Two on­line re­tail firms team up to grab big­ger mar­ket share

China Daily (Canada) - - BUSINESS - By MENG JING mengjing@chi­nadaily.com.cn

United States-listed Dang­dang Inc, a ma­jor e-com­merce player in China, and Yhd.com, a Chi­nese on­line su­per­mar­ket that is ma­jor­ity-owned by Wal­Mart Stores Inc, are ex­pected to team up to achieve a break­through in mar­ket share.

Yhd.com con­firmed on Thurs­day that the Shang­haibased com­pany will form an al­liance with Bei­jing-based Dang­dang Inc. The two com­pa­nies are sched­uled to an­nounce their “mar­riage” in Bei­jing on March 5.

This type of part­ner­ship is be­com­ing more com­mon in China’s e-com­merce sec­tor.

For ex­am­ple, Vipshop Hold­ings, a US-listed on­line dis­count re­tailer, and lefeng. com, a busi­ness-to-con­sumer cos­metic plat­form, formed a part­ner­ship on Feb 14.

Ten­cent Hold­ings Ltd, the largest In­ter­net com­pany in China by mar­ket value, is re­port­edly hold­ing ne­go­ti­a­tions to com­bine its e-com­merce op­er­a­tions with those of China’s sec­ond- largest busi­ness-to-con­sumer re­tailer, JD.com. Nei­ther com­pany would com­ment on the sit­u­a­tion.

The mar­ket share and rank of each of the ma­jor busi­ness-to­con­sumer play­ers in China have re­mained sta­ble as the coun­try’s e-com­merce mar­ket ma­tures.

“De­spite the high dou­bledigit growth of the B2C mar­ket, the growth mo­men­tum is not as strong as it was one or two years ago.

“Most Chi­nese people have al­ready be­come on­line shop­pers, which means you will not see a surge of new buy­ers,” said Lu Zhen­wang, chief ex­ec­u­tive of­fi­cer of the Shang­hai-based Wan­qing Con­sul­tancy.

Ac­cord­ing to iRe­search Group, a Bei­jing-based IT con­sul­tancy, China’s on­line shop­ping mar­ket ex­panded 42.4 per­cent to 454.76 bil­lion yuan ($74.71 bil­lion) in the third quar­ter of 2013.

But that was def­i­nitely a slow­down from 2012, when the aver­age quar­terly growth rate of the on­line shop­ping mar­ket never fell be­low 55.8 per­cent.

“So, at this stage, if a com­pany wants to make a break­through and ex­pand its busi­ness into oth­ers’ ter­ri­tory, you’d bet­ter find a part­ner ei­ther a strate­gic one or a fi­nan­cial one,” said Lu. That’s what Vipshop did when it formed a part­ner­ship with lefeng.com, an on­line re­tail web­site.

Vipshop said it in­vested $112.5 mil­lion to take a 75 per­cent stake in lefeng.com. The ar­range­ment will help both com­pa­nies to in­crease loy­alty among fe­male shop­pers, Vipshop said in a news re­lease.

It noted that it ac­counts for about 70 per­cent of all on­line sales of clothes and shoes in China, while lefeng.com ac­counts for 50 per­cent of on­line sales of cos­met­ics.

Al­though Dang­dang and Yhd.com may not have the same cus­tomer base, their part­ner­ship is a great op­por­tu­nity to ex­pand and build a rep­u­ta­tion in new busi­ness sec­tors, said Lu.

Dang­dang has been try­ing to move into sales of food prod­ucts for a long time, but it’s failed to be­come a strong com­peti­tor in the sec­tor. Yhd. com, which is known for its rich port­fo­lio of food of­fer­ings, has strug­gled to break into the on­line clothes sec­tor.

The com­pa­nies don’t com­pete head-to-head. “Their co­op­er­a­tion can help build them into a more com­pre­hen­sive on­line plat­form with more cat­e­gories of prod­ucts, which will even­tu­ally in­crease user stick­i­ness,” Lu said.

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