In China’s e-commerce history, late-comers have often complained that established players are competing unfairly to defend their turf. One tactic is to use so-called exclusive operation agreements to lock vendors into one platform.
JD.com and VIPshop complained about this in 2017, when they asked regulators to intervene. The e-commerce companies didn’t name names in their joint statement but alleged that a competing e-commerce player had asked vendors to “pick sides”: either stop selling on JD and VIPShop, or be cut off by the competing firm.
Pinduoduo, a firm that just launched a few years ago, brought the issue to the attention of its investors in a letter in late April, saying that “the current ‘forced exclusivity’ observed in the market” is likely to persist for some time.
Unfair competition among e-commerce players hasn’t received much public attention, because consumers are less impacted by these types of business practices.
But recently Galanz, a Chinese home appliance maker, decided to stand up and accuse Tmall in public.
The firm, known as a supplier of microwave ovens and other household items, issued two statements on Monday, one in the afternoon and one later in the evening, via its Sina Weibo account to raise awareness about the issue it’s having with Tmall.
Galanz alleged that searches for its products on Tmall, where it runs a flagship store, were leading to “abnormal results” from time to time, seriously affecting sales.
The firm said this problem began cropping up right after some of its executives had visited Pinduoduo on May 28. The two companies signed a strategic cooperation agreement on that day.
Galanz, in its first statement, did not elaborate on what type of problem it was encountering on Tmall, but simply appealed to the latter’s executives to fix “search-related problems.”
Galanz said that it was “very discontented” as it had prepared 200,000 units of goods for Tmall users for a promotional activity scheduled for June 18, adding that this campaign had failed due to the abnormal search function on Tmall for Galanz products.
When contacted by KrAsia on Monday, Pinduoduo provided a statement saying that Galanz is the first company to publicly claim it has suffered from the “pick-a-side” phenomenon that’s known to many e-commerce players. Pinduoduo said it was able to reproduce the abnormal search results Galanz was complaining about. When you enter keywords like the Galanz brand name or its products into the search bar on Tmall, similar products by other brands show up.
Pinduoduo also cited Hu Yunteng, a judge of the Supreme People’s Court of China, who made a remark about unfair competition in a lecture in Shanghai on May 28. Hu said at that time that some e-commerce companies misuse their leading position in the market to force merchants to choose only one platform out of two and this type of move is against the fair competition value of the market economy. Pinduouo said it doesn’t know whether Galanz will resort to the law to push its case.
However, Alibaba maintains that search results for Galanz were normal when contacted by KrASIA.
Later in the evening on Monday Galanz issued a second statement, saying searches for its products on Tmall were back to normal at around 4:10 pm but went bad again at 4:28 pm.
The company added that Tmall still had not responded directly to the complaints and that it hoped Tmall could respond in public. In this second statement, Galanz also posted a video that shows some of the issues it was facing with the search bar.
The situation remains muddled.
As of Tuesday, search results for “Galanz” or “Galanz flagship” (in Chinese characters) still yielded no direct link to the brand’s flagship store within the top 30 results. However, when you combine the keyword Galanz and a “store” button–which an Alibaba spokesperson suggested to try–this does bring up Galanz’s flagship store as its first result.
Alibaba has not commented further on Galanz’s two statements and the video.