Chinese booming e-commerce nibbles traditional retailers
Xinhua | 2013-2-18 10:38:32
By Agencies
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China's e-commerce giant Jingdong Mall announced Saturday that it has secured 700 million U.S. dollars in its latest fundraising effort.

Canada's Ontario Teacher Pension Fund and Kingdom Holding Co, the international investment firm of Saudi billionaire Prince Alwaleed bin Talal, were among the consortium of investors.

Jingdong said that the new funds will go to company operations, new business development and logistics system construction.

So far, Jingdong has finished four rounds of fundraising with a total financing at a remarkable high of 2.3 billion U.S. dollars, which is shocking in a depressed year.

Investment became more cautious as the capital market remained sluggish in 2012. Statistics showed that the total funds raised through IPO around the globe last year plummeted to 112 billion U.S. dollars, the lowest level since the 2008 global financial crisis.

Against such a background, the bounty demonstrated the confidence of the international capital market in Jingdong and the recognition of China's vigorous online business market.

ONLINE BUSINESS BOOMS

China's online business market volume exploded in the past year.

A report recently released by China's E-Commerce Research Center showed that by the end of December, the transaction volume of China's online retail market reached 1.32 trillion yuan RMB, a year-on-year increase of 64.7 percent.

The figure is projected to jump to 1.81 trillion yuan RMB in 2013, according to expert forecast.

Meanwhile, the number of online shoppers increased 21.7 percent to reach 247 million at the end of 2012.

In the next few years, with more and more brick-and-mortar enterprises entering the e-commerce industry, the online shopping potential in the western region as well as third-tier cities in central and east China will be further tapped, industrial insiders said.

In addition, as the development of mobile Internet makes mobile shopping more convenient, China's online shopping market will maintain its fast growth momentum and is expected to surpass 3 trillion yuan RMB by 2015 or 2016, experts said.

Compared with off-line shopping, online shopping makes it possible for people to purchase goods without stepping out their rooms with more options at lower prices.

TRADITIONAL RETAIL INDUSTRY THREATENED

In contrast to the flourishing e-commerce enterprises, traditional retail industry has been greatly shocked in recent years.

On Nov. 11, the so-called singles day and a big promotion event day for Chinese online shops, the daily sales on the world's largest e-commerce group Alibaba's Taobao and Tmall reached up to 19.1 billion yuan RMB.

Nie Linhai, deputy director of the Department of Electronic Commerce and Information of the Ministry of Commerce, said, "China is expected to surpass the United States and become the world's largest online retail market in 2013."

"Customers used to buy things only when they can see and touch them personally. But thanks to the complete online information such as the evaluation and price check systems, information asymmetry has been solved," said Huang Lihua, director of the E-commerce Center of Shanghai-based Fudan University.

Together with the advantages of lower prices and great convenience, e-commerce has brought huge challenges to traditional commercial activities, with some retail shops becoming customers' "fitting rooms".

"The impact of e-commerce on traditional business areas is inevitable," said Jingdong founder and CEO Liu Qiangdong. And the tens of millions yuan RMB in sales growth of e-commerce each year is actually won over from the traditional retailers.

Consequences of the impact are emerging, with a number of stores going out of business and sales volume of large malls plummeting.

In the future, the market shares of e-commerce enterprises in standard products like electrical appliance, electronic gadgets, books and cosmetics will probably reach 70 to 80 percent, according to Liu Qiangdong.

Apart from retailers, some cities as traditional business centers, including Beijing and Shanghai, may be embarrassed by the "fitting room" dilemma.

"For these cities, what they can do is to upgrade customer experiences and enhance cultural attraction," Huang Lihua said.


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