SHANGHAI – China’s State Administration for Industry and Commerce (SAIC) met with major e-commerce players in China ahead of the Singles’ Day shopping festival to warn against unfair sales and marketing practices.
According to a release posted to the SAIC’s Web site Tuesday evening, the business regulator met with Alibaba, JD.com, Amazon, Baidu, Tencent and several others on Monday in an effort to curb the selling of fake products or the false inflation of sales figures on China’s biggest shopping day of the year.
“The SAIC will strengthen market supervision … monitor and manage online marketplaces according to law, and together with the majority of industry players jointly create an online market environment of fair competition and an environment for online consumption that is safe and secure,” the SAIC said.
Singles’ Day, which is named in honor of an anti-Valentine’s Day holiday in China invented in the Nineties and held annually on Nov. 11, is also an opportunity for major platforms to rack up billions of dollars in sales in a single day.
Alibaba’s platforms alone claimed $14.3 billion in gross merchandising volume over the 24-hour sales period in 2015, with some expecting continued growth of 15 to 20 percent in sales growth for the next decade.
Brands are forced to offer steep discounts in order to participate in sales activities. And the heightened importance of the festival as a barometer of consumer sentiment and e-commerce growth has led to an increasingly competitive atmosphere surrounding the event, more commonly known in China as “shuang shi yi” or “double 11”.
There is also little oversight of the sales reported as part of Singles’ Day promotions, with the potential for inaccurate reporting leading to an ongoing investigation from the SEC into Alibaba’s accounting practices.
“Alibaba are well-known in the Chinese market for pressuring their vendors to place fake orders. I have a lot of customers here that work with Tmall and do the 11/11 promotion who receive calls from the Tmall sales guys telling them to buy their own products, to ensure the sales records are broken each year,” said Patrice Nordey, chief executive officer of Shanghai-based digital inception agency Velvet.
“The sales numbers are still incredible, but they are certainly overestimated,” he continued. “I don’t know whether it’s by 10 percent or 15 percent, but for sure they aren’t as large as published.”
According to Angelito Tan, co-founder of RTG Consulting, it should be expected that a large number of products purchased on Singles’ Day will be returned as limited-time discounts encourage impulse purchasing and China’s consumer protection laws allow for buyers to return goods bought using e-commerce within seven days without giving a reason.
Tan also points out that some returns might have a more nefarious origin, pointing to the proliferation online of “shua dan” (which literally translates as “swipe bill”) operations.
“This is a scam where unscrupulous sellers use technology and/or contract fake customers to buy products for the sole purpose of increasing their sales statistics and rankings,” Tan explained.
“These are fake transactions as money never changes hands, and I suspect accounts for a high percentage of the total returns,” he said.
Alibaba responded to the SAIC statement by maintaining that, rather than being part of the problem, its platforms are industry leaders in combating “unfair and illicit practices”.
“We never tolerate malpractices by merchants on our marketplaces. Infringing merchants are subject to a range of penalties including the permanent closure of their storefront,” a spokeswoman said.