INTERNET: LeTV Finds Double-Edged Sword in E-Commerce

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Bottom line: LeTV’s fledgling e-commerce business could rise quickly but may also experience growing pains that bring negative publicity, as media start to tire of the company’s constant hype and its fortunes start to stagnate.

LeTV jumps into e-commerce

Online video sensation LeTV (Shenzhen: 300104) has never been one to do anything quietly, and that’s true once more with its sudden jump into the hotly contested e-commerce space. In its usual high-profile fashion, LeTV has sent out emails to reporters detailing its huge success with a recent e-commerce promotion, and also its launch of a US e-commerce site.

But the media weren’t giving to much ink to LeTV’s hype, and instead focused on negative reports of logistical problems connected to its recent promotion on September 19. Such problems don’t come as a huge surprise for an e-commerce newcomer like LeTV, which is far better known for its online video service than Inernet shopping.

The contrasting items show that China’s media are a fickle group, and can quickly transform rising stars like LeTV into yesterday’s news. Smartphone maker Xiaomi is just the latest example of one such case. In the space of less than a year, the company has transformed from a nonstop headline grabber for its cool and trendy products, to a maker of so-so smartphones dogged by delays, cost-cutting and other technological issues.

It’s not clear yet if LeTV has moved from the “cool” to the “yesterday’s news” column, but I do sense that shift may be near. Nonetheless, the company’s hype machine is still buzzing ahead full-steam with its latest announcement of a surge in business for its young e-commerce site during a promotion last month.

LeTV’s September 19 promotion was a clear copycat of Alibaba’s (NYSE: BABA) hugely successful November 11 Singles’ Day, and achieved impressive results if we believe the company’s own report. According to its email sent to reporters, LeTV’s LeMall was China’s third most popular e-commerce site from September 14-20, hosting 207 million visitors. LeTV added it will be offering more promotions on November 11 Singles’ Day, which has rapidly grown into China’s equivalent of Black Friday in the US.

Logistically Challenged

The September promotion may have been a smashing success in terms of visitor numbers, but apparently LeTV wasn’t prepared for so many shoppers, according to a media report on numerous complaints from buyers during that period. (Chinese article) The report says the promotion was plagued with delivery delays, most likely because parcel delivery companies weren’t prepared for the surge in orders.

Such delays aren’t uncommon during unexpected surges in activity, and were a common complaint during the early November 11 promotions. Now many couriers hire extra staff to work during the Singles’ Day promotion, and I expect they might do the same next year if LeTV’s September 19 event gains traction. The media reports say some buyers also complained of receiving the incorrect products, which sounds like a logistical problem with LeTV’s own order fulfillment process.

In an interesting footnote, LeTV has also launched an e-commerce site for US customers, just months after Alibaba sold its own fledgling US that failed to gain traction. (previous post) I checked out lemall.com/us/, and the site has gone live and now features just a few accessory type products such as earphones and speakers all selling for less than $20.

At the end of the day, the September 19 event looks like a relative success for an e-commerce newcomer like LeTV, and even the delivery delays and product fulfillment problems testify to the promotion’s popularity. LeTV undoubtedly used its online video platforms to promote the event, which also looks smart. We’ll have to wait and see if the company can build on its momentum, which should become clearer after Singles’ Day. But I do suspect the media could be starting to tire of this hyperactive company, and the negative headlines could soon quickly replace all the positive hype LeTV has received  over the past year during its rapid rise.

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