stop investing into their company and giving consumers what they want, Alibaba seems to be doing the opposite. Though the company may have reported lower earnings and less actual buys taking place, there is no need to worry. Alibaba is the e-commerce king in China. They offers millions of products, and are constantly bringing new ideas to the market, something that consumers are eager to have.

About Author

Social Brand Watch (SBW) is a collection of experts in digital, mobile and social media in China. SBW was created to complement Resonance's China Social Branding Report, a bi-weekly report focusing on modern marketing methods of the world's top brands in China.

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