what is the assessment of zero covid policy in e-commerce companies?

According to an article by Financial TimesπŸ‡§πŸ‡· the two chinese companies e-commerce, Meituan and pinduo-duomanaged to take advantage of the pandemic to get rich and beat tech giants like Tencent or Alibaba. Very satisfactory results, but still to be qualifiedπŸ‡§πŸ‡·

In the face of widespread closures, two e-commerce companies stand out

Alibaba is paying a high price for the policy followed by China since the beginning of the pandemic in 2020. your financial statement for the third quarter of 2022the e-commerce giant presented one of his smallest growths – despite the increase in operating profit. Same observation for Tencent, whose revenue dropped 3% in the second quarter of 2022 compared to the second quarter of 2021. The first since the company went public in 2004πŸ‡§πŸ‡·

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This situation can be explained in particular by the zero Covid policy followed by Beijing since the beginning of the pandemicπŸ‡§πŸ‡· With that, many factories had to close their doors, which led to the stoppage of several sectors of activity in several cities. This was the case in Shanghai, China’s largest city, or Shenzhen, a city often described as China’s Silicon Valley. In the face of these widespread closures, two e-commerce companies still managed to get out of the game taking ” decisive steps that gave them a competitive advantage during the tense period some experts said.

Robin Zhu, analyst at Alliance Bernstein (AB) indicated that β€œ both showed agility in the face of the Shanghai stoppage Β» configuring quickly ways to facilitate deliveries for people confined to their homesπŸ‡§πŸ‡· Meituan and Pinduoduo also benefited from the campaign launched by Beijing aimed at to further regulate the dominance of tech giants in the e-commerce industryπŸ‡§πŸ‡· Specifically, after several years in which companies could benefit from the absence of official regulation, China took over many measures especially to fight anticompetitive practices and illegal collection of personal dataπŸ‡§πŸ‡·

Encouraging results, but which must be qualified

According to Financial Timesfrom June to September 2022, the two e-commerce companies made a combined profit of $1.7 billionπŸ‡§πŸ‡· Its sales also increased, in the period from 2021 to 2022, 28% for Meituan it’s from 65% for PinduoduoπŸ‡§πŸ‡· This is not the case for the country’s technology giants, which saw their revenues drop over the same period.πŸ‡§πŸ‡·

However, according to sources, the zero Covid policy is not the only factor who helped for Meituan’s profitabilityπŸ‡§πŸ‡· A former employee of the company said that β€œ the company started laying off people […] cuts intensified after distribution of Chinese New Year bonuses “. The online sales company declined to comment for this information. Recently, Tencent, one of the largest shareholders of the Chinese e-commerce company, decided to sell Meituan shares for US$20 billionπŸ‡§πŸ‡· Following this decision, the company’s shares fell 6.4% on the Hong Kong stock exchangeπŸ‡§πŸ‡·

Pinduoduo is not spared, as after having experienced a prosperous second quarter of 2022, Neil Shen, director of Sequoia China, the Chinese branch of a successful Silicon Valley venture capital firm, has decided to step down from the board of directors to ” focus on other projects “. Always according to Financial Timesfollowing this announcement, entities affiliated with Sequoia China filed a request to sell Pinduoduo shares to a total amount of 390 million dollarsπŸ‡§πŸ‡·

China is relaxing the country’s restrictions against Covid-19. Faced with this relaxation, Meituan and Pinduoduo are looking to secure future sources of income after taking advantage of the Covid zero policy imposed by the Chinese regime. The two e-commerce companies are now interested in the tourism and fashion sector through a Shein-like app called Temu, aimed at Western shoppers.

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