E-commerce leader Alibaba loves to talk about how the business model for its popular TMall online mall gives it an edge over most of its rivals by letting it focus on its role as a web mall operator while leaving the actual business of managing online stores to third-party merchants. But the company is much less talkative about some of the downsides to such a business model, most notably the issue of quality control for the products and service provided by thousands of merchants that sell their goods on TMall. A sharp and sudden price hike in store rentals fees by TMall last year provoked a sharp backlash from many smaller merchants, creating huge headaches and a publicity nightmare for Alibaba. Now, many of those same small- and medium-sized merchants, known in the industry as SMEs, are complaining once again about new policies that Alibaba says are designed to improve quality and customer service, even as the SMEs argue those policies discriminate against them and lack transparency. (Chinese article)
Tag Archives: TMall
News Digest: October 9 报摘： 2012年10月9日
The following press releases and media reports about Chinese companies were carried on October 9. To view a full article or story, click on the link next to the headline.
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- China’s Huawei, ZTE (HKEx: 763) Should Be Kept From US: Draft Congress Report (English article)
- Merchants Have Doubts Over TMall’s New Program Targeting Fake Goods (Chinese article)
- Haier (HKEx: 1169) Says F&P (NZ: FPA) Independent Directors’ Valuation Optimistic (Chinese article)
- Qihoo 360 (NYSE: QIHU) Partners with Ctrip (Nasdaq: CTRP) (English article)
- Cisco (Nasdaq: CSCO) Cuts Ties to China’s ZTE (HKEx: 763) After Iran Probe (English article)
E-Commerce: Big Spenders Keep Spending 大型电子商务企业继续挥金如土
News from e-commerce giant Suning (Shenzhen: 002024) and web portal Phoenix New Media (NYSE: FENG) indicate a long-awaited consolidation in e-commerce has begun at the bottom of the Internet food chain, where many smaller players are quietly closing up shop as big names continue their aggressive fight for market share.
News Digest: August 1, 2012 报摘： 2012年8月1日
The following press releases and media reports about Chinese companies were carried on August 1. To view a full article or story, click on the link next to the headline.
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- Gaopeng, FTuan Combine to Form New Online Auction Company Groupnet (Chinese article)
- Hanlong Says China Approves $1.3 Bln Bid for Australia’s Sundance (Sydney: SDL) (English article)
- Alibaba’s TMall 3C, Appliance Transactions Up 200% YoY in H1 2012 (English article)
- Lenovo (HKEx: 992), EMC (NYSE: EMC) in Strategic Tie-Up, to Form JV (Chinese article)
- Dianping Says Mobile Users At More Than 40 Mln, Figure Surpasses PC Users (Chinese article)
- Latest calendar for Q2 earnings reports (Earnings calendar)
Alibaba Feels the E-Commerce Pinch 阿里巴巴感受电子商务竞争
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
China: Room for How Many Amazons? 中国电商市场到底有多大？
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
