Tag Archives: Dangdang

Latest business news and financial news from E-Commerce China Dangdang Inc. (DANG) by Business expert on China’s market Doug Young

Alibaba Feels the E-Commerce Pinch 阿里巴巴感受电子商务竞争

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Alibaba appears to be feeling the pinch that has hit most of its major rivals over the last year as they engage in a nonstop game of cutthroat competition, with news that China’s e-commerce leader is doing the once unthinkable: offering discounts. At the same time, media are reporting the company has also become the latest entrant to the online book-selling business, again reflecting the overheated competition that has gripped the market as everyone battles with everyone else in just about every major product category. To understand the significance of this latest news, we need to look first at Alibaba’s e-commerce model, which is quite different from that of its major rivals like Jingdong Mall, which also goes by the name of 360Buy, and Dangdang (NYSE: DANG). Whereas nearly all of its major rivals directly sell their merchandise to consumers, Alibaba uses a model that see it acting as middleman for other online retailers by letting them set up shops on its online TMall platform, formerly known as Taobao Mall. That means that Alibaba, as a middleman platform operator, has largely avoided the recent price wars infecting most of its rivals, whose margins have plummeted as they offered steep discounts to maintain their market position. Now it appears that Alibaba is also feeling some of this price-war pain, as the company reportedly prepares to help the merchants on its TMall platform by providing $47 million in rebates for sales of their various electronics, from cellphones to televisions and air conditioners. (English article) That figure doesn’t look all that big for a company of Alibaba’s size, but it probably reflects the fact that many of the merchants who sell things on TMall are feeling the effects of the price wars that have driven nearly all major e-commerce companies deeply into the loss column, including Dangdang, the only publicly traded company in the space. (previous post) Alibaba likes to boast that it is one of the few e-commerce companies that has remained profitable throughout the price wars, but clearly it’s starting to feel some pressure as many of the merchants who sell items on TMall are being forced to do so at a loss and perhaps even closing up shop. I wouldn’t expect TMall to start losing money anytime soon, though it will clearly feel more pain as the overheated e-commerce sector undergoes a much-needed consolidation that could result in the closure or merger of one or more major players. (previous post) Meantime, Alibaba is copying a tendency by most of its rivals to encroach on each others’ product areas with the latest news that it is boosting its online book-selling business, according to media reports. (English article) That move would following another high-profile entry into the online book business by Jingdong Mall, which made headlines earlier this year when it entered a business dominated by Dangdang and Amazon’s (Nasdaq: AMZN) China site. Despite its late entry to the space, Alibaba will probably gain at least some market share in online books simply because of its size. But from a broader perspective, this move just underscores that the rampant competition in China’s e-commerce space is continuing, with consolidation sorely needed to set the sector on a more solid footing for long-term profitability.

Bottom line: Alibaba’s offer of financial support to its online merchants is the latest sign of rampant competition that has pushed most Chinese e-commerce companies into the red.

Related postings 相关文章:

