Dangdang and Gome in cooperation talks

Updated: 2012-02-14 09:56

By Chen Limin and Tuo Yannan (China Daily)

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Reports suggest that electronics retail giant may open virtual store

BEIJING - E-Commerce China Dangdang Inc, a major Chinese online retailer, may join hands with Gome Electrical Appliances Holding Ltd, the electronics retailer, to develop its product portfolio in the face of increasing challenges from competitors.

Dangdang and Gome in cooperation talks

An advertisement for China Dangdang Inc in Shanghai. In recent years, the e-commerce website has been making efforts to increase its product portfolio.[Photo/China Daily]

Dangdang, which went public on the New York Stock Exchange in 2010, is reported to be in talks with Gome - the country's biggest electronics retailer by sales - concerning possible cooperation, according to a report in the China Business News on Monday.

Gome is likely to open a virtual shop on Dangdang to sell products, the newspaper said, citing an unnamed source close to the matter.

The e-commerce website has been paying more attention to competitors that sell electronics online, said a Dangdang director, who declined to be named. However, the source denied any knowledge of possible cooperation between the companies.

Yu Liangchuan, the public relations manager of the e-commerce division of Gome, declined to comment on any possible cooperation. However, he said that companies such as Gome and Suning Appliance Co Ltd have price advantages in terms of logistics and purchasing over stores that only operate online, so the template of e-commerce will change in the near future.

In recent years, Dangdang, which began as an online bookseller, has been making efforts to increase its product portfolio, especially as its competitors have been increasingly aggressive in exploring areas that were once its strong suits, such as book sales.

Last year, the company was involved in price wars with rivals, such as Beijing Jingdong Century Trading Co, the operator of the website 360buy.com.

The profit margin on sales of home appliances and electronic devices is narrower than for other products, but Dangdang has to provide items of this kind to attract customers, said Li Guoqing, the company's chief executive officer, in an earlier interview with China Daily.

"Electronics and home appliances are the weak performers for Dangdang, that's why it's reasonable that it may cooperate with Gome," said Chen Shousong, an analyst with the researcher Analysys International.

However, some analysts believe that a deal between Dangdang and Gome would not prompt big changes in the industry.

"Dangdang has missed the best time to be the big winner in e-commerce," said Hu Yanping, general manager of the Data Center of China Internet.

"It (Dangdang) is unlikely to grow to a very large scale, considering the resources and funding it has," he said, adding that if the companies do not cooperate at the capital level, it is unlikely to have a substantial effect on their performances.

The Chinese e-commerce business-to-consumer market generated sales worth 40 billion yuan ($6 billion) in 2011, and 360buy.com took 12.9 percent of that figure while Dangdang only garnered 1.5 percent.

Gome entered the e-commerce market in 2003, and remodeled its website in April 2011 to attract more customers. The company's President Wang Junzhou has said the retailer will invest more in the company's online store this year.