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Latest “Suning” Business news & Financial news from a Chinese Market Expert

Microsoft E-Commerce: Late to the Game Again 微软进军中国电商市场最终或以失败收场

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I suppose I should congratulate Microsoft (Nasdaq: MSFT) for finally realizing the huge potential of e-commerce in China, even though it’s quite late coming to this incredibly competitive space. Then again, no one will ever accuse Microsoft of being a leader in anything these days, as this company is clearly a follower that takes advantage of its dominant PC presence with Windows to force its way into other product and service areas developed by nimbler, more innovative companies. Chinese media are reporting that Microsoft, through its MSN platform, is planning to enter the crowded e-commerce space in China following the recent end of beta testing for its Chinese-language Bing search engine. (English article) The company didn’t provide any details, but it sounds like the new e-commerce platform will be somehow integrated with Bing, as well as Microsoft’s Windows platform that is also the dominant PC operating system in China, similar to the rest of the world. First off, I have to say that I’m amazed that Bing in China is just finishing up its beta testing, as Microsoft launched the site 3 years ago. Clearly it wasn’t fast-tracking Bing in China, which is obvious from the fact that the search engine is still a non-player in the market, similar to its status in the rest of the world despite Microsoft’s putting large resources into this key Internet area dominated by Google (Nasdaq: GOOG) globally and local search leader Baidu (Nasdaq: BIDU) in China. But let’s take a rest from my sarcasm about Bing, and turn my attention instead to this ludicrous new e-commerce initiative. I use the word “ludicrous” not because e-commerce isn’t an area filled with huge potential, but rather because Microsoft will stand little or no chance of success because the space is already so crowded with other much bigger names with far longer histories in the area. In terms of actual numbers, China’s e-commerce market was worth 500 billion yuan in sales in 2010, or nearly $100 billion, and is likely to hit the 1 trillion yuan mark by 2015 if current growth trends continue. But much of that growth has been fueled by a crowded field of both home-grown and international players who will be formidable rivals even for Microsoft. Just to name a few, the former category includes industry leader Alibaba, along with challengers Jingdong Mall, Suning and Dangdang (NYSE: DANG). In the latter category, retail giants Amazon (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT) are both making aggressive pushes in the space, the former with a major expansion of its China website and the latter through its investment in another domestic player called Yihaodian. I’m not saying that entry at this late stage is impossible, as Microsoft does have some advantages that its rivals don’t have. But the lateness of this arrival, combined with the presence of so many well-funded, highly experienced rivals, make me fairly confident in saying that this new e-commerce initiative will ultimately end up a failure.

Bottom line: Microsoft’s new China e-commerce initiative is likely to fail due to its late arrival to the sector where it will face stiff competition from well-funded domestic and international rivals.

Related postings 相关文章:

◙ E-Commerce: Dangdang CFO Goes, Suning’s New Trip 当当网首席财务官请辞 苏宁进军在线旅游业

◙ China: Room for How Many Amazons? 中国电商市场到底有多大？

◙ Dangdang Loss Balloons In E-Commerce Wars 当当网在电子商务大战中亏损严重

China: Room for How Many Amazons? 中国电商市场到底有多大？

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China’s e-commerce space seems to get noisier by the day, with about a half dozen companies vying to become the nation’s next Amazon (Nasdaq: AMZN) by launching a steady stream of new initiatives in recent months taking them into a dizzying array of new product areas, many far removed from their roots. But at the end of the day there may only be room for 2 or possibly 3 mega online retailers in the market, and we should expect to see many of these aggressively expanding players ultimately either merge with rivals, or more likely quietly shutter their online shops in the next 1 to 2 years as they feel the heat of excessive competition now gripping the market. The latest in the steady flow of new initiatives has Suning (Shenzhen: 002024), better known for its bricks-and-mortar shops selling home appliances and electronics, opening a wine shop this week on its fast-expanding e-commerce site. (English article) News of this new online direction actually first emerged last month, along with reports that Suning would also get into the even more unrelated business of online travel services. Suning is hardly the only one to be branching into all kinds of strange new directions these days in the online space. Its forays into wine and travel come as the country’s second largest e-commerce site, 360Buy, which also goes by the name of Jingdong Mall, has also embarked on its own series of strange initiatives far beyond its original focus as an online electronics seller. Earlier this year the company launched a new book-selling business, and more recently reports have emerged that it will also get into the somewhat unrelated real estate and travel services businesses. (previous post) Then there’s Dangdang (NYSE: DANG), China’s only publicly listed e-commerce company, which began life as an online book seller similar to Amazon. But also similar to Amazon, the company has recently expanded into a number of new directions, including a major tie-up with GOME (HKEx: 493), one of China’s top bricks-and-mortar electronics retailers, in a bid to enter the online market for electronics and home appliances. If all of this is starting to sound like everyone is stepping on everyone else’s turf, it’s because that indeed seems to be what’s happening, with apparently little or no regard for profits or focusing on strategic new areas to complement existing core businesses. Not to be outdone in all this, the nation’s leading e-commerce site TMall, owned by Alibaba, is reportedly gearing up to significantly beef up its presence in the electronics space by signing major names like Philips (Amsterdam: PHG), Lenovo (HKEx: 992) and LG Electronics (Seoul: 066570) to an expanded area in its online mall dedicated to the highly competitive space. Outside all this expansion by domestic names, US retailing giants Wal-Mart (NYSE: WMT) and Amazon itself are also aggressively building up their China presences, the former through its investments in another major site called Yihaodian and the latter through its Joyo platform purchased several years ago, which recently changed its name to Amazon China. The Chinese e-commerce market is certainly big and can support more than one major player, though I seriously doubt it can support all these big names now scrambling to get into just about any new area they can find. The broader e-commerce market itself was worth around 500 billion in 2010, meaning perhaps its now worth about $100 billion — certainly not a small sum but also not enough for all the companies now chasing that limited pot of dollars. At the end of the day, look for 2 or perhaps 3 of these big players to survive in the longer term, with profitable companies like TMall and ones with cash-rich backers like Amazon China and Yihaodian, standing the best chances for success. But even those companies may have to make major adjustments before the current situation stabilizes, bringing widespread pain to nearly everyone as players open and close new business areas before they find the right mix.

