A major U.S. clothing brand experienced a sharp drop off in sales after it refused to sign an exclusive contract with Alibaba Group’s (BABA) Tmall.
According to a report from The Associated Press, the unnamed U.S. company was expecting to profit from the Chinese e-commerce giant’s massive reach by registering a 20% rise in online sales on Tmall. However, when Alibaba learned that the company shunned its offer of an exclusive contract in favor of participating in a promotion with archrival JD.com (JD), things quickly turned nasty.
Two executives told The Associated Press that Tmall retaliated by taking measures to reduce the U.S. company’s ability to sell products on its website. Advertising banners reportedly vanished from Tmall sales showrooms and the company’s goods suddenly started to appear at the bottom of search results. The upshot was the well-known American brand’s Tmall sales falling 10 to 20% 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."
According to the report, this does not appear to have been an isolated incident. Executives from five major consumers brands told AP that they also experienced a similar fate after refusing to enter into exclusive partnerships with Alibaba. Three of these brands were American companies that generate billions in annual sales and rely on China for growth
Alibaba denied the accusations. In a statement, the Chinese multinational e-commerce, retail, internet, AI and technology conglomerate dismissed allegations that it punished companies and defended its decision to pursue exclusive deals, describing it as a common industry practice. (See also: Alibaba Tmall Maintains E-Commerce Market Lead.)
"Alibaba and Tmall conduct business in full compliance with Chinese laws," Alibaba said. "Like many e-commerce platforms, we have exclusive partnerships with some of the merchants on Tmall. The merchant decides to choose such an arrangement because of the attractive services and value Tmall brings to them."
Alibaba accounted for more than three-quarters of online retail sales in China in 2015, according to Bloomberg. (See also: Is Alibaba Trying to Take Over Food Delivery, Too?)