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People's Daily Online>>China Business

360buy's supplier squeeze is unwise in the long term

By Chen Yongdong (Global Times)

14:08, February 16, 2012

Chinese online business-to-customer (B2C) retailer 360buy.com was recently bombarded with criticism for squeezing its suppliers.

According to Beijing Morning Post, citing an anonymous supplier, 360buy has required suppliers to pay 20 percent of their gross profits from sales on the site to the company, as well as pay a service fee of 200,000 yuan ($31,739).

Suppliers are up in arms, as their gross profit is now no more than 10 percent and net profit is lower than 2 percent, according to 21st Century Business Herald.

360buy's practice shows its desperation to increase its earnings, with the company reportedly also upping its retail prices.

According to a survey released by Etao, a shopping search engine under Chinese e-commerce giant Alibaba Group, 360buy raised its prices by 5 to 15 percent in the fourth quarter of 2011, higher than the other three top B2C platforms dangdang.com, amazon.com.cn and tmall.com.

Though the credibility of the data has been questioned, as Etao is operated by a rival of 360buy, I believe there is truth in it.

Many consumers, including myself, have noticed the price hikes. Also, an investigation by IT website Donews showed that 360buy, whose success mainly came from its attractive prices, is gradually losing its price advantage.

In the competitive B2C market, a low price is the main strategy for companies to gain more market share. Unless 360buy was experiencing severe pressure on its profit margin, it would not raise its prices.

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