New Delhi

The upcoming quarterly earnings reports from Chinese e-commerce giants Alibaba and JD.com are set to provide crucial insights into consumer sentiment in the world's second-largest economy.

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As per estimates by DBS, these two companies collectively hold a 69 per cent share of China's e-commerce market revenue, making their performance major indicators of market trends.

In recent years, Alibaba and JD.com have encountered increasing competition from low-cost platforms like Pinduoduo and Douyin, owned by ByteDance.

This competition comes amidst a backdrop of cautious consumer spending habits triggered by the COVID-19 pandemic and economic slowdown.

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To address this trend, both Alibaba and JD.com have adjusted their strategies to cater to cost-conscious consumers, albeit at the risk of thinner profit margins.

S&P Global analyst Cathy Lai emphasised the challenge facing Alibaba and JD.com.

"As long as consumers remain highly cost-conscious such policies are likely to further slow revenue growth and erode profit margins," Reuters quoted her as saying.

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Lai noted that both companies are increasingly venturing into the realm of unbranded goods, a domain traditionally dominated by Pinduoduo.

Alibaba and JD.com find themselves in a delicate balancing act as they endeavour to defend their premium product segments while simultaneously expanding their offerings to include cheaper alternatives.

Lai pointed out that Alibaba "cannot ignore PDD, but nor can it quell the competitive threat by wholly adopting PDD's strategy."

In response to inquiries, Alibaba's Taobao and Tmall Group have said that they would continue to ensure user satisfaction and investing in product supply, competitive pricing, and quality service.

However, JD.com did not provide a comment regarding the matter.

The financial results from the September to December quarter of last year revealed mixed outcomes for Alibaba and JD.com.

Despite investments in subsidies and discounts during sales events like Singles Day, Alibaba's Taobao and Tmall Group saw a 2 per cent year-on-year revenue increase, while JD.com experienced a similar marginal rise of 3.6 per cent.

Analysts anticipate a slow growth trajectory for both companies in the upcoming quarterly reports, reflecting consistent trends observed in recent quarters.

In contrast, Pinduoduo Holdings reported a 123 per cent revenue growth in the December quarter, brought by its international platform Temu and its domestic platform Pinduoduo.

Additionally, Douyin, although not regularly disclosing sales data, is projected to have achieved a 60 per cent growth rate in 2023, according to estimates by research firm eMarketer.

As China's e-commerce landscape gears up for major mid-year sales events like 618, Alibaba and JD.com face intensified pressure from brands shifting their advertising expenditure towards live-streaming platforms like Douyin.

This shift poses additional challenges for the e-commerce giants, as observed by Jacques Roizen, managing director of China consulting at Digital Luxury Group.

The prolonged reliance on discounts by e-commerce platforms risks undermining the profitability of brands such as L'Oreal and Estee Lauder, which derive a significant portion of their China sales from e-commerce channels.

Alibaba is scheduled to report its earnings for the quarter ending in March on Tuesday, followed by JD.com on Thursday.

(With inputs from Reuters)