Editor's Note

Chinese retail giants on Wednesday started offering massive tit-for-tat discounts to fire up sales amid sluggish domestic demand.

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.

Latest News

No ceasefire in appliance price war
Liu Qiangdong, founder and CEO of 360buy.com, denied Friday the reports that the price war over home appliances is about to end. Liu said on his verified Weibo account on Friday afternoon that the price war would not cease.

Online price war worries some consumers
An ongoing price war between Chinese online retailers may have temporarily spiked sales, but it has also triggered concerns among consumers over potential market disruptions.

Home appliance retailers' shares slump over price war
Two home appliance retailing giants in China saw their stock prices tumble on Wednesday morning as they scrambled to fight a price war provoked by a major online retailer.

360buy unleashes new B2C price war
Chinese online business-to-consumer (B2C) retailer 360buy.com signaled a new round of price wars in the sector Tuesday by announcing that the home appliances on 360buy will be sold at zero gross margins for the next three years.

E-commerce price wars escalate in China
With more and more brick-and-mortar home appliance retailers tapping the e-commerce market, the online price wars have been escalating more fiercely in the Chinese market.

Price War Doubted

Source: Beijing News

Since Aug.15, the prices of major appliances of the two giants have been increasing. Does it mean that the price war has stopped?

Liu Qiangdong's post that 360buy.com would extend its price wars to all kinds of commodinites has been deleted. Does it mean that he breaks his promise?

Price war produces more boasts than savings
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.

Price War Timeline

Time	Moves
10:21 am-10:28 am, Aug. 14	Liu Qiangdong, CEO of 360buy.com, said on his Sina Weibo account that the prices of the home appliances on 360buy will be at least 10 percent lower than those at the online platforms of Gome and Suning, its major competitors. Liu also said that any employee found selling a product with a price markup will be fired.
04:08 pm, Aug. 14	Li Bin, executive vice president of Suning, said on his Sina Weibo account that the prices of all Suning's products will be "lower than those of 360buy."
11:00 am, Aug. 15	Shares of Hong Kong-listed GOME (00493.HK) plummeted more than 8 percent to 0.66 HK dollar ( $0.09) as of 11:30 am, while Shenzhen-listed Suning (002024.SZ) dipped over 3 percent to 5.68 yuan ($0.89) during morning trading, Xinhua reported August 15.
	A total of 27 percent of total products offered on 360buy.com were over 10 percent lower than those at Suning, while nearly 50 percent of total products were priced lower overall. In contrast, around 32 percent of Suning’s prices were below those offered by 360buy.com, while 18 percent remained the same. Source: caijing.com.cn
Around 12:00, Aug. 15	According to 360buy Sina Weibo account, sales figures of large home appliances broke 200 million yuan as of midday. During a Wednesday morning press conference, Liu claimed the price war was a result of competition dictated by the market, adding 360buy expects to hit 30 billion in home appliance next year and 50 billion yuan by 2014. Source: Sina.com.cn
9:29 am, Aug. 16	Liu Qiangdong annouced that 360buy.com would directly send 2,000 to 3,000 yuan and 3,000 to 5,000 yuan worth of coupons on major appliances.
August 17	Liu Qiangdong announced on its microblog that 360buy.com would extend its price wars to all kinds of commodinites.
August 17	The Ministry of Commerce said it would introduce more specifications to better guide the development of the nation's e-commerce market.
August 17	Li Bin announced on his microblog that on Saturday, which was the 3rd anniversary of Suning, the company would maintain its advantage over their lower prices.

Prices Comparisons

Products	Prices
Bosch Kan62V41 TI 610L	gome.com.cn ￥8,999	coo8.com (out of stock) ￥9,799	360buy.com ￥9,999
Dell XPS 13(I5 2467M) 13.3 Inches	51buy.com ￥9,599	coo8.com ￥9,888	gome.com.cn (out of stock) ￥9,998
Panasonic TH-P50ST50C 50 Inches	360buy.com (out of stock) ￥8,899	510buy.com (out of stock) ￥8,980	gome.com.cn (out of stock) ￥9,188
Canon EOS 60D	dangdang.com (out of stock) ￥9,408	51buy.com ￥9,478	gome.com.cn ￥9,488

The table above shows the different prices of the same type of home appliances sold by China's leading online retailers Wednesday. Chinese retail giants on Wednesday started offering massive tit-for-tat discounts to fire up sales amid sluggish domestic demand.

Vote and Voices

A total of 17,919 net users as of 15:40 pm Wednesday believed that the price war among major Chinese online business-to-consumer (B2C) retailers Wednesday was only their promotion way to seek for online expansion while around 1,907 held that it is a real price war among them, according to a vote launched by sina.com.cn Wednesday. Photo:sina.com.cn-Globaltimes.cn

For A:

@Jophy沫: This is just hype. I’ll believe otherwise when these companies are capable of not running out of stock!

@yuchenjie: All companies have overhead, taxes, and employees’ salary to pay; but their net profits are very low. If prices keep going down, how can anybody earn money? There must be something else going on here.

For B:

@种子家园: Competition brings down prices. The cheaper regular people can buy things the better.

@拼搏de疯狗: It is not likely that competitors got together to stir things up. I support the price war, and hope the same thing happens in the real estate market.

To vote

Comments

Experts' Comments:

Chen Shousong, an industry analyst at consulting firm Analysys International

Suning is more motivated to launch such a price war compared with 360buy.com, as it is a late comer to the sector and more willing to use such strategies to gain a bigger market share.

Chen also noted that such moves are mainly a way for companies to promote themselves and will not have that much effect on their revenue.

"Home appliance products offer a very low profit margin anyway, so even a zero profit margin will not make a significant difference to their revenue," said Chen.

Ding Jiaqi, an analyst with consulting firm iResearch

"Price wars in the e-commerce sector are unavoidable, since online e-commerce platforms not only face competition from rival firms, but also from offline retailers seeking online expansion."

"The new move by 360buy could mean further losses for its appliances business, but it may also gain more consumers for the company and put pressure on its competitors," Ding noted.
Legal price war?

Liu Qiangdong, CEO of 360buy.com:

 “Our prices are not below import prices, which rules out any legal issues,” said Liu at a press conference on Wednesday, according to Sina.com.cn.  

“Price wars are decided by the market. We are not being aggressive or want to kill anybody, nor do we want to bring chaos to the B2C industry. Every company has a sense of competition. It is a war of cost and sales, a war of partnerships and of testing the patience of investors,” he added. 

Liu Qiangdong explains the cause and effects of price wars at a press conference on Wednesday, according to a Sina.com.cn report.

Related regulatory authorities:

Related regulatory authorities have deemed the price war between 360buy and Suning is not cutthroat competition, as not one company involved would gain a majority market share, reported finance.cnr.cn.

According to national regulations, cutthroat competition is defined if one business stands to gain a market monopoly, which is not the case between 360buy and Suning. Also this was not a case of selling below cost, because online stores such as 360buy and Suning can still remain profitable because operation costs of are much lower than those of retail outlets.

Regulatory authorities further expressed that they will not intervene in the price war, believing such competition benefits consumers.

Source: CNBN

Related regulations:

Article 11 of the Anti-unfair Competition Law states proprietors should not sell products below cost price in order to edge competitors out. 

Article 17 of the Antitrust Law prohibits companies from selling products below cost price without good cause.