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Questions raised over stores' price war

By He Wei  (China Daily)

15:02, August 27, 2012

While Chinese shoppers wonder how long the price war, started on Aug 15 by Jingdong Mall, Suning Appliance Co and Gome Electrical Appliances Holding Ltd, will eventually come to an end, some have already noticed it is no longer a sort of "Romance of the Three Kingdoms". (Photo/China Daily)

Many wonder if it's all a stunt and whether reductions are genuine

Xu Yunmei was never an online shopper. She distrusted Internet transactions and believed in "what you see is what you get".

But as massive online price campaigns started to dominate the office conversation, she was persuaded to make her first online purchase using a co-worker's e-bank services and it didn't feel so bad.

"It's easier than I thought. As price reductions are frequently in the headlines these days, I thought I should just swim with the tide," said Xu, 37, a civil servant in Shanghai.

A Bain & Co study verified the high growth potential in sales of home appliances online. It suggested many non-e-commerce shoppers expect to make their first online purchase in 2012 and the first category on their minds is electronics and appliances.

On Aug 14, a micro blog by Liu Qiangdong, the charismatic president of Beijing Jingdong Century Trading Co, which runs online retailer Jingdong Mall, accelerated the trend by starting what may be the largest price war targeting major home appliances.

"We are striving to maintain zero gross margins for three years and undercut our rivals by 10 percent," the blog read, heralding its launch.

It's been two weeks since major home appliances chains, whether the digital arm of brick-and-mortar shops or traditional e-commerce stores, pledged to outdo one another on pricing.

But it remains to be seen whether the blitz will stoke an industry reshuffle in the rapid growing yet embryonic sector.

The size of China's overall e-commerce market will expand dramatically through 2013, growing at a compound annual rate of 48 percent to hit 1.5 trillion yuan, according to forecasts by Bain.

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