Hong Kong’s online retail market has become too crowded for e-commerce giant Alibaba, which is closing its local Tmall site

Alibaba will shut down operations of Tmall Hong Kong on October 31, as the company sharpens its focus on cross-border e-commerce opportunities
That move comes as no surprise, according to analysts, because Hongkongers have plenty of online shopping platforms to choose from

Alibaba

Jiaxing Li

Published: 8:30am, 28 Jul, 2022

Why you can trust SCMP

Hong Kong’s e-commerce market has become too crowded for Alibaba Group Holding, according to analysts, as the Chinese internet retail giant moves to close its local Tmall platform at the end of October.

Tmall Hong Kong, which was set up last year as a dedicated shopping channel for merchants and consumers in the city on Taobao Marketplace, will shut down operations on October 31, according to a notice posted on the platform last Friday. It said August 21 will serve as the last day for customers to place orders, and that merchants must dispatch all orders before August 26.

That move comes as no surprise because the local market is already dominated by HKTVmall, which operates the city’s biggest and most widely used online shopping app, according to Carlton Lai, an analyst at Daiwa Capital Markets Hong Kong.

“It’s not possible to have multiple dominant [e-commerce] players in Hong Kong, considering the size of this market,” Lai said. “Tmall Hong Kong’s logistics efficiency, variety of products and number of merchants cannot compete with those of HKTVmall.”

HKTVmall has more than 1 million unique users in Hong Kong, a city with a population of 7.7 million. Photo: Winson Wong

The decision to cease Tmall Hong Kong’s operations was made because of a change in business strategy, according to the platform’s notice. It indicated that the city’s consumers will continue to be served via Alibaba’s main Chinese retail sites, leading social commerce platform Taobao and Tmall, its premium online marketplace for major international and Chinese brands and retailers.

Hangzhou-based Alibaba, owner of the South China Morning Post, said on Wednesday that the company intends to sharpen its focus on cross-border e-commerce development opportunities, while pledging improved logistics and customer service to Hong Kong consumers.

“Tmall Hong Kong’s closure will not impact local consumers significantly because there are a lot of online shopping platforms to choose from,” Zhang Yi, chief analyst at Guangzhou-based iiMedia Research, said on Wednesday.

Chinese e-commerce rival Pinduoduo, for example, quietly expanded its presence in Hong Kong this month, providing new delivery and payment services tailored for local consumers, as well as its well-known cutthroat pricing model.

A Tmall worker is seen on the floor of the Chinese online shopping platform’s warehouse in Jiangmen, a city in southern Guangdong province, on November 28, 2018. Photo: EPA-EFE

“Hongkongers have plenty of choice, including from some of the global business-to-consumer [e-commerce] players,” said Paul Haswell, partner and technology lawyer at Hong Kong-based Seyfarth Shaw. “Alibaba’s Taobao remains very popular in any event.”

Alibaba’s tactical manoeuvre in Hong Kong reflects how China’s major internet companies are trying to fine-tune their operations amid continued implementation of rigid pandemic control measures on the mainland and the nation’s flagging economy.

The company recently reported its slowest ever revenue growth in the March quarter and a wider year-on-year net loss in the same period.

Tmall Hong Kong was established by Alibaba on May 21 last year to tap the growing number of online shoppers in the city, Chen Zijian, director of Tmall’s Hong Kong and Macau operations, said in a press statement at the time.

Alibaba CEO promotes positive role of e-commerce giant’s technology

By November the same year, more than 5,000 local brands had signed up with Tmall Hong Kong to sell their merchandise to the city’s consumers, the platform said during Alibaba’s Singles’ Day promotion that month.

Much like other markets, online shopping was given a boost in Hong Kong by the Covid-19 pandemic. E-commerce sales in the city grew 27 per cent in 2020 and 50 per cent of local consumers now prefer online shopping, according to estimates by government agency the International Trade Administration, which is under the US Department of Commerce.

Tmall Hong Kong’s market positioning, however, put it in direct competition with popular local retailing app HKTVmall, which has more than 1 million unique users in a city with a population of 7.7 million.

Alibaba’s Tmall made its initial foray in Hong Kong in 2017, when the platform mainly sold food, household products and other daily necessities from the mainland under its “Taobao Collection”.