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English>>China Business

Price war produces more boasts than savings

By Zhao Qian (Global Times)

08:28, August 20, 2012

Liu Qiangdong, CEO of popular online computer and consumer electronics site 360buy.com, waged a fierce price war last week with his major competitors Suning and Gome. But the event has turned out to be more cold war than total war, despite promises on all sides to slash prices to new lows.

Consumers have been disappointed and industry insiders relieved to find that the conflict has not resulted in significant price cuts, despite both online and off-line stores receiving a dramatic jump in both visits and sales. Some are talking darkly of a joint conspiracy to draw in customers and win media attention.

But the war is still going on. And if no bottom line is established for price cuts, smaller firms risk being eliminated altogether, while the giants may find that the conflict has only ended up costing them. China's home appliance e-commerce sector is still an immature market, and the conflict may set it back by years.

Opening shots

Liu started the war by claiming on his verified Weibo account Tuesday that the prices of home appliances on 360buy.com would be at least 10 percent lower than those at other online retail sites of Suning and Gome, his firm's main competitors. 360buy.com has a longer online presence than the other two firms, and is determined to fend off their attempts to intrude into its business.

After his initial salvo, Liu aggressively published around 40 posts within three days, including a claim that "if Suning cuts its products to one yuan per set, I will sell them for free."

Senior executives of Suning and Gome, which have both online and traditional off-line appliance retail businesses, all accepted the challenges via their own Weibo accounts. Suning promised that all its products will be lower than 360buy.com, while Gome boldly pledged its prices would be 5 percent lower than those of 360buy.com.

But as of Sunday, executives' grand promises hadn't resulted in plunging prices.

Yet there's still no sign of a clear end to the price war, and all the players have pledged on Weibo that they have no intention of making peace.

Suning and Gome declared Friday that, save for computer and telecom products, all their products in brick-and-mortar stores will sell at prices lower than 360buy.com. Normally, the products in physical stores are slightly higher than online products due to higher operation costs.

360buy.com, which began its e-commence business at least five years earlier than Gome and Suning, has established a firm consumer base. It has already set up strong and close relationship with distributors of 3C products, namely computers, communication and consumer electronics, giving it a solid foundation to exploit.

While Suning, with 1,900 off-line entity stores and 4,000 after-sales offices nationwide, has a comprehensive storage and distribution system which has been operating for over 20 years that could offer huge support for its online sales.

But Suning copied 360buy.com's e-commence model after it started its online sales in 2009, without adding any innovations of its own, and the two websites even have a suspiciously similar look.

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