Bottom line: The recent rapid expansion of major e-commerce firms into new product areas is unsustainable, and will end with many failures before 2-3 players emerge after a coming cleanup.

Related postings 相关文章:

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

◙ Dangdang, GOME In New Alliance, More to Come 国美携手当当网 或开启类似合作序幕

◙ 360Buy Losing Focus With Travel Plan 京东商城涉足在线旅行服务业 偏离核心业务

 

News Digest: May 11, 2012 报摘： 2012年5月11日

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The following press releases and media reports about Chinese companies were carried on May 11. To view a full article or story, click on the link next to the headline.

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◙ Proview Refuses Apple (Nasdaq: AAPL) $100 Mln Offer for iPad Trademark – Source (Chinese article)

◙ Yum (NYSE: YUM) to Open Restaurants in Suning (Shenzhen: 002024) Stores (English article)

◙ ICBC (HKEx: 1398) Gets Fed Nod as Chinese Banks Seek US Growth (English article)

◙ SEC Charges Deloitte Shanghai with Refusal to Produce Documents (SEC announcement)

◙ SMIC (HKEx: 981) Reports Q1 Results (HKEx announcement)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

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

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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.

Related postings 相关文章:

◙ E-Commerce: Dangdang CFO Goes, Suning’s New Trip 当当网首席财务官请辞 苏宁进军在线旅游业

◙ Dangdang and Gome: Marriage Ahead? 当当和国美：联姻前夕？

◙ Dangdang Loss Balloons In E-Commerce Wars 当当网在电子商务大战中亏损严重

E-Commerce: Dangdang CFO Goes, Suning’s New Trip 当当网首席财务官请辞 苏宁进军在线旅游业

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There are a couple of interesting news bits from the e-commerce space, one from e-commerce giant Dangdang (NYSE: DANG) whose CFO has just resigned, and the other on an interesting new move by an increasingly aggressive Suning (Shenzhen: 002024) into online travel services. I was originally planning to start with Suning, as that news looks the most interesting in terms of broader strategy. But then I had a look at Dangdang’s stock, and was a bit surprised to see it plunged more than 15 percent after news of the CFO resignation came out, indicating investors are clearly concerned about this development. Dangdang itself wasn’t saying much, except that CFO Conor Yang, who joined the company 2 years ago and saw it through its IPO in late 2010, tendered his resignation for personal reasons. (company announcement; Chinese article) Yang helped Dangdang raise more than $300 million in the successful IPO, with Dangdang shares initially soaring in their trading debut. But since then they have tumbled due to fierce competition in China’s e-commerce space that has led Dangdang and most of its peers deeply into the red, and now they trade at about half of their IPO level. It’s never good to lose a CFO, and it’s especially bad when your CFO leaves when the company is so deeply in the red. Such departures often imply the CFO, who is traditionally more conservative about financial matters, may believe his bosses are pressuring him to understate the nature of bad news like big losses. If that’s the case, look for more turbulence for this already-battered stock as its accounting comes under increasing scrutiny. Meantime, Suning, which has aggressively moved into e-commerce over the past year and is now the country’s fourth-biggest player, announced it is getting into the online travel business by selling airplane tickets and hotel reservation services. (English article) This move looks interesting as the online travel space is already quite crowded, dominated by established players like Ctrip (Nasdaq: CTRP) and eLong (Nasdaq: LONG) and recent entries to the space by e-commerce rival 360Buy and search giant Baidu (Nasdaq: BIDU). (previous post) Suning seems to be quite good at executing its new business strategies, and thus could offer a serious product in the space in a relatively short time. If that happens, along with all these other new initiatives, look for the online travel sector to see a serious jump in competition — and profit erosion — in the next 2 years.

