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Consumers lose out in price war

By Xin Zhiming (China Daily)

13:15, August 16, 2012

It hasn't taken consumers long to realize that the ongoing price-cutting competition by China's top e-retailers is just another gambit in the battle for supremacy.

Liu Qiangdong, president of top online retailer 360buy Jingdong Mall, at 360buy.com, announced on Tuesday through his micro blog that Jingdong will wage a price-cutting war against its rivals, most noticeably suning.com owned by domestic retail giant Suning Appliance Co Ltd, and gome.com.cn of Gome Electrical Appliances Holding Limited.

Liu said on his micro blog that Jingdong Mall, often dubbed China's amazon.com, will always price its online products 10 percent lower than the same products sold in the online shops of Suning and Gome.

Suning and Gome immediately responded by announcing that the prices of their online products will always be lower than those of Jingdong.

However, when people rushed online to buy these low-price products on Wednesday, they found that it was not so easy to grab the promised bargains, as quite a few of the so-called close-price items were either out of stock or not really on sale at a low price.

According to etao.com, a website that compares the prices of online products, by noon on Wednesday, among the 2,200 electronic appliance products for sale at 360buy Jingdong Mall, only 78 items, or 1.6 percent, had been reduced in price and about 30 percent of the supposedly lower-priced items were out of stock.

Jingdong even raised the prices of about 50 items by up to 100 percent, according to etao.com.

Meanwhile, Gome had cut the prices of about 7.8 percent of its online products, etao.com said.

There are few signs these companies are seriously offering discounts for consumers, some analysts pointed out, and their price-cutting initiatives appear to be marketing gambits aimed at taking customers from one another rather than genuine offers of discounts.

Many foreign e-retailers jealously eye the size of China's e-commerce market despite its starting later than Western businesses. According to the latest research by Boston Consulting Group, e-retail sales in China are expected to hit $360 billion in 2015, triple the current spending. The country has 193 million online shoppers today, compared with 170 million in the United States, according to the consulting firm.

However, due to the immature market conditions, life for Chinese e-retailers is not that easy. The proportion of e-retail to retail sales as a whole remains small and it seems a remote dream for domestic e-retailers to make a handsome profit.

Jingdong, for example, ventured into online retailing in 2004, selling almost everything, from books and furniture, to electronic appliances and infant products. It is known for its low prices and fast delivery, but even so it is still struggling to make ends meet.

Despite the claim by its President Liu Qiangdong that it has ample cash in hand, it is not known how long the company will be able to continue after its long-awaited listing plan failed to materialize this year. Jingdong had planned to raise about $5 billion from an IPO this year, but was forced to put it off because of unfavorable market conditions amid global economic difficulties.

Therefore, it is not surprising that Jingdong has entered into a price war with its major rivals as it bids to grab a larger market share as soon as possible.

It seems unlikely that consumers are going to benefit much from the current price war, and once the dust settles those that emerge strongest will be in a position to dominate the market.

In the meantime, regulators should keep a close eye on how the battle develops to ensure there are no market irregularities that jeopardize consumers' interests.

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