China just devolved into open war… on the Internet.
On Tuesday, Liu Qiangdong, the CEO of Beijing Jingdong Century Trading Co., the parent of online Amazon-like retail site 360Buy.com (known in Chinese as Jingdong "京东"), went on microblog Weibo and basically announced an all-out price war. To drive home just how serious he was, Liu added that any sales staff that turned even 1 yuan (0.16) gross profit during that time would be canned.
Liu declared that Jingdong's new policy will be zero gross profit for its consumer electronics and home appliances retail business for the coming three years. Another Weibo post called for applications for 5,000 undercover shoppers--to be paid no less than 3,000 yuan ($484) a month--who would amass price information from Jingdong's competitors. Any Jongdong price that did not beat competitors' prices by at least 10 percent would qualify for a price match or coupon. In certain cities, customers were even guaranteed same day delivery. Liu particularly targeted two competitors, writing that "prices of large home appliances sold on Jingdong will be at least 10 percent lower than those in the Gome and Suning stores." Gome (Guomei 国美) and Suning 苏宁) are major appliance retailers in China.
China web giant Tenecent's retail site 51buy.com immediately announced it would not only match Jingdong's prices, but, starting in September, undercut them.
Not to be left out of the massacre was China cellphone maker Xiaomi, which has been slowly scrapping for market share. Following other retailers, the brand's CEO, Lei Jun, announced that Xiaomi would drop the price of its popular phone by nearly a third, knocking 700 yuan ($113) off the online price to just 1,299 yuan ($210). Xiaomi also offered a 700 yuan rebate to any customer who bought the phone in the last two weeks.
On Tuesday, Liu Qiangdong, the CEO of Beijing Jingdong Century Trading Co., the parent of online Amazon-like retail site 360Buy.com (known in Chinese as Jingdong "京东"), went on microblog Weibo and basically announced an all-out price war. To drive home just how serious he was, Liu added that any sales staff that turned even 1 yuan (0.16) gross profit during that time would be canned.
Liu declared that Jingdong's new policy will be zero gross profit for its consumer electronics and home appliances retail business for the coming three years. Another Weibo post called for applications for 5,000 undercover shoppers--to be paid no less than 3,000 yuan ($484) a month--who would amass price information from Jingdong's competitors. Any Jongdong price that did not beat competitors' prices by at least 10 percent would qualify for a price match or coupon. In certain cities, customers were even guaranteed same day delivery. Liu particularly targeted two competitors, writing that "prices of large home appliances sold on Jingdong will be at least 10 percent lower than those in the Gome and Suning stores." Gome (Guomei 国美) and Suning 苏宁) are major appliance retailers in China.
China web giant Tenecent's retail site 51buy.com immediately announced it would not only match Jingdong's prices, but, starting in September, undercut them.
Not to be left out of the massacre was China cellphone maker Xiaomi, which has been slowly scrapping for market share. Following other retailers, the brand's CEO, Lei Jun, announced that Xiaomi would drop the price of its popular phone by nearly a third, knocking 700 yuan ($113) off the online price to just 1,299 yuan ($210). Xiaomi also offered a 700 yuan rebate to any customer who bought the phone in the last two weeks.
As with any declaration of war, alliances soon formed. In responses to Jingdong's announcement, e-commerce site DangDang (当当网) joined the fray, announcing it would side with Gome "against Jingdong." Just a few months ago, DangDang and Gome had reached a strategic partnership. In fact, Jingdong's (360buy.com's) attack could have been triggered by the pressure the partnership put on the leading e-tailer, which saw sales reach 30 billion yuan ($4.7 billion) in 2011. Data from iResearch show that there are 210 million online shoppers in China who spent 268.4 billion yuan ($43.3 billion) in the second quarter of 2012, a 52 percent increase from 2011.
A day later, Jingdong, Suning, Gome, (Xiaomi CEO) Lei Jun, and (Jingdong CEO) Liu Qingdong were five of the top ten trending topics on Weibo.
While price battles have been increasing in scope and severity since early 2012, the latest folly from Jingdong represents a whole new style of total war. A few on Weibo have speculated that Jingdong's (360Buy.com's) strategy may have been born out of itsrecent disappointing IPO attempt.
An interesting side note is that Walmart--an early investor in 360Buy--was just given approval by the Ministry of Commerce to purchase a controlling stake in Yihaodian (1号店网), China's largest online supermarket.
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