Bottom line: Dangdang’s CFO resignation could point to accounting issues, while Suning’s entry to online travel services will further heat up this increasingly crowded space.

Related postings 相关文章:

◙ Dangdang Loss Balloons In E-Commerce Wars 当当网在电子商务大战中亏损严重

◙ Dangdang and Gome: Marriage Ahead? 当当和国美：联姻前夕？

◙ Baidu’s Qunar: Going Places 百度投资的去哪儿网：前途无量

News Digest: April 17, 2012 报摘： 2012年4月17日

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The following press releases and media reports about Chinese companies were carried on April 17. To view a full article or story, click on the link next to the headline.

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◙ Suning (Shenzhen: 002024) Retail Portal to Launch Travel and Wine Channels (English article)

◙ Marvel’s “Iron Man 3” to Be Co-Produced in China (Businesswire)

◙ Goldman Sachs (NYSE: GS) Said to Raise $2.5 Billion in ICBC (HKEx: 1398) Sale (English article)

◙ People’s Daily Web Site Sets IPO Price Range, Demand Strong (Chinese article)

◙ Sina (Nasdaq: SINA) Weibo Microblog Releases Ad Price List (English article)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

Dangdang and Gome: Marriage Ahead? 当当和国美：联姻前夕？

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The arrival of spring is bringing a sudden surge in new partnerships for China’s overheated tech space, as companies seek any competitive advantage they can find to stay in business. Online video sites Youku (NYSE: YOKU) and Tudou (Nasdaq: TUDO) led off the parade with announcement of their $1 billion marriage last month (previous post), followed by a strengthening of ties last week between Apple (Nasdaq: AAPL) and Foxconn International (HKEx: 2038), one of its main iPhone producing partners. Now struggling online retailer Dangdang (NYSE: DANG) and equally embattled real-world electronics retailer Gome (HKEx: 493) have formally cemented a relationship that will see the pair merge their online electronics retailing business. (company announcement) This new tie-up has been rumored for a while now so it isn’t really news (previous post), though it should help both partners better compete with 360Buy, the online retailer that started out as an electronics seller, as well as Suning (Shenzhen: 002024), Gome’s main real-world retailing rival that has also pushed aggressively into the online space. But I suspect what really has investors excited, and myself intrigued as well, is the possibility that this alliance could eventually develop into an outright marriage between these 2 companies, each of which could greatly benefit from the other’s traditional strengths. Investors in New York bid up Dangdang shares as much as 15 percent in Monday trade to levels not seen since last September, with the stock closing up nearly 10 percent. Still, its shares are trading at just a third of their level from a year ago — testimony to a bloody price war with 360Buy and other players backed by the likes of Amazon (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT) in China’s ultra-competitive e-commerce space. That price war pushed Dangdang itself deeply into the loss column in its latest reporting quarter, with the company posting a $21 million loss for the fourth quarter of 2011. (previous post) While Dangdang’s troubles have mostly appeared over the last year, Gome’s date back a bit longer, starting a few years back after its charismatic founder Huang Guangyu was arrested on insider trading allegations. Since then Gome has been involved in an endless series of internal power struggles, which has undermined its ability to function effectively. This new partnership won’t immediately address Gome’s internal problems, but it could give both companies a nice boost by allowing each to draw on its traditional strengths to help the other if the partnership runs smoothly. Of course there’s no guarantee that will happen, as Huang may still try to interfere with the new partnership from his prison cell and Dangdang’s husband and wife founders, Peggy Yu and Li Guoqing, are also quite opinionated and may not easily want to give up any control of their company. But if both sides realize that a strong partnership is in everyone’s own interest, I could see this relationship deepen and eventually result in a real-world merger in the next 2-3 years.

Bottom line: The new partnership between Gome and Dangdang could evolve into a true merger within the next 2-3 years if the 2 sides can work well together.

Related postings 相关文章:

◙ Dangdang, GOME In New Alliance, More to Come 国美携手当当网 或开启类似合作序幕

◙ Dangdang Loss Balloons In E-Commerce Wars 当当网在电子商务大战中亏损严重

◙ 360Buy Heats Up E-Books, People’s Daily Goes to Market 京东商城高调进军电子书,人民网开启上市进程

News Digest: February 16, 2012 报摘： 2012年2月16日

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he following press releases and media reports about Chinese companies were carried on February 16. To view a full article or story, click on the link next to the headline.

