Tag Archives: GOME

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