E-Commerce Giants Accused of Bullying Shops Into Cutting Prices

2017-06-19 23:57:49

Two stores have challenged China’s e-commerce giants during a major online shopping festival, shedding light on deep-seated tensions between the industry’s vendors and the platforms that host them.

Liebo, a women’s apparel brand, has accused JD.com of forcing it to offer discounts to customers during Sunday’s 618 shopping festival — a nationwide online shopping bonanza launched by JD.com in 2010 — said Tang Dafeng, Liebo’s founder, on her personal Weibo account on Sunday.

JD.com, the country’s second-largest e-commerce website after Alibaba, first blocked Liebo’s access to the platform by preventing the vendor from editing information, including stocks and prices, said Tang. Then, without permission from Liebo, JD.com included the store in one of its promotional events in which vendors were obliged to offer 62 percent discounts on their products.

As a result, the store received far more orders than it could process. It is not clear whether customers who did not receive their orders on time were eligible for refunds.

“Liebo can’t take on the losses caused by overselling at such a discount,” wrote Tang. “If I don’t have the right to decide the price of my products and am forced to undersell things by hundreds of thousands of yuan […] then why should I continue the business?”

Liebo has temporarily shut down its store on JD.com, and lawyers have sent a letter on behalf of the company to the e-commerce giant, Tang added.

In response to these claims, JD.com later said in a statement that Liebo participated in the promotional event voluntarily. But “for reasons that everybody knows,” the statement continued without elaborating, Liebo withdrew on the eve of the shopping festival and raised prices of its products on JD.com without doing the same on other e-commerce platforms.

“Liebo’s behavior has severely violated the promises it made when it applied to participate in the event,” JD.com’s statement read. The platform’s women’s apparel department had required Liebo to offer discounts so that consumers could purchase goods at the same price as on other platforms, but Liebo did not comply, the statement continued.

JD.com did not respond on Monday to Sixth Tone’s request for comment.

As more and more people move online to fulfill their everyday shopping needs, retailers have grown increasingly reliant on third-party e-commerce platforms to reach customers, which puts shopping platforms in an advantageous position, Yang Yaqiong, an analyst at Beijing-based data firm Analysys International, told Sixth Tone.

Liebo is not the only vendor to complain about unfair treatment from well-known e-commerce websites. LeTV, a division of embattled tech conglomerate LeEco, said in a statement that despite a voluntary price cut, “two major third-party e-commerce platforms” still forced the company to lower prices further.

Although LeTV did not specify the two platforms’ names, industry analysts have speculated that they were JD.com and Tmall, a shopping site owned by rival Alibaba. In response, LeTV issued a statement on Monday evening in which it denied JD.com was one of the two platforms. However, the company did not clarify which two websites it was originally referring to.

“A big store can bully smaller shops,” Cao Lei, a researcher at the China E-Commerce Research Center, told Sixth Tone. “In this case, a big shopping website can take advantage of its vendors. But Liebo and LeTV have shown that they’re strong enough to challenge the status quo.”

More than half of Liebo’s sales in 2015 occurred on Alibaba’s two shopping sites, Taobao and Tmall, whereas only 2.3 percent came from JD.com, according to a company prospectus Liebo submitted to the China Securities Regulatory Commission last year. LeTV, a major manufacturer of smart TVs, also sells its products on LeEco’s online shopping mall.

The dominance of online platforms will not be challenged in the short term, as the retail industry becomes more technology-driven, said Yang. Instead, e-commerce companies are likely to become even more powerful as they accumulate more data from customers and vendors, she added.

However, Cao warned that e-commerce giants should not overlook vendors if they want to develop a sustainable business model. “If vendors cannot make money online, or if they only make meager profits, then they won’t be able to innovate or improve their products and services,” he said. “Eventually, customers will get frustrated and move on to other shopping sites.”

This article has been updated to include LeTV’s statement.

Editor: Matthew Walsh.

(Header image: Richard Liu, founder and CEO of Chinese e-commerce giant JD.com, prepares to deliver orders to customers in celebration of the anniversary of the company’s founding, Beijing, June 16, 2014. Jason Lee/Reuters/VCG)