Electronics price war begins in China

17 August 2012

BEIJING: Online and offline electronics retailers like 360Buy, Suning and Gome are engaging in a public price war in China, reflecting the highly competitive nature of the category.

One player pursuing this approach particularly forcefully is 360Buy, the ecommerce group. Liu Qiangdong, the site's CEO, promised it would take no gross margin from large home appliances in the next three years.

Among the additional commitments he made, originally on a microblog, was to sell products for at least 10% less than Gome and Suning, two of the biggest appliances chains in the country.

The firm will also send 5,000 representatives into the field to regularly check on the prices of these operators, in an indication of the increasingly intense rivalry observable across the industry.

"We have to follow the competition. We must be more active. It is our long-time strategy to offer the lowest price to consumers," said Liu, as reported by Xinhua. "We have enough cash in our account now, so we don't need to raise more funds."

In response to 360Buy's assertions, Li Bin, an executive vice president of Suning, stated on his microblog: "The prices of all products on Suning's online platform will be lower than those of 360Buy."

The two firms then both committed themselves to offering cheaper prices than the other in a sale of August 15, and 360Buy revealed that it had clocked up RMB200m in sales between 9am and 1pm on that date.

Gome also announced on the same day that the prices of all its home appliance products would be "5% lower than 360Buy". Dangdang and 51buy.com, run by Tencent, made similar proclamations regarding their overall competitiveness.

Lamine Lahouasnia, a retail analyst at Euromonitor, the insights provider, reported the dynamics of this sector - demonstrated by the fact the ten leading laptops take around 85% of online sales - effectively encouraged such a situation.

"Consumers are more familiar with the brands in electronics and appliances and this makes it easier to price compare," he said. "After all, a 16-gigabyte iPod Touch is the same device, no matter who sells it."

But Martin Lau, president of Tencent, suggested that the experience of consumers appeared to be substantially different from the war of words between companies.

"There could be price wars launched here and there. If you look at price comparison, in reality, I think the price actually didn't drop as much as it's advertised in the media," he said.

"More of the companies [are] trying to promote their company, rather than really lowering price such that they are losing a lot of money on the transactions."

Data sourced from Xinhua, Wall Street Journal, CNBC; additional content by Warc staff