◙ Alibaba: Let’s Get the Roadshow Rolling　　阿里巴巴：我们开始路演吧

◙ Jingdong Mall on IPO Fast-Track 京东商城IPO提速

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

Jingdong Mall on IPO Fast-Track 京东商城IPO提速

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After reports emerged last week that e-commerce giant Jingdong Mall’s on-again-off-again IPO was on again, it now appears the company is fast-tracking the deal with plans to list as soon as September, providing a big test for the anemic market for Chinese Internet IPOs in the US. It’s still too early to say how this IPO will fare, since it’s still at least 4 months away and a lot can happen to broader market sentiment in that time. Reports last week said that revenue at Jingdong, which also is known as 360Buy, reached 21 billion yuan and are expected to double this year. (previous post) The company has yet to provide any profit or loss figures, but I am quite confident it will show quite a big loss for 2011, possibly $100 million or more, when it finally releases that information, as it battles with other e-commerce names like Alibaba and Dangdang (NYSE: DANG) for market share. Lastly, we know from the earlier reports that Jingdong thinks it’s worth around $10-$12 billion, echoing comments from investors when the company received a record-breaking $1.5 billion investment last year (previous post); but the the company’s investment bankers are now saying a $6 billion valuation is much more realistic, meaning a final valuation might come in around $7 billion. Let’s look quickly at the latest reports, which come about a week after Jingdong reportedly held its first official meeting with analysts to discuss its upcoming offer. According to the reports, Jingdong could make its first non-public filings with the US securities regulator as soon as this month, and has hired Kate Kui, a big name former Bank of America Merrill Lynch banker, to lead the IPO charge. (English article; Chinese article). This sudden fast-tracking of the deal marks the latest chapter in schizophrenic signs from Jingdong, whose founder and chief executive Liu Qiangdong said several times early this year that an IPO was at least several years away, even as other unnamed sources said an offering could be coming in the next 12 months. These latest reports seem to indicate the group pushing for an IPO sooner rather than later has taken control of the situation. I find it a big strange that such a cash-rich company wants to make an offering in such a poor IPO climate, though it’s possible Jingdong’s cash situation could be tighter than many people realize. But I suspect the real reason for this fast-tracking is that the investors who bet $1.5 billion on Jingdong last year want to see some quick returns on their investment, since it’s far from clear what China’s e-commerce market will look like a year or more from now due to the rampant competition with the entry of a number of major global players. All that said, I would say the chances for Jingdong to complete its IPO by the end of this year are good, though it’s unlikely to get a great valuation and could end up raising just $1 billion or less due to poor market sentiment towards loss-making Chinese Internet companies.

Bottom line: Jingdong Mall is likely to complete an IPO by the end of the year, but will get a weak valuation on a deal that could ultimately raise only $1 billion or less.

Related postings 相关文章:

◙ Jingdong Mall: Back on the IPO Track? 京东商城上市：“狼”真要来了？

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

◙ Message to 360Buy: Make Up Your Mind! 京东商城IPO“暗战”

Jingdong Mall: Back on the IPO Track? 京东商城上市：“狼”真要来了？

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After at least a month or 2 of silence from Jingdong Mall about its schizophrenic plans for a mega-IPO, the e-commerce giant that also goes by the name of 360Buy has suddenly vaulted back into the headlines with talk that it’s preparing a listing as soon as September. I honestly don’t know what to think of these latest reports anymore, as the company has sent so many contradictory signs on the IPO issue over the last year, with CEO Liu Qiangdong publicly denying plans for any such offering for at least a couple of years, even as unnamed people from the investment community say differently. I would have possibly have ignored these latest reports, except that they contain a level of detail that looks too deep to be purely gossip and speculation. (English article; Chinese article) According to one of the reports, Jingdong managers, including Liu Qiangdong himself, and their investment bankers met with analysts in Hong Kong earlier this week for 3 hours to discuss their plans, which include registration for a New York listing as early as June, followed by an actual IPO as soon as 3 months after that. Most of this news appears to be coming from analysts who attended the meeting, including one who said that Jingdong’s CFO was also present, as were representatives from major investment banks including Goldman Sachs (NYSE: GS), JPMorgan (NYSE: JPM) and CICC. During the meeting, Jingdong also reportedly made some of its first official disclosures about its sales, which apparently reached 21 billion yuan last year and are expected to more than double in 2012. There’s no mention of profits or losses, although most believe that Jingdong is losing big money due to a recent series of price wars with rivals like Alibaba’s TMall and Dangdang (NYSE: DANG). The report also discusses valuation, with 360Buy reportedly looking for a valuation of around $10 billion even though the investment banks said $6 billion is more realistic. This level of details leads me to believe that perhaps something is really happening, which would be consistent with some previous signals, and that we could actually see an IPO if the financial markets show even just a little improvement by this fall. If that happens, I would congratulate Jingdong for finally making up its mind after a past year of schizophrenic signals. As to whether anyone will want to buy into this offering, that’s a completely different story. I imagine that some investors will be tempted by the company’s position as China’s second largest e-commerce firm and big growth forecasts, but will no doubt be concerned about its losses. All that said, the offering could at least attract moderate interest, perhaps helping to breathe some life back into a moribund market for overseas Chinese listings.

