Consolidation continues to advance in the Chinese supermarket aisle, with word that Hong Kong grocery operator Dairy Farm (London: DFIB) is paying nearly $1 billion for 20 percent of Yonghui (Shanghai: 601933), one of China’s top chains. A couple of years ago I would have said this deal looked like a good one for both sides, combining Dairy Farm’s well-run Hong Kong-based chain of Wellcome supermarkets with Yonghui’s sizable Chinese operations. But frankly speaking, China’s rapid migration of food shopping into the e-commerce realm makes the whole idea of consolidation of brick-and-mortar operations look like a belated effort with limited growth potential. Read Full Post…
The list of traditional retailers suffering from the e-commerce challenge has gained a new member, with domestic giant Wumart (HKEx: 1025) reporting its profit for 2013 fell for the first time in 5 years. It’s noteworthy to point out the last time Wumart’s profit fell was at the height of the global financial crisis in 2008, when the reasons for the downturn were sudden and severe but also relatively short-term. This time the reasons are much more gradual and signal a longer term decline for traditional retailers like Wumart, which are facing an unprecedented challenge from big e-commerce names like Alibaba, JD.com and Amazon China (Nasdaq: AMZN). Read Full Post…
If I was a shareholder in e-commerce firm Dangdang (NYSE: DANG), I would definitely sell my stock after hearing about the company’s latest announcement of a tie-up with Walmart-backed (NYSE: WMT) Yhd.com. I personally wasn’t surprised by the nature of the tie-up, which will see the pair cross-promote each others’ services, even though I was a bit disappointed that there was no equity exchange. Dangdang had previously confirmed it would announce a tie-up after rumors of an alliance first appeared a few weeks ago. This kind of hype followed by disappointment is quite typical of Dangdang’s co-founder and CEO Li Guoqing, whose fierce independence could ultimately lead to the marginalization or even death of his company. Read Full Post…
Anti-monopoly regulator may need to brandish veto stamp
After years of fragmentation, China’s Internet has undergone a sudden and radical overhaul over the past year, with 3 major firms emerging as major consolidators. The frenzy of new tie-ups and acquisitions has been a welcome development, helping to cool overheated competition in a wide array of sectors where most companies were losing money.
But with the emergence of Alibaba, Tencent (HKEx: 700) and Baidu (Nasdaq: BIDU) as the 3 major consolidators, China’s anti-monopoly regulator should start to give closer scrutiny to future deals to avoid too much reduction in the competition necessary to ensure future innovation and consumer choice. Such scrutiny could and should ultimately lead to the veto of some future deals, especially larger ones, by regulators who need to become more assertive in the space. Read Full Post…
Two of China’s older Internet names, e-commerce firm Dangdang (NYSE: DANG) and leading video sharing site Youku Tudou (NYSE: YOKU), are showing just how important profits have become for their investors, with shares of each posting big gains after reporting moves into the black after years of losses. In the case of Youku Tudou, the company didn’t actually report a net profit, but said it moved into the profit column on an operating basis in last year’s fourth quarter. Dangdang was more definitive, posting its first net profit since sinking into the red 2 years ago when competition in China’s e-commerce sector first began heating up. Read Full Post…
Alibaba’s colorful and sometimes controversial founder Jack Ma has been called many things in the past, but even he must be surprised and somewhat alarmed at the latest monicker of “vampire” given to him by an influential commentator at CCTV, China’s leading broadcaster. I don’t usually take sides in this kind of politically sensitive debate, though in this case I really do think that CCTV’s claim is largely unjustified. I suspect the attack, which Alibaba is correctly taking quite seriously, was prompted at least partly at the urging of big state-run lenders that are unhappy about the meteoric rise of Alibaba’s Yu’ebao service, which competes with traditional savings accounts. Read Full Post…
I don’t usually write about the same news twice in a single week, but in this case reports with new details on looming tie-ups involving 4 of China’s top e-commerce firms seem to justify an update. In the larger of the deals, the latest reports say top Internet firm Tencent (HKEx: 700) is nearing a deal that would see it buy 6-20 percent of JD.com, forging a partnership that would create a major new e-commerce contender to rival industry leader Alibaba. In the second update, 2 smaller e-commerce firms, Yihaodian and Dangdang (NYSE: DANG), have confirmed earlier reports that they will announce a major alliance early next month. Read Full Post…
Two of China’s biggest Internet names are making interesting new moves into the tough US market, with word that Alibaba has launched an American e-commerce website and Baidu (Nasdaq: BIDU) founder Robin Li is helming a major new Hollywood animation studio. Both moves look cautious but relatively well conceived, even though each carries a degree of risk due to intense competition in the US e-commerce and animation sectors. Still, I have to admire both companies for at least trying, even if their chances of success could be around 50-50. Read Full Post…
Two US high-flyers that have relied heavily on the China story to fuel their growth are suddenly going into proactive mode, with KFC’s parent Yum (NYSE: YUM) and personal care products maker Herbalife (NYSE: HLF) both taking new steps to avoid repeats of previous recent disasters. In the former case, Yum has said that so far it sees no signs of declining business at its China KFC stores as we head into the height of the current bird flu season. Meantime, Herbalife is trumpeting its receipt of a quality designation for its products in Taiwan, as it seeks to avoid repeating a disaster at rival Nu Skin (NYSE: NUS) in China last month. Read Full Post…
It’s quiet outside as markets reopen on this first work day after the New Year, so I thought I’d start off 2014 with some predictions for the year ahead in the sectors that I cover. Generally speaking, I do think the first half of the year will see a continuation of strong momentum that began in late 2013 for many sectors. But that momentum will slow as we near the mid-year mark, and 2014 could end with a whimper as the Chinese economy continues to slow and Beijing pushes for higher quality growth. Read Full Post…
It seems appropriate that I’m writing this post on my computer while sitting in a coffee shop at a Wanda Plaza shopping center in Shanghai, since new reports say the Wanda real estate group owned by one of China’s richest men is planning a big new move into the booming e-commerce sector. Wanda Group Chairman Wang Jianlin will certainly have plenty of competition if he makes such a move, including from an increasingly aggressive Walmart (NYSE: WMT), whose China-based Yihaodian site is reportedly getting set to move into a ground-breaking new free-trade zone (FTZ) in Shanghai. Read Full Post…
