New moves from Internet giant Tencent (HKEx: 700) and global retailer WalMart (NYSE: WMT) are turning up the competition in China’s e-commerce wars, which are quickly becoming a contest to see who can outspend whom. Both of these latest initiatives look quite pricey, especially Tencent’s move that will see it roll out an ultra-fast product delivery program. WalMart, meantime, is pouring big money into a campaign to build a new in-house clothing brand for its recently acquired Yihaodian online store. Read Full Post…
Online discount retailer Vipshop (NYSE: VIPS) emerged as one of China’s most remarkable turnaround stories in 2012, as its shares rallied sharply in the second half of the year after a miserable IPO. Now the company is passing more new milestones, reporting its first-ever profit in the fourth-quarter of 2012 and also entering the relatively small club of Chinese Internet firms that can boast of market values of $1 billion or more. The company has also solidified its position as China’s most valuable publicly traded e-commerce firm, after taking the title from older rival Dangdang (NYSE: DANG) last fall.
Just days after announcing it would shutter its Hong Kong stores, we’re getting word that struggling home appliance and electronics retailer Gome (HKEx: 493) is also cutting positions in its online division as it looks to return to profitability. These latest job cuts look particularly interesting to me, as they seem to represent a retreat in the important but ultracompetitive e-commerce space, where rivals like Suning.com (Shenzhen: 002024) and Jingdong Mall continue to add staff even as everyone is losing massive money. In this case, Gome’s online cut-backs could perhaps presage a future strengthening of its current alliance with e-commerce specialist Dangdang (NYSE: DANG), and even result in a future marriage between these 2 companies whose e-commerce and traditional retailing businesses are quite complementary.
I’ve been writing for most of the past year about China’s bloody e-commerce battles, and now we’re getting some figures that finally show how bad the situation is with news that up-and-comer Suning (Shenzhen: 002024) has missed its 2012 online sales target by a relatively large margin. This bad stumble reflects the fact that China’s e-commerce market may have big potential, but the overall space is still limited in size. What’s more, with so many big names fighting for a piece of the pie, everyone is having to sell their products at very low prices that ultimately result in lower overall revenues and operating losses.
Media are reporting that online retailers Dangdang (NYSE: DANG) is launching a major overhaul and Vancl is facing issues from its own big retrenchment, as each searches for elusive profits that have become increasingly hard to find in the current cutthroat e-commerce space. In Dangdang’s case, the company is attempting to focus on several key product groups, giving up its previous aim of becoming a general merchandise giant like Amazon (Nasdaq: AMZN). Meantime, online clothing retailer Vancl’s own ongoing slimming exercise has left it so lean that it is reportedly running into logistical problems that are resulting in delayed shipments to some of its customers. All of this reflects just how difficult China’s e-commerce environment has become, with most companies resorting to desperate measures in their bids to conserve cash and become profitable in the ultra-competitive space.
The official start of winter may fast be approaching, but there are growing signs that an early spring has arrived for US-listed China stocks, with Internet security provider NQ Mobile (NYSE: NQ) and e-commerce firm Vipshop (NYSE: VIPS) making headlines that look good for both themselves and the broader sector. NQ, which was formerly called NetQin Mobile, has proven once more that short sellers no longer hold the same kind of influence over these stocks the way they did just 6 months ago, with its shares bouncing back strongly after a recent attack. Meantime, Vipshop, one of only 2 major Chinese firms to list in the US this year, has suddenly become a darling of investors, who have sent its shares to new highs as they scramble to buy a piece of what has quickly suddenly China’s largest listed e-commerce company.
