China’s consumer-tech companies are riding an endless train of trouble. Just as the government seems to be easing its regulatory crackdown, consumer fatigue — even disinterest — is setting in.
At last month’s meeting of the Chinese Communist Party Politburo, the top government policymaking body, Beijing vowed to support the healthy growth of platform companies, a statement interpreted by many analysts as the end of the government’s year-long campaign to rein in big tech across a wide range of issues, from antitrust to data security.
Beijing’s crackdown cost tech companies as much as US$2 trillion of market value, the equivalent of 11 percent of China’s GDP, Goldman Sachs Group Inc said.
However, a potentially bigger threat looms — citywide lockdowns are forcing consumers to seek alternatives and question how useful Big Tech really is.
For years, e-commerce was the crown jewel of the Chinese tech industry, with online shopping accounting for a much bigger share of retail sales than from US companies. Alibaba Group Holding Ltd, JD.com Inc and Meituan invested heavily to build distribution and logistics networks, going as far as sourcing fresh produce directly from farmers and recruiting armies of migrant workers for speedy deliveries.
The Shanghai lockdown, which began on April 1, disrupted the entire business model. The price of hiring riders — scooter delivery drivers — has soared, and a large number of delivery workers are stuck at home.
Many of those who can work cannot go back to their families at the end of the day because the government is minimizing traffic in and out of residential areas. As a result, e-commerce companies must offer free accommodation or risk their riders going homeless.
Last month, Internet companies dispatched about 20,000 riders to fill 2.5 million grocery orders per day to the city of 25 million, the Shanghai government said.
While this number seems sizable, it is only about one-third of pre-lockdown levels, CLSA Ltd said.
So instead of e-commerce, Shanghai residents have turned to analog strategies — their social skills and the kindness of their neighbors — to meet basic needs. Community buying, in which residents at the same address band together to make bulk purchases of groceries in a single order from suppliers and restaurants, has become increasingly popular.
Neighborhood volunteers take it upon themselves to contact merchants and couriers, drop off each order door-to-door, and check on older people who do not know how to use smartphones.
Meanwhile, WeChat, operated by Tencent Holdings Ltd, is no longer serving as the digital town square where users remain endlessly engaged. The social media super-app has been quick to censor criticism and skepticism of President Xi Jinping’s (習近平) “zero COVID” policy, deleting plenty of content — from a six-minute video that documented the pleas of Shanghai residents, to photo blogs of elderly people dragged to makeshift quarantine centers, and even articles on China’s cybersecurity law and censorship regulations.
Nowadays, when one tries to open a link, “unable to view this activity” seems to be the norm. Increasingly, people use code words to describe sensitive topics such as “zero COVID” and emigration out of China, and many who were once chatty on WeChat have gone silent. Some migrated to Telegram. WeChat has become a digital contact list — and nothing more. Many people feel that the user experience has been ruined.
Before the pandemic, tech companies made life easy. Bubble tea could be delivered to your office within 15 minutes, and WeChat messages lit up all day along. Now, COVID-19 lockdowns have left many people with a sour aftertaste. They remember the futile attempts to place online grocery orders at 6am, and the spite that wells up when social media is censored.
So when millions of Chinese re-emerge from their lockdowns — whenever that is — many might find they have broken their addiction, preferring real face-time with humans instead of the virtual kind. Sometimes, to connect with others, people must disconnect from their smartphones, but what does that mean for the business models of Big Tech, which is all about hooking users to their screens?
Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. A former investment banker, she was a markets reporter for Barron’s. She is a CFA charterholder. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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