10:33 PM EST, 03/08/2023 (MT Newswires) -- China's online retail market is facing market share and revenue growth momentum pressure amid the heating competition in the sector, Fitch Ratings said in a note on Tuesday.
"Investments to defend market position could hurt margins, although our rated companies' strong balance sheets and free cash flow generation should help them weather potential challenges in the near term," the rating agency said.
JD.com's (HKG:9618) recent promotional tactics including offering significant subsidies could trigger a price war with other leading e-tailers, said Fitch.
Douyin, the Chinese version of TikTok, could use its large audience as an advantage in expanding into the on-demand food delivery business, the agency said.
"This raises uncertainty among the dominant incumbents, including Meituan (HKG:3690) and Alibaba Group's (HKG:9988) Ele.me," Fitch said.
However, the debt rater said that Meituan and Alibaba have already established an extensive and reliable network of riders and merchants, giving them an edge in defending their market shares.
Fitch warned that companies with a less-diversified business mix may face greater pressure.
The agency recently downgraded Chinese e-commerce firm Vipshop, reflecting the risk of intensified competition in China.
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