US brands suffer collateral damage in Chinese corporate war

Erika Kinetz
INTERNATIONAL.- It was looking like a banner year for business in China. The U.S. clothing company was expecting a 20 percent jump in online sales on Alibaba’s Tmall, thanks to the e-commerce giant’s massive reach. But executives soon learned that what Alibaba gives, it can also take away.

The company refused to sign an exclusive contract with Alibaba, and instead participated in a big sale promotion with its archrival, JD.com Inc. Tmall punished them by taking steps to cut traffic to their storefront, two executives told The Associated Press.

They said advertising banners vanished from prominent spots in Tmall sales showrooms, the company was blocked from special sales and products stopped appearing in top search results.

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The well-known American brand saw its Tmall sales plummet 10 to 20 percent for the year. “Based on our sales record, we should have been in a prominent position, but we were at the bottom of the page,” said the brand’s e-commerce director, who spoke only on condition of anonymity for fear of further retaliation.

“That’s a clear manipulation of traffic. That’s a clear punishment.” As the Trump administration pushes China to play by fair trade rules, companies are caught in a quieter but no less crucial struggle for fair access to a $610 billion online marketplace, an AP investigation has found.

Executives from five major consumer brands told the AP that after they refused to enter exclusive partnerships with Alibaba, traffic to their Tmall storefronts fell, hurting sales. Three are American companies with billions in annual sales that rely on China for growth.