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Price war between e-commerce firms hotter

Updated: 2013-06-19 02:54
By SHEN JINGTING ( China Daily)

Price war between e-commerce firms hotter

An advertisement for Jingdong's 10th anniversary sale. The discounts have triggered an industry-wide price war with rivals undercutting each other, hoping to grab market share. Provided to China Daily 

A price war has flared up again among Chinese e-commerce websites, despite government officials accusing them of "fooling consumers with promotional activities" just nine months ago.

JD.com, also known as Jingdong, offered heavy discounts on millions of products, including some best sellers, to celebrate its 10th anniversary on Tuesday.

In an e-mail reply to China Daily, the business-to-customer e-commerce website said it offered "the most favorable discounts in a decade" on some goods.

Though the promotion started on June 1, it offered the deepest discounts for a three-day period starting on Monday

Jingdong's sales more than doubled in the first 15 days of June, according to the company. The website sold 40 million yuan ($6.5 million) of electronic products in the first seven minutes of Tuesday.

In addition to Jingdong, other e-commerce platforms such as Tmall.com of Alibaba Group Holding Ltd, 51buy.com of Tencent Holdings Ltd and Suning.com have joined the battle.

Wang Yulei, vice-president of Tmall.com, said Tmall would offer discounts totaling 200 million yuan in June.

Summer is traditionally the peak season for consumer electronics, he said.

51buy.com, a business-to-customer branch of Tencent, challenged Jingdong directly by offering products "at least no more expensive than JD.com".

The Tencent subsidiary asked clients to inform it when they found certain goods costing more than on 51buy during the three-day period starting on Monday. If they do, they receive reward points.

51buy launched its three-day half-price sale on Monday.

Song Yang, from Tencent's e-commerce department, denied the company was mimicking Jingdong's marketing campaign.

"We planned this promotion at the start of the year. June is usually the start of the online shopping season every year, so it is natural for industry players to act at the same time," he said.

The National Development and Reform Commission, China's top economic planning agency, punished three major Chinese e-retailers in last September for "cheating online shoppers in self-labeled price wars".

However, after several tranquil months, the price battle broke out again, this time with even more participants.

"It is because price and sales wars are still the most effective way for e-commerce websites to win customers' attention," said Lyu Bowang, chief analyst at Beijing-based Zhengwang Consultancy.

"Meanwhile, as Chinese economic growth slows down, inventories piled up in manufacturers' warehouses, which resulted in demand for relief from producers," Lyu added. E-commerce platforms are effective channels for them to ease this pressure, he said.

Regina Leung, vice-president of the marketing division of marketing services company Epsilon International, said e-commerce retailers are using heavy discounts to practically buy market share.

Retailers use discounts because they have a short-term impact, she said.

However, "retailers who rely on discounts to drive traffic and revenue will soon shoot themselves in the foot when they are perceived by consumers merely as discounters. Their slim profit margin will also eventually disappear," she added.

Zhang Jindong, chairman of Suning Appliance Co Ltd, China's largest electric appliance retailer, said in an April interview that the price war would continue.

"There is a bubble in the e-commerce industry, so the price war will carry on," he said.

Jingdong said in a statement: "We welcome competition. Only with more players participating can China's e-commerce industry realize rapid development."

 
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