Alibaba’s Tianmao Takes on Electronics 天猫发力家电市场

By newsdoug on May 5, 2012

The e-commerce space keeps getting hotter and hotter, this time with word that sector leader Alibaba is gearing up to get into the ultra crowded market for home electronics. Its latest initiative will see Tianmao, Alibaba’s online business-to-consumer (B2C) shopping site formerly known as Taobao Mall, joining hands with many top brands to open a section specifically dedicated to household electronics, according to local media reports. (Chinese article) Its entry will come as a direct challenge to a number of major players already fighting for control of the space, including private equity-backed 360Buy, as well as publicly listed Suning (Shenzhen: 002024) and Gome (Hong Kong: 493). 360Buy actually began its life as an online electronics seller but later diversified into a wide range of other consumer goods, while Suning is better known as a brick-and-mortar electronics retailer that has aggressively expanded into e-commerce in the last 2 years. Gome is a relative latercomer to e-commerce, but recently made headlines when it signed a deal to team with Dangdang (NYSE: DANG) that would essentially see China’s largest publicly listed e-commerce site operate Gome’s online presence. (previous post) Alibaba clearly knows it will face stiff competition as such a late entrant to this part of the market; but as the clear leader of China’s broader e-commerce sector, with about a third of the market, the company clearly has the resources to make a serious bid for the space. The media reports are saying Tianmao has already signed up many major electronics makers for its new initiative, including names like Phlips (Amsterdam: PHG), Lenovo (HKEx: 992) and LG Electronics (Seoul: 066570) all set to offer their products on the new platform. The addition of such a major new player into the space will only turn up the already stiff competition, meaning many of these e-commerce companies, most of which are already operating in the red, could lose even more money. (previous post) Unfortunately for the competition, Tianmao is one of the few big e-commerce players that is still earning a profit, meaning it has more resources and time to spend on this initiative and less concerns about quickly turning a profit. That means we can expect another brutal war to erupt soon in this online space, pushing all participants further into the red.

Bottom line: Alibaba’s entry into the home electronics e-commerce will further heat up an already overheated space, prolonging losses in the market for at least another year.

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