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◙ China Mobile (HKEx: 941) to Build Second National Call Center (English article)

◙ Apple (Nasdaq: AAPL) Asks Amazon (Nasdaq: AMZN), Suning to Drop iPad (English article)

◙ SouFun (NYSE: SFUN) Announces Q4 and Fiscal Year 2011 Results (Businesswire)

◙ NetEase (Nasdaq: NTES)  Reports Q4 and Fiscal Year 2011 Financial Results (PRNewswire)

◙ Former Acer (Taipei: 2353) China VP Named 360Buy’s CMO (Chinese article)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

Tidbits: Alibaba, Anhui Conch, Sinopec, China Mobile

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There are quite a few too good stories out there today, so here are some quick takes on a few that didn’t make the headlines but look interesting nonetheless.

— The chief executive of Alibaba’s Etao has held a high-profile media briefing to announce his company, operator of a search engine specializing in e-commerce, will invest 1 billion yuan in its business. (English article) This event is a clear signal to the market that Alibaba intends to stand by this investment despite recent moves by a number of major e-commerce sites, including 360Buy, Dangdang (NYSE: DANG) and Suning (Shenzhen: 002024), to block their pages from inclusion in Etao’s search results.

— Sinopec (HKEx: 386; NYSE: SNP) is reportedly in talks to buy a stake in Galp’s Brazilian Unit, for what’s sure to be an overinflated price. (English article) This latest potential mega-acquisition by a Chinese oil major just shows how China’s policy of buying global assets at any cost to feed its growing economy continues to be in effect, even as oil prices show every sign of coming down for an extended period.

— The China Daily is reporting that Anhui Conch (Shanghai: 600585; HKEx: 914), one of the country’s leading cement makers, aims to go global by purchasing distressed international assets for bargain prices, as most of the world’s construction industry suffers during the global downturn. I would look for this company to carry through with this plan with a major announcement or two over the next year, but have serious doubts about its ability to manage such global assets.

— Chinese media are reporting that China Mobile‘s (HKEx: 941) long-running talks with Apple (Nasdaq: AAPL) to make a TD-SCDMA iPhone have finally broken down, confirming what I had already suspected several weeks back. (Chinese article) If true, which seems likely, this would be a relatively major setback for China Mobile, which was counting on the iPhone to breathe some life into its anemic 3G business.

Alibaba’s Etao Faces New Merchant Revolt

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E-commerce leader Alibaba Group looks set to soon get its long-awaited wish for separation from major stakeholder Yahoo (Nasdaq: YHOO), but it won’t have much time to celebrate as new fires seem to be popping up everywhere for nearly all of its major businesses. The latest crisis for the increasingly embattled company has cropped up at its Etao search site, which Alibaba is trying to build up as a specialist in e-commerce searches that can eventually rival online search titan Baidu (Nasdaq: BIDU). Chinese media are reporting that Etao has confirmed that it is no longer indexing search information from sites for a number of major online retailers, including general merchandiser Dangdang (NYSE: DANG) and electronics giant Suning (Shenzhen: 002024) (Chinese article). The confirmation comes just a week after another leading e-commerce site, 360Buy, hinted it may block its pages from Etao searches (previous post), and indeed 360Buy was among the new list of confirmed companies whose pages will no longer be indexed by Etao. With all these major online retailers blocking their material from Etao searches, and the list likely to grow, Alibaba must certainly be worried about the future viability of Etao as a true e-commerce search engine. This latest crisis follows an uprising earlier this month by independent merchants on Alibaba’s B2C platform, Taobao Mall, after the site sharply hiked its fees. That same group of merchants, which has been wreaking havoc on the Taobao Mall site, later moved its rabble-rousing campaign to Alibaba’s electronic payments site, Alipay, as well. (previous post) While all of these crises rage, Alibaba got a rare piece of good news as domestic media reported that Yahoo is looking to sell its 40 percent stake in Alibaba, as the US web giant tries to dispell broader talk that the entire company itself is for sale. Alibaba has long clamored for Yahoo to sell the stake amid friction between the two companies, so clearly it should be happy about this news. But with all the crises now happening in its own businesses, Alibaba won’t have much time to celebrate and indeed might wish it had an ally to help it in this time of trouble.

Bottom line: Alibaba may soon get its official independence from major stakeholder Yahoo, but it won’t have time to celebrate as it faces an escalating crisis at its Etao search site.

Related postings 相关文章:

◙ Albaba Faces New Assaults From Merchants, 360Buy 阿里巴巴受到中小商户和京东商城的双重夹攻

◙ Taobao Mall’s IPO March Collides With Merchant Uprising 淘宝商城IPO或因商户“起义”被推迟

◙ Alibaba Sharpens Focus in Yahoo Buy-Out, Taobao Mall 阿里巴巴回购雅虎所持股权有望