Bottom line: The latest reports of an IPO as soon as September for e-commerce firm Jingdong Mall look like they may be credible, and could attract moderate investor interest.

Related postings 相关文章:

◙ Message to 360Buy: Make Up Your Mind! 京东商城IPO“暗战”

◙ E-Commerce: 360Buy Awaits IPO Window, Amazon Expands 京东IPO融资心切 亚马逊物流扩张加剧竞争

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

Commerce Ministry Weighs in on Price Wars 商务部或对电商领域价格战有所行动

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You know things are bad when even your national regulator isn’t optimistic, which appears to be the situation based on comments by a top Commerce Ministry official discussing rampant competition plaguing China’s e-commerce sector. Of course, it doesn’t take a genius to know that China’s vibrant e-commerce industry is in the midst of a series of cutthroat price wars, with new promotions being announced almost daily by the likes of Jingdong Mall, also known as 360Buy, Dangdang (NYSE: DANG), Yihaodian and Suning (Shenzhen: 002024). What’s more interesting here is the fact that the regulator is commenting on the situation, which hints that perhaps it may soon make an attempt to ease the situation — a step that would be consistent with China’s past behavior but also one I would strongly advise against. According to media reports, a top Commerce Ministry official for e-commerce, speaking at an event in Beijing this week, noted that the online retailing space has huge growth potential, with total sales set to pass 3 trillion yuan in the country’s current 5 year plan. But he also noted that companies are using the future to subsidize the present, which has led most major players to sink deeply into the red. (Chinese article) That trend has been all too obvious on company financial statements lately, with Dangdang, the biggest publicly traded player, and newly listed discount retailer Vipshop (NYSE: VIPS) both recently reporting big quarterly losses. (previous post) None of this is really news, as these price wars have been going on for nearly a year now. But what’s potentially cause for concern is that the Commerce Ministry is speaking so publicly about its own concern for the sector, since regulators are traditionally supposed to remain low-key and impartial to market developments as long as conditions remain orderly. These comments indicate the ministry may be considering taking steps to cool the competition, perhaps by bringing the major parties together to try and tone down their price wars. Indeed, the very same Commerce Ministry made a similar move last year, when it tried to mediate a patent dispute between telecoms equipment leaders Huawei and ZTE (HKEx: 763; Shenzhen: 000063). (previous post) That attempt looked clumsy and inappropriate and I doubt it yielded any results, and a similar attempt to end the rampant competition in e-commerce would most likely product a similar outcome. It’s somewhat understandable that Beijing regulators might want to prevent this kind of destructive situation from getting out of control, which is clearly the case with e-commerce. But experience in the West has shown that government intervention in these situations usually just makes the situation worse, and instead natural market forces are the best antidotes for these kinds of problems.

Bottom line: The Commerce Ministry needs to remain impartial in ongoing e-commerce price wars and let market forces resolve the situation.

Related postings 相关文章:

◙ Beijing Plays ‘Father Knows Best’ In Huawei-ZTE Spat 中国政府插手华为与中兴之争

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

◙ Youku and Dangdang: Stuck in the Red 优酷和当当：生存在亏损

Youku and Dangdang: Stuck in the Red 优酷和当当：生存在亏损

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Two of China’s money-losing Internet companies to make New York IPOs at the height of an investor frenzy for their shares in 2010 have posted more losses, though e-commerce firm Dangdang (NYSE: DANG) and online video leader Youku (NYSE: YOKU) appear to be moving in different directions in their quest for profits. Let’s look at Dangdang first, which was profitable when it first went public, but slipped deeply into the red last year as competition intensified with other names like Jingdong Mall in China’s crowded e-commerce market. Dangdang posted its third consecutive quarterly loss in its latest reporting period, losing $15.8 million to be exact. (results announcement) Investors certainly didn’t seem to like the news, bidding down Dangdang shares by 16 percent after the numbers came out. But from my perspective, the numbers actually do appear to show that Dangdang may have turned the corner and its situation may be improving, which is good not only for the company but also for the broader e-commerce space where most players are now losing money as they fight for market share. In terms of actual numbers, Dangdang’s first-quarter loss was actually an improvement from the previous quarter, when it lost $21 million. Furthermore, the company’s gross margins also improved to 14.2 percent from a low of 10.5 percent in the previous quarter, though the figure is still well below the nearly 20 percent figure from a year earlier. It’s too early to say if Dangdang is back on the road to profitability, but if it can sustain this latest trend into the current quarter it could actually have a chance of returning to the black by the end of the year. That situation contrasts sharply with Youku, which reported its net loss more than tripled in its latest reporting quarter, even as revenue more than doubled for the period. (results announcement) The cause for the big jump in net loss appears to be ballooning costs, with operating costs up 140 percent while administrative expenses tripled. Rapidly rising costs isn’t necessarily a bad thing for a company at Youku’s stage of development, but only if that rate of increase is roughly comparable to the revenue growth rate. Ideally, costs should grow more slowly than revenue, showing a company is achieving better margins as it gains bigger scale. But in this case the opposite seems to be true for Youku, with costs growing much more rapidly than revenue. Further clouding the issue, Youku forecast revenue in the current quarter would only rise 90-100 percent, a slowdown from the 111 percent growth rate in the first quarter. Investors also punished Youku stock, which fell 10 percent before the results came out though its shares rebounded slightly in after-hours trading. Youku’s problems are only likely to grow as it prepares to merge with rival Tudou (Nasdaq: TUDO), which will bring together 2 very different corporate cultures. All that said, if I were an investor in these companies, I would say the outlook definitely looks much brighter for Dangdang than Youku over the next 12 months.

Bottom line: Dangdang could return to the profit column by the end of this year as e-commerce competition eases, while Youku may have to wait a year or more for its first profits.

Related postings 相关文章:

◙ Rumored Tie-Up to Challenge Youku-Tudou 腾讯、搜狐和百度或结盟 挑战优酷-土豆联姻

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

◙ Tudou, Youku: Stormy Marriage Ahead 优酷土豆“联姻”：想说爱你不容易

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

 

Shanda Cloudary Wows Investors With Profit 盛大文学利润令投资者惊叹

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Despite a dismal climate for US-listed Chinese stocks, online entertainment specialist Shanda appears to be moving ahead with a long-delayed IPO for its Cloudary online literature unit by attempting to wow investors with something they haven’t seen in a while: a profit. If Cloudary does indeed make it to market, it would become only the second Chinese firm to make a public listing in New York this year, as US investors have largely shunned Chinese stocks following a series of accounting scandals last year. The only company to make an offering so far this year has been a money-losing online discount retailer named Vipshop (NYSE: VIPS), whose March IPO was a resounding flop. (previous post) Another money-losing firm, auto rental specialist China Auto was all set to make a New York IPO to raise around $100 million last month, when it abruptly halted the deal due to anemic demand just before its shares were set to price. (previous post) Shanda had indicated earlier this year it was planning to refile for the Cloudary IPO, which it had to abort last summer after sentiment turned sharply negative due to all the accounting scandals and a constant stream of short seller attacks. Now it has submitted a new filing to the US securities regulator, surprising everyone by announcing that Cloudary posted its first-ever profit of about $3 million in the first quarter of 2012. (Chinese article) If that’s true, the company would indeed have a rare asset in its profitable bottom line, contrasting sharply with most of the Chinese companies that have gone public over the last year and a half, starting in late 2010 when such firms were an investor favorite. Names like online video site Youku (NYSE: YOKU) and social networking site Renren (NYSE: RENN) all have yet to report a profit despite making public offerings during that period, and online retailer Dangdang (NYSE: DANG), one of the few profitable companies at the time of its offering, has fallen deeply into the loss column since then due to stiff competition. So against that backdrop, Shanda’s Cloudary offering actually could look quite attractive and may potentially even draw some moderate investor interest if it moves ahead. When news of this offering first surfaced last year, I said it actually looked relatively attractive, as online literature was a growing area, driven by a boom in demand from users of e-readers, smartphones and tablet PCs looking for material to read on these mobile devices. Furthermore, Shanda appears to be a relative leader in the area, and could earn a premium for being the first to make an IPO in this category. Of course the big risk could be that Shanda, aware that investors aren’t interested in money-losing companies, has used accounting tricks to make Cloudary profitable for this latest reporting quarter, and that the company could slip back into the loss column in the current quarter. I suspect the truth is somewhere in between, that Cloudary is probably still losing money but is perhaps is quite close to becoming profitable on a sustained basis perhaps by the end of this year. All that said, look for investors to show some moderate interest in this offering when it moves forward, providing a welcome relief for the beleaguered IPO market.

Bottom line: Shanda Cloudary’s latest regulatory filing including a first-quarter profit shows it is moving ahead with its New York IPO plan, which could attract moderate interest from investors.

Related postings 相关文章:

◙ IPO Chill Bites LaShou, China Auto 中资企业赴美上市连遭冷遇

◙ China IPO Winter Goes On as Vipshop Flops 唯品会大跌，中国IPO冬季持续

◙ Outlook Cloudy As Shanda Refiles for Literature IPO 盛大文学重启赴美IPO计划

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

Talks Swirls on Baidu’s Lekutian 百度乐酷天拟走“日系风格”

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Baidu (Nasdaq: BIDU) has been phenomenally successful in its core online search business, but it’s had a much harder time diversifying into other areas like social networking and e-commerce. The company called it quits in microblogging last year after a late arrival and half-hearted effort in the space (previous post), and now its latest e-commerce initiative, called Lekutian, appears to also be suffering from its own identity crisis. Lekutian is Baidu’s second major attempt at getting into the lucrative but highly competitive e-commerce space, following its failed effort with another site, called You’a, last year. With Lekutian, Baidu was hoping to avoid the same fate by setting up the business as a joint venture with Rakuten (Tokyo: 4755), one of Japan’s a leading e-commerce companies. Signs that the venture wasn’t progressing as quickly as planned first emerged late last year when domestic media reported that Baidu was halting its new investment in the business — reports that Lekutian denied. Now a new flurry of reports have again emerged on Lekutian, with some saying the venture is making a major directional shift while others are saying the site is implementing major layoffs. (English article; Chinese article) Not surprisingly, Lekutian is denying the layoff reports, though it is also talking openly about the directional shift. One report cites a company spokeswoman saying the site wants to take advantage of its Japan connections to transform itself into an e-commerce platform with a distinctly Japanese flavor, including Japanese brand products and a more Japanese look and feel. The site will also emphasize a more mall-like business model, similar to Alibaba’s Tianmao, which operates a platform on which other retailers can open online stores rather than selling merchandise directly itself. Frankly speaking, this move by Lekutian smells a bit of desperation to me, and hints that the site isn’t doing very well and could easily end up with a similar fate  to the failed You’a. At the same time, I should commend Baidu this time for realizing that it is a latecomer to the e-commerce game, and will have to develop a more niche product as it clearly can’t compete with much bigger and more established giants like Tianmaol, 360Buy and Dangdang (NYSE: DANG), as well as sites operated and invested by big foreign names like Amazon (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT). I do question whether the “Japanese experience” niche that Lekutian is pursuing will find a big audience in China, and suspect the site will ultimately end up as a small player that will later get quietly shut down. Not all of Baidu’s non-core investments have done so badly, with a big bet last year on an online travel site called Qunar looking like it could have good potential. (previous post) If Baidu is smart, it might be advised to invest in more existing companies like Qunar that already have a strong operating record, rather than trying to start its own new businesses, where its record is decidedly not so good.

Bottom line: A major directional shift by Baidu-invested e-commerce site Lekutian hints at troubles at the joint venture, which could end up as a niche player at best.

Related postings 相关文章:

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

◙ Baidu’s Takes a $300 Mln Spin on Travel Market 百度斥资3亿美元进军旅游市场

◙ Baidu’s Latest Botch: Microblogging 百度“微博”的倒掉

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