Major e-commerce pioneer Dangdang struggling to survive
Updated: 2013-05-23 10:54
BEIJING - Once described as "China's Amazon," e-commerce website Dangdang.com is finding itself fighting to stay afloat due to rabid competition.
The company started selling leftover stock on May 7 despite of an earlier strategy aimed at middle and high-end clothing. CEO Li Guoqing told the Beijing News that his company is struggling to balance its expansion.
The price of Dangdang's shares has dropped from $35 per share to less than $5, despite a booming e-commerce sector that has enjoyed average annual growth of 66 percent.
Dangdang was founded in 1999, while its main competitor 360buy.com emerged five years later. In that time, 360buy has surpassed Dangdang, with its 2012 sales volume exceeding 60 billion yuan ($9.69 billion) compared to Dangdang's paltry 5.19 billion yuan.
Other competitors, including Tmall, Suning and Yihaodian, have also outgrown Dangdang, leaving the company with a shrinking market share.
Analysts have attributed the company's poor performance to a failure to map out appropriate strategies for business expansion.
E-commerce analyst Li Chengdong said Dangdang's budgeting was unduly conservative in its initial stage of expansion, while its counterparts have boldly expanded through risky financing strategies.
Li said his company, which got its start selling books, has been more cautious and prudent than other companies that head into the sector with nothing to lose or fear.
The CEO said 360buy should target markets that differ from those targeted by Dangdang, rather than trying to dominate the entire sector, so that all companies can profit.
Li's wife and company president Yu Yu said Dangdang has survived the competition and remains a leading brand, despite its sales slump.
However, Dangdang's prices, product diversity and inflexible payment methods have stopped it from expanding as quickly as its competitors.
Analyst Ding Chenling said the company's biggest problem has been its slow reaction in upgrading its business structure.