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Questions raised over stores' price war

Updated: 2012-08-27 09:06
By He Wei in Shanghai ( China Daily)

Many wonder if it's all a stunt and whether reductions are genuine

Xu Yunmei was never an online shopper. She distrusted Internet transactions and believed in "what you see is what you get".

Questions raised over stores' price war

While Chinese shoppers wonder when the price war, started on Aug 15 by Jingdong Mall, Suning Appliance Co and Gome Electrical Appliances Holding Ltd, will eventually come to an end, some have already noticed it is no longer a sort of "Romance of the Three Kingdoms". Because other e-commerce companies have taken part in it, including China Dangdang Inc and Tencent Holdings Ltd's, quite a few online shoppers are saying excitedly it is really a "Warring States Period" for Chinese e-commerce businesses. [Photo/China Daily]

But as massive online price campaigns started to dominate the office conversation, she was persuaded to make her first online purchase using a co-worker's e-bank services and it didn't feel so bad.

"It's easier than I thought. As price reductions are frequently in the headlines these days, I thought I should just swim with the tide," said Xu, 37, a civil servant in Shanghai.

Questions raised over stores' price war

A Bain & Co study verified the high growth potential in sales of home appliances online. It suggested many non-e-commerce shoppers expect to make their first online purchase in 2012 and the first category on their minds is electronics and appliances.

On Aug 14, a micro blog by Liu Qiangdong, the charismatic president of Beijing Jingdong Century Trading Co, which runs online retailer Jingdong Mall, accelerated the trend by starting what may be the largest price war targeting major home appliances.

"We are striving to maintain zero gross margins for three years and undercut our rivals by 10 percent," the blog read, heralding its launch.

It's been two weeks since major home appliances chains, whether the digital arm of brick-and-mortar shops or traditional e-commerce stores, pledged to outdo one another on pricing.

But it remains to be seen whether the blitz will stoke an industry reshuffle in the rapid growing yet embryonic sector.

The size of China's overall e-commerce market will expand dramatically through 2013, growing at a compound annual rate of 48 percent to hit 1.5 trillion yuan, according to forecasts by Bain.

This growth will be fueled by an expected increase of more than 60 percent in the e-commerce customer base and a projected 40 percent or more surge in customer spending. That is why many e-vendors are eager to grab a share in the explosive market.

Questions raised over stores' price war

See more stories about price war in China e-commerce sector

Apart from sparking the latest round of discounting, Jingdong Mall made an unusual move by recruiting 5,000 agents to check prices at rival outlets of Suning Appliance Co and Gome Electrical Appliances Holding Ltd. The company pays a 3,000 yuan ($471) monthly salary and gives out tailor-made outfits.

But the competitors have not been ambivalent about their attitudes. On the same day, Suning stated that all of its items are already priced lower than those on Gome also announced all of its online items would be priced 5 percent lower than those of Jingdong.

There's a reason for Liu's bellicosity. One week before the "war" broke out, Suning, the top electronics vendor by sales, initiated a so-called "Beijing Strategy" aiming to unify prices of its online and offline products.

The move was widely perceived by industry insiders as a targeted general offensive on its long-time rival Beijing-based Jingdong Mall.

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