A catty of chicken wings for 4.90 RMB (about S$1), a catty of vegetables for 0.10 RMB, 20 eggs for 5.90 RMB — the community group buying trend that first started on WeChat groups is now seeing red-hot demand after a surge in online shopping since the pandemic.
Over the past six months, China’s internet giants have flocked to join the fray, with DiDi, Meituan, Pinduoduo, Alibaba, JD.com, and other platforms rolling out community group-buying services at shockingly low prices.
However, having experienced price wars on ride-hailing, food delivery, and bicycle-sharing online platforms, Chinese consumers are becoming smarter. While taking advantage of various promotions, they expose the dark schemes behind “online vegetable baskets”.
... many small retailers and vendors will be eliminated and major platforms will monopolise the market and control prices.
Fear that internet giants will spoil a good thing
There are concerns that once cash-rich internet giants enter the community group-buying market, they will seek to increase user traffic by offering large discounts. And once consumers change their buying habits, many small retailers and vendors will be eliminated and major platforms will monopolise the market and control prices. That is, they will have the final say on whether to increase prices and the savings that consumers get through discounts in the initial phase will all come to zero in the end.
This scenario of internet heavyweights with deep pockets coming in to offer large discounts is a familiar one. A netizen said sarcastically: “From e-commerce to food delivery, ride-hailing to bicycle-sharing, it’s still the same old formula with the same old flavour.”
It was the Chinese official media that started this condemnation of internet heavyweights going into the community group-buying market.
In November this year, People's Daily ran a commentary titled “Behind the Debate Over Community Group Buying Lies Greater Expectations of Technological Innovation by Online Giants”. The piece questioned if internet companies were only obsessed with quick results and short-term profits.
The commentary noted: “With a wealth of data resources and advanced algorithms, internet giants should take on more, have higher pursuits, and do more in terms of technological innovation, rather than just think about the few cabbages or fruits transacted in the community group-buying market.”
With its super-rapid growth, the internet industry has been China’s foremost growth driver over the past decade or so. Two or three years ago, China’s media trumpeted China’s “four new inventions” — the high-speed rail, e-commerce, mobile payments, and bicycle sharing. Three of these are closely linked to the internet economy. But now, internet giants have become pests that many people cannot wait to stamp on to vent their frustration.
Internet giants’ bad reputation
Internet companies did not go from being the pride of the people to the source of their resentment overnight; it is a release of years of pent-up anger. The death of Wei Zexi (a 21-year-old cancer patient who had sought experimental immunotherapy treatment at a hospital following false advertising on Baidu), rape-killings by DiDi drivers, bicycle-sharing company ofo siphoning off consumers’ deposits, the collapse of many internet finance companies, platforms using big data to cheat their consumers, manipulative Singles Day promotions — society has paid a huge price in the growth of China’s internet giants. Many interests have also taken a hit, including many people who have lost their jobs due to the impact of the internet economy.
The media had once estimated that following Ant Group’s successful listing, each employee’s wealth would exceed 40 million RMB on average, while 58 of its executives would be worth hundreds of millions RMB.
This is also why there has been so much controversy over internet heavyweights — with funds to rival the national coffers — fighting tooth and nail just to compete with small vendors to get people to buy groceries.
That is why, when filthy rich internet giants fiercely compete with small business owners over who gets to fill the people’s vegetable baskets, Chinese public opinion can no longer keep quiet.
Embedded in the negative sentiments against internet giants is a hatred of the rich. The explosive growth of the internet industry has highlighted a path to gaining wealth that most people will never get to emulate in their lifetime. The media had once estimated that following Ant Group’s successful listing, each employee’s wealth would exceed 40 million RMB on average, while 58 of its executives would be worth hundreds of millions RMB. By that estimate, the IPO that was later halted would have created hundreds of thousands of millionaires, and could be considered an unprecedented wealth-making event. But such people are just a minority in China.
Wealth-making myths a dampener instead
In a society with serious income inequality, such wealth-making myths can elicit complex emotions such as doubt, jealousy, and resentment in many people. When the secret to getting rich is not being exceptionally intelligent or diligent but using methods that could hurt the interests of the public, people would naturally become more disapproving of it. When Ant Group’s IPO was suddenly halted by Chinese regulatory authorities in early November, some public opinion makers actually rejoiced.
Objectively speaking, the rise of the internet economy has indeed drastically changed people’s lives, in ways such as offering greater convenience and affordability. From a capitalist perspective, safeguarding their interests and disregarding the means by which wealth is acquired are par for the course. In a market that is free and governed by the rule of law, one should be allowed to do anything they wish within the law.
... the world is also watching to see if China can find ways to eliminate the drawbacks and become a pioneer in the uncharted territory of regulating the internet economy.
The reason for the problems and controversies of China’s internet economy is because corresponding government regulations and industry rules have not caught up with the speed of the industry’s development yet. At the meeting of the Politburo of the Chinese Communist Party last Friday, stronger measures against monopolies and the “disorderly expansion of capital” were mentioned for the first time. More regulatory measures are expected to be rolled out soon. In future, relevant regulations will have to strike a balance between filling regulatory loopholes, preventing industries from running rogue and breaking new monopolies on the one hand, and preventing regulations from stifling innovation and market freedom on the other.
It is difficult for the development of the internet economy to be rid of the reality of having to bear the ills of the industry whilst reaping its fruits, as trying to pre-regulate what is innovative is not easy. With China’s internet economy at the forefront of the world, both its positive experiences and negative lessons can be taken as references. In the changes brought about by the internet economy, the world is also watching to see if China can find ways to eliminate the drawbacks and become a pioneer in the uncharted territory of regulating the internet economy.
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