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360buy unleashes new B2C price war

By Liang Fei Source:Global Times Published: 2012-8-14 22:45:04

Chinese online business-to-consumer (B2C) retailer 360buy.com signaled a new round of price wars in the sector Tuesday by announcing that the home appliances on 360buy will be sold at zero gross margins for the next three years.

Liu Qiangdong, CEO of 360buy.com, said on his Sina Weibo account on Tuesday that the prices of the home appliances on 360buy will be at least 10 percent lower than those at the online platforms of Gome and Suning, its major competitors. Liu also said that any employee found selling a product with a price markup will be fired.

"360buy will hire employees to monitor the prices at Gome and Suning, and consumers will be compensated if our prices are not 10 percent lower than theirs," said Liu.

He said that 360buy will also launch a faster delivery system to guarantee a better consumer experience. "Orders made before 11 am will be delivered in the afternoon, and orders made before 11 pm will be delivered the next morning."

Suning soon launched its response. Li Bin, executive vice president of Suning, said on his Sina Weibo account later  Tuesday that the prices of all Suning's products will be "lower than those of 360buy."

"Any company should first consider whether they can survive before they launch such practices," said Li.

Chen Shousong, an industry analyst at consulting firm Analysys International, told the Global Times that Suning is more motivated to launch such a price war compared with 360buy.com, as it is a late comer to the sector and more willing to use such strategies to gain a bigger market share.

Chen also noted that such moves are mainly a way for companies to promote themselves and will not have that much effect on their revenue.

"Home appliance products offer a very low profit margin anyway, so even a zero profit margin will not make a significant difference to their revenue," said Chen.

"Price wars in the e-commerce sector are unavoidable, since online e-commerce platforms not only face competition from rival firms, but also from offline retailers seeking online expansion," Ding Jiaqi, an analyst with consulting firm iResearch, told the Global Times Tuesday.

"The new move by 360buy could mean further losses for its appliances business, but it may also gain more consumers for the company and put pressure on its competitors," Ding noted.

In the second quarter of this year, China's online B2C sector was still dominated by Alibaba's tmall.com, with a market share of 57.1 percent, followed by 360buy with 20.1 percent and Tencent with 4 percent, according to data from iResearch.

The online platform of Suning ranked fourth with a 3.8 percent share of the market, according to iResearch.

360buy has brought in total investment of some $1.5 billion in its third round of financing, but the company is still short of capital and has not yet started to break even.

Suning announced a plan Tuesday to issue 8 billion yuan ($1.25 billion) in corporate bonds in order to fund its growth in areas such as logistics.

Gome was not available for comment Tuesday, but recent media reports said the company has sold one of its real estate assets to Hainan Airlines, possibly in a move to seek funds for its online platform.

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