Confident youth turns Internet start-up CEO

In China's e-commerce market, a fast-changing and fiercely competitive field, only those willing to embrace change can succeed.

Meet Liu Qiangdong, the founder and CEO of 360buy.com.

Liu Qiangdong, aka Lao Liu, founded 360buy.com after the SARS scare destroyed his business. [Jiang Xin / for China Daily]

He was born in 1974 in Suqian, Jiangsu province, a place known for producing commercially minded individuals since the Chinese feudal ages. With his broad shoulders and strong determination, Liu became the leader of the pack among the children in his village.

Fellow students nicknamed him Lao Liu, or elderly Liu, perhaps because he was mature beyond his years.

Liu liked giving "speeches" to his friends when he was a little boy. For many years, Liu organized his friends to sit around and listen to his talks.

Thirty years later, instead of prattling on about visionary strategies, Liu now has more realistic discussions about development strategies for 360buy.com, the e-commerce company he founded in 2004.

Liu says focus and determination have helped him become successful.

During a get-together many years ago, one of his friends asked him: "Why do you get better grades than us even though we studied longer than you?"

Liu said proudly, "Because I concentrate when I study. If you speak to me when I am studying, I can't hear you unless you come over and shout at me."

Education was an important part of his upbringing.

"I was born into a family where education was essential, and my parents supported my education no matter how poor we were," says Liu, who has one sister.

Liu went on earn a liberal arts degree from Renmin University of China in 1996. Although he studied sociology, he spent most of his spare time learning computer programming. He developed several programs, earning more than 200,000 yuan (21,700 euros) in seed money. He used the money to invest in a restaurant near the university.

Because of a lack of business experience, Liu didn't take on any management role at the restaurant. Ultimately, his first foray into business ended in total failure.

To rebuild his savings, learn some advanced management skills and accumulate more work experience, Liu chose to work for a foreign company for two years.

He then opened his own business in 1998 in Zhongguancun, the technology district in Beijing. He started by selling compact disc writers.

Jingdong Multimedia developed into a computer products chain of 12 stores in Beijing, Shenzhen and Shenyang, Liaoning province.

Because of ferocious competition, market prices started to fluctuate daily like a futures market. Manufacturers were increasing the prices of products, as retailers continued to drop prices to retain customers.

Many times, prices would fall even after a product was delivered to a customer, resulting in lower profit margins for retailers such as Liu.

His goal was to open 200 stores by 2008. But in 2003, the SARS epidemic broke out, and sales at Liu's stores declined sharply since residents feared going outside.

"We were forced to find alternate ways to promote our products," Liu says.

Which gave him the idea of posting product information online. With an overwhelmingly positive response, his e-commerce business was formed. This also effectively reduced high inventory and operating costs.

Liu closed his stores in 2005 and focused solely on his online business. He headed up a group of IT technicians to develop the technology that allows customers to purchase products on a website.

The online website is called 360buy.com, or Jingdong Shangcheng in Chinese. The word Jingdong comes from the last Chinese characters of a former girlfriend's name and his name.

Despite many companies jumping into e-commerce with similar business models, 360buy.com remains on top.

When asked what is the secret to 360buy.com, Liu gave a simple answer: focus.

To Liu, when many traditional retailers and suppliers tiptoe into the online world, they tend to look at it as a complementary unit and not as the main source of income. For 360buy.com, e-commerce is everything.

In 2005, after 360buy.com transferred all of its business online, its sales dropped to 30 million yuan, one-third of what they were in the previous year. But since moving online, 360buy.com is now able to offer more items for sale, such as eyeglasses, jewelry, toys as well as electronics.

360buy.com also kept it simple, targeting three goals: improving its information systems, building good teams of employees and optimizing its supply chains.

360buy.com's business model is based on products, prices and customer service. But Liu says it's the attention to details that keeps customers coming back.

"360buy.com's business model is no secret. Many of our competitors do the same thing. The difference is whether one can continue to improve the price, product and service performance," Liu says.

Liu says that he devotes 30 percent of his time every day at work to reading customers' emails, which helps 360buy.com improve its customer service.

In 2007, it successfully attracted $10 million (6.96 million euros) in foreign investments and its sales volume increased from 80 million yuan to 360 million yuan.

Liu's friends consider him a lucky guy.

"He is really lucky, since he didn't know much about the e-commerce industry yet he's made such huge achievements," says one of his long-time friends.

Liu doesn't think he's lucky, just self-motivated. At the initial stages of setting up his online business, Liu actively sought out industry experts to glean more information.

"I couldn't fall asleep after chatting with them, because I found I really didn't understand this industry very much and there was a huge gap between me and them," Liu says.

Liu's good luck is also exemplified in the financing process.

In April, 360buy.com received $1.5 billion from six well-known venture capitals, including Digital Sky Technology and Tiger Fund.

Liu recently raised the earnings forecast of 360buy.com to up to 30 billion yuan this year, from a previous expectation of up to 26 billion yuan.

Liu's confidence comes from 360buy's good performance in the e-commerce market. According to iResearch Consulting Group, the online shopping market's growth rate was 89.4 percent in 2010; 360buy.com grew by 300 percent.

The online retailer has seen its annual revenue increase by more than 200 percent over the past six years. It brought in 10.2 billion yuan in 2010 and, according to a report published by iResearch last month, 360buy.com accounts for 35 percent of the business to consumer market in China, far more than the total market share of the other top 10 retailers.

The company has more than 23 million registered users, more than 45 million daily page views and receives on average 200,000 orders per day. 360buy.com claims to be the only online retailer that has broken 10 billion yuan benchmark in sales in China.

And the growth potential of the online shopping market remains strong.

According to a report by Nuremberg-headquartered German research firm GFK Group, China's online shopping market reached revenues of 498 billion yuan in 2010, rising 96 percent over the previous year. Online household appliance sales experienced even faster growth, up 200 percent to about 80 billion yuan.

Liu says he hopes the company will become one of the top five e-commerce businesses in the world, rivaling the likes of Amazon.com Inc.

But 360buy.com also faces many challenges. Because it developed so quickly, so did the number of its employees. It grew from 30 in 2004 to almost 12,000 this year, which tested Liu's management skills.

At the insistence of a venture capital partner, senior managers were hired in 2007. Liu was nervous about this business decision and was not willing to pay high salaries to them.

Even now, the salaries of the management team of 360buy.com are still lower than the average level in the e-commerce industry. Liu declined to reveal a typical salary for a senior executive, but in Beijing, someone at that level can expect to make 300,000 yuan to 500,000 yuan per year.

But employees may be lured to stay in a job by stock options. Once an employee has worked at 360buy.com for at least a year, he or she is given stock options.

Liu says that it isn't realistic to think there aren't any problem at such a huge company like 360buy.com.

Remaining No 1 will be tough, since 360buy.com is facing competition from traditional electrical appliance retailers, such as Gome and Suning.

Suning aims to grab more than 20 percent of the market share for China's household appliances by 2013 and become the biggest business to consumer website in the sector in China, Sun Weimin, deputy chairman of Suning, said last year.

Wang Junzhou, Gome's president, expressed a similar ambition by saying his company hopes to become China's biggest online household appliance vendor.

"Gome made 100 billion yuan in revenue last year. Compared with a company that earns 10 billion yuan a year, Gome definitely has strong bargaining power and can bring more benefits to customers," Wang said at a Shanghai news briefing earlier this year.

When asked about his opinions on the upcoming battles and whether he felt like fighting alone in this competitive field, Liu says: "360buy.com is confident it will win on the battlefield. This is a huge business and one cannot fight alone."