Ecommerce battle hits China

03 March 2011

BEIJING: Companies such as Suning, Gome and Wal-Mart are increasing their online presence in China, recognising the opportunities afforded by the country's rapidly-growing ecommerce sector.

Suning, the home appliance giant, is attempting to augment an already substantial bricks-and-mortar network, but will simultaneously allocate the web a heightened status.

"While we add stores, we're still paying attention to our online business," Sun Weimin, Suning's vice chairman, told the China Daily.

"Traditional [retail] and ecommerce have different customers, and we believe the two can develop cooperatively."

In a bid to further its capabilities in this area, Suning is building 27 storage centres, ten of which are now under construction.

The organisation intends to finalise 60 equivalent sites between 2013 and 2015, costing approximately 12bn yuan ($1.8bn; €1.3bn; £1.1bn).

"We have completed our logistics plan for e-commerce operations," Sun said.

Tang Jiarui, an analyst at Everbright Securities, argued a comprehensive infrastructure would form an essential component of Suning's long-term performance.

"If the 60 centres can be set up, Suning's online profit and premium valuation brought by high growth will greatly improve its investment value," said Tang.

Gome, a rival to Suning, purchased 80% of in 2010, as it sought to gain a foothold in the burgeoning ecommerce category, setting a sales target of at least 20bn yuan by 2014.

"E-commerce will play a very important role in Gome over the next five years, and we have a determined resolution regarding this," said Wang Junzhou, Gome's president.

"It's the company's first shot to tap the e-commerce market."

Elsewhere, Wal-Mart has taken a share in internet-based electronics retailer 360Buy, and recently unveiled an ecommerce platform linked to Sam's Club outlets in Beijing, Shanghai and Shenzhen.

Doug McMillon, chief executive of Wal-Mart International, suggested prioritising global markets where it has a major physical presence should yield advantages.

"We believe our 8,000 points of distribution give us an opportunity to leverage that network, more than a purely online retailer can do," he said.

Other brand owners have also looked to the web, selling to underserved shoppers in lower-tier towns and cities.

Apparel specialist Levi's has established a virtual store on Taobao Mall, offering 200 products at present.

The US firm previously launched a brand, Denizen, specifically aimed at Chinese buyers, and is now planning to introduce internet-only designs.

Gap, Uniqlo and Adidas have similarly partnered with Taobao in a parallel fashion, lured by the possibilities promised by over 450m netizens.

"We felt that working with Taobao Mall offered the best approach to reaching out to more consumers because it is so clearly the most influential online business-to-consumer sales channel," said Christophe Bezu, chief e-commerce officer for Adidas, last year.

"It allows us to reach millions of consumers in a very direct way, many of whom we would have difficulty reaching through brick-and-mortar storefronts."

According to iResearch, the total number of orders made via the web in China hit 564.7m by the close of 2010, measured against 371.5m just 12 months earlier.

The conversion rate had declined from 6.3% to 5.5% during the same period, iResearch estimated, but expanded by 1.1 percentage points quarter-on-quarter.

Data sourced from Caijing, Financial Times, CNN, China Daily; additional content by Warc staff