Yesterday we reported that Tencent was restructured into six groups, through which the Penguin Emperor set up a wholly owned subsidiary called Tencent E-Commerce Holding Company. It seems that Tencent’s grander plan of intensifying the Chinese e-commerce competition just surfaces.
On May 16th, B2C site 51buy.com (Yixun in Chinese) announced that Tencent had taken major stakes in it and it will be an independent operation. The two have the same ambition of reaching a 10-billion sales volume. According to an analyst from Zero2IPO the Bejing-based think tank, since the average price of 3C products in China remains high and all the etailers are trying to increase their turnover, a price war on 3C products is just around the corner. How will the Tencent/51buy alliance survive the battle?
500M Investment and 51buy’s up trend
Data form iResearch showed 51buy’s turnover of last year reached RMB 2.37 billion, ranking No.3 after 360buy and Suning in the domain of 3C products. 51buy last week initiated a big SALE for its 6th anniversary in which it claims to put over RMB 500 million for sales incentives and marketing together with Tencent. All home appliances are sold 50%. And the sales seemed well received, 51buy generated more than 80,000 orders and a sales of over RMB 50 million in the first day.
51buy now has been integrated into Tencent’s QQ Wanggou (buy.qq.com) platform with OKBuy, Kela.cn among other Chinese B2C services that Tencent has stake in.
More to Expect
Bu Guangqi, CEO of 51buy said that the company’s extensive experience in supply chain management, logistics and warehousing plus Tencent’s development power and abundant data would help the company grow at fast pace this year.
He also revealed that in the near future Tencent’s ecommerce effort will be consisted of self-operated and open-platform business. 51buy falls under the first category while Okay comes under the latter.
Currently, over 60% of 51buy’s inventory are directly supplied by manufacturers, the number will keep on growing.
3C products have definitely become a battleground for etailers this year with so many price wars declared by X on Y. However, 51buy seems to be confident and determined when it comes to price war. “In the short term, we won’t set any target for profit, we just want to ensure our price advantage. Mostly the cost of marketing will account for 10 – 20% of the gross margin, we’re saving that part to offer a more competitive price.”
screenshot of 51buy homepage
Tencent’s input into e-commerce has never stopped, but it still hasn’t found a unique and feasible mode for itself.
For now, this new combination brings more opportunities to 51buy with the new investment and Tencent’s huge traffic. It understands that price war can never be a long-term choice; the key to success is service.
The company now has built warehouses and distribution centers in Shanghai, Beijing and Shenzhen and logistics and distribution teams in over 10 cities including Hangzhou, Suzhou, Nanjing and so on. Yixun aims to set up an operation center of 800,000 square meters in the next three years.
It seems that 51buy is determined to win the escalated ecomm war with Tencent’s deep pocket and big traffic as well as its price edge and excellent customer.