Is China’s E-commerce Market Growing Too Fast?

Two days ago, I wrote about how “China Wants US$2.8 Trillion E-Commerce Sales by 2015, But Please Stop Bleeding Money First!” I highlighted how China’s rapid development through the internet has superseded the ability to manage and control it. Although higher internet penetration leads to higher sales, it doesn’t mean higher profits. Many famous e-commerce players are still struggling to become sustainably profitable. Li Guoqing, DangDang’s CEO berated 360Buys ability to do e-commcerce as “bullshit” and said for every dollar they earn, they spend four.

Now China Daily has reported about customers suing 360Buy.com for failing to uphold its end of the deal to provide sightseeing trips for 1 yuan or 16 cents. This highlights another pillar lacking in China’s heavy shift towards supporting e-commerce: rules, regulations, policy and law.

So what happened? According to China Daily, 360Buy advertised several sightseeing packages, including one to Shaoxing, a historic city in Zhejiang province for a ridiculous 1 yuan per customer on March 19. The deal included breakfast, one night’s stay in a hotel and entrance fees for some scenic areas. Nearly 1,700 people purchased the trip online. But subsequently 360Buy cancelled the deal and refunded the money back to customer accounts. 360Buy claimed they made a technical error and the page was only meant to be a test page.

Enraged customers who were hopeful of going on a nice trip for a ridiculous small fee are now taking 360Buy to court and now want them to honour its contract and offer fair compensation. In response, 360Buy has agreed to compensate involved customers with 20 yuan voucher that can be used on the site. But many are not satisfied, feeling mislead and cheated.

Of course you could argue, the deal was too good to be true and you shouldn’t believe it. I mean, I can’t even buy a Jian Bing (egg pancake) for 1 yuan on the street. But legal disputes have been taken to court in other countries for much more absurd things. I remember studying trade practices law in Australia and we learnt about Section 52 of the TPA that made it illegal to falsely advertise and mislead consumers. But alas, China is a developing country and still needs time to establish and enforce such laws.

The Ministry of Industry and Information Technology announced that the total volume of e-commerce in China will hit 18 trillion yuan in 2015, 4x the current level. At that pace, people like Mo Daiqing, an analyst with China E-commerce Research Center believe that policies and regulation still lag between the developments of e-commerce. China Daily says that according to a guideline issue by the Ministry of Commerce last year, comprehensive laws and national information for e-commerce credit are only expected to be set up by 2015.

In some ways, China’s e-commerce development is very impressive. I have ordered products from 360Buy and have been impressed with their same day or next day delivery. By using China’s relatively lower pool of manual labourers, such amazing logistic and distribution networks can be achieved. Watching Chinese friends place orders on e-commerce sites with as much ease and speed as writing an e-mail is also impressive. But despite its dramatic leaps into advancement, China will need to be careful of how it manages its hyper growth in e-commerce. Tripping up on a 1 yuan sightseeing trip for thousands of customers is one thing, but imagine extrapolating that across much higher value technical glitches or ‘mistakes’. People will get angry and who knows what a lot of angry people will do.