Price Wars Beat Up Online Retailers 网上零售商引爆价格战

By newsdoug on November 4, 2011

Boxing brawl rages between 360Buy, Dangdang Barely a day has passed these last few weeks without a report in the Chinese media about the latest price wars between major online retailers, reflecting rampant competition that is causing companies to hemorrhage cash. Two of the biggest rivals in the never-ending wars are Dangdang (NYSE: DANG) and 360Buy, also known as Jingdong Mall, with Dangdang reportedly preparing to turn up the heat with a major new offensive. According to domestic media, Dangdang is preparing to launch a major new campaign against 360Buy, extending a current drive that already specifically undercuts prices for popular items on 360Buy by significant amounts. (English article) For its part, 360Buy is also offering a near non-stop stream of promotions that have been so popular that an unusually high volume of shoppers caused its site to crash earlier this week, forcing the company to install more servers. (Chinese article) While such a high volume of shoppers would normally be good news, the business disruption will hardly help 360Buy’s reputation. Furthermore, the new servers will only add to the company’s costs, and I suspect many of the goods that attracted such attention in the first place were being sold at a loss. If the competition remains this rampant, look for a cash-hungry 360Buy to potentially try to accelerate its stalled plan for a multibillion-dollar IPO to raise more cash (previous post), and for Dangdang, which already reported a widening loss in the second quarter, to see its losses widen even further going forward.

Bottom line: Chinese online merchants engaged in non-stop price wars are facing a cash crunch that could soon result in consolidation for the overheated sector.

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