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    China Clamps Down on the Group Buying Craze

    As 2020 draws to a close, China continues to clamp down on its pool of internet giants. This time, turning its attention on group buying.
    As 2020 draws to a close, China continues to clamp down on its pool of internet giants. This time, turning its attention on group buying. Photo: Shutterstock.
    Gemma A. WilliamsAuthor
      Published   in Finance

    What happened

    China’s State Administration for Market Regulation (CSMR) body has introduced anti-monopoly measures to prevent the undercutting of prices in the group buying sector. It met with representatives from the Alibaba Group, Tencent, JD.com, Pinduoduo, and Meituan to regulate the industry. Following the news, shares in conglomerates like Alibaba Group have dipped. Group buying has been one of 2020’s hottest trends in China and involves discounted prices when purchases are made in bulk. As a site specializing in group buying, Pinduoduo has seen spectacular growth during the COVID-19 pandemic and has overtaken JD.com as China’s second largest e-commerce group.

    The Jing Take

    The excitement of group buying has never quite gained traction in the West as it has managed to do in China. A rise in social selling has been driving the growth of young companies like Pinduoduo, which now has 731 million annual customers — just shy of Alibaba’s 757 million. Not bad for a company only five-years-old. The concept appeals to a wide range of consumers of all ages eager to shop collectively — though it’s predominantly more popular in lower-tier cities — and covers all product categories.

    Even luxury has not escaped: High ticket items have unwittingly become the target of bargain shoppers looking to brag online. The recent “Shanghai Debutante” craze of splitting costs illustrated a novel way to buy and there was speculation that such schemes could ignite new, and possibly profitable, business models.

    These latest measures are likely to clamp down hard on the sector, much to the chagrin of China’s mega giants, who have been investing heavily in its sweeping appeal. Though we await the exact rulings from the governing body, as we end 2020, China is showing the world that it will regulate big tech. Which is badly needed. Yet, excitingly, innovation is often at its greatest under much duress.

    The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

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