Dispassion Thinking on China’s E-business Enterprises’ Promotion War on November 11

EASTERN ACADEMIC FORUM
Dispassion Thinking on China’s E-business Enterprises’ Promotion
War on November 11
ZHAN Mingzhen
International Business Economic College, Wuhan Textile University, P.R.China
[email protected]
Abstract: Since November 11, 2009, China’s e-business enterprises annually have organized a
promotional feast elaborately on this day, which day has become consumers’ shopping carnival. But the
problem can’t be concealed behind the prosperity, after thinking calmly, we find there is a lurking crisis
in the huge transactions with nearly 20 billion yuan on the day of the last year, such as the imaginary
declining and deceptive price, bottlenecks in the technology, logistics and after sale service, excessive
consumption and the homogeneous competition with low price and so on. Therefore, the article
proposes China’s e-business enterprises should standardize the transaction systems, cultivates their core
competitiveness, establish a complete industrial chain, make their online and offline businesses
positively interactive for realizing sustainable development.
Keywords: Promotional war, November 11, E-business enterprises, Dispassion thinking,
Countermeasures
1 Introduction
Promotional festival on November 11 is well known for us. November 11, 2009, Tmall (Taobao Mall)
began to organize promotional activities, making use of “Singles Day”, and then shaped its commercial
holiday. It is said that T-mall chooses the day which for traditional retailers can promote consumption by
making holiday with a blank period in the promotional season between Golden Week and Christmas.
China’s e-business enterprises push the promotion toward the summit on November 11, 2012, create a
sale legend being unable to achieve by traditional retailers. Just the day in 2012 has become the world’s
largest online shopping holiday, the total sales of China’s e-business platform websites achieved more
than 20 billion yuan in the day, which exceed that of America on “Cyber Monday” (only with 7.8 billion
yuan) .①
The big promotion on November 11, as for the participants, participating brands increase form only 27
in 2009 to 150 in 2010, further to 2,000 in 2011, but there are more than 10,000 stores in 2012 only for
Tmall. In terms of the turnover, Tmall achieves 52 million yuan, increase 1.9 billion yuan in 2010,
Taobao Group reaches 5.2 billion yuan in 2011, the total sales of Alipay in 2012 get 19.1 billion (5.9
billion for Taobao and 13.2 billion for Tmall). According to the brand transaction size, Jack Jones
reaches 500 million yuan in 2009, more than 80 stores’ sales exceed a million and the highest arrives
more than 20 million yuan in 2010, 497 stores are over million in 2011 (more than 40 million yuan for
three brand stores and 10 million yuan in 38 stores), until 8 o’clock am on November 11, 2012, 53
stores’ Alipay turnover are over 10 million yuan (over 40 million for one store, more than 30 million for
9 store, over one million for more than 634 stores). About the scale of logistics, commodities waiting for
transportation have been accumulated about a week after Festival in 2012, logistics is almost paralyzed.
Involving promoting costs, only red packets pay 110 million yuan.
①
Zhuang Jian, Teng Fuqing, Yao Hongwei. (2012-11-12). November 11 becomes the largest festival of the global
online shopping, businesses just want to earn popularity. Evening News.
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2 Analysis on E-business Enterprises’ Promotional War on November 11
2.1 The advantages
2.1.1 For e-business enterprises, Alibaba is the biggest winner, the other small and medium-sized online
stores get breakeven or little margins
Transactions of Alipay of Alibaba Group are rising for 4 years, only 52 million yuan in 2009, climb to
the peak value with 19.1 billion increased 366.3 times on November 11, 2012. As seen from Table 1, the
domestic major e-business Enterprises’ sales all have significantly increased, Taobao Group ranks first
and far exceeds Dangdang, Jingdong, Suning, Gome and 51Buy. In addition, the total return of Tmall
achieves 4-6 billion yuan which is the highest, mainly composed of advertising investment of online
stores (the booth fees are more 4 times than that in usual time) and sales commission (5%). For other
small and medium-sized online stores, they get breakeven or little margins, their returns after the
original price half off deduct advertising investment (rose 4 times than that in usual time), minus sales
commission (5%) and other expenses, real profitable businesses are still the great brands.
Table 1 Sales and promotions of the domestic major e-business Enterprises on November 11, 2012
Items
Sales
Promotions
Websites
Taobao Group
19.1 billion yuan
Price half off
Dangdang
Over 1 billion yuan
Average price declination is 26%
Jingdong
25 billion Yuan sales, all orders 4.5 million
Price declination arrives at 3.1%
Suning
Orders exceed 0.15 million, the growth
year-on-year of all sales is more than 20 times, the
website flow nearly increases 20 times
“Free on three days and three nights”,
price declination arrives at 0.2%
Gome
Online mall sales grows 7 times than that during
the corresponding period last year
9 big categories, more 3 hundred Small
goods overall price drop
The growth year-on-year of sales on the day more
“Strip off 72 hours, shopping rush on
6 times, orders is over 1 billion Yuan
electrical equipment with price half off”
Sources: Han Zheng, Zhang Xiao, et al. (2012-11-12). The growth year-on-year of Suning sales on November 11 is
more 20 times. New Express; http://tech.163.com/12/1115/18/8GCD82FF000915BF.html.
51Buy
2.1.2 Involving Consumers, they have also got some price benefit in the promotion on November 11
The domestic major e-business enterprises’ sales all have used markdowns promotions, Tmall has a
decline largest. NetEase Youdao data displayed, Tmall’s price on November 11 decreases 48%
compared to the previous day, down 59% than the counter price, and make price half off, 18.5% of
goods in Tmall’s commodities same with that in B2C have lower prices in other B2C. Therefore,
consumers get some price benefit indeed in the fierce promotion war, improved their welfare.
2.1.3 The promotion war on November 11 promotes the rapid development of e-commerce industry,
pushes to transform the development mode of brick-and-mortar retailers
The promotional war not only makes e-business enterprises with fruitful results, also greatly enhances
the influence of e-commerce and strengthens of consumers’ understanding and participation in online
shopping on a universal online shopping trend, the developed prospects of China’s e-commerce industry
are immeasurable. The promotion battle also brings a fundamental revolution in brