Two of the largest online retailers in China are having a price war.  One of them is Dangdang, a leading online book store in China that has just listed in Nasdaq. Another is 360buy, the largest online retailer in China by revenue and the most aggressive player in the industry. (Here is an article from local media: http://tech.sina.com.cn/i/2010-12-17/00114993519.shtml.)

It all started on Dec 8, when Dangdang  had a very successful IPO in Nasdaq.  On the very same day, its competitors, Joyo and 360buy were slashing prices on books.  When Dangdang’s president, Li Guoqing, did his TV interview, he swore he was going to retaliate.  So that is it.  The price war began.

Li said Dangdang is selling everything (books, computers, cosmetics, etc.) at lower prices than its competitors.  And it prepares to back up its plan with a RMB 40 million war chest.  In response, 360buy further lowered its prices and it said it prepared to spent RMB80 million.

No matter what happen, it is certain that the price war will hurt Dangdang’s bottom line.  Share prices of Dangdang has been dropping since its IPO.  It is currently trading at US$25.41 a share, 26% off its peak of US$34.46.

Once again, it shows how brutal the Chinese market is.  Your competitors will always strike at your weakness.  Just when Dangdang needs to show its investors some profitability, its competitors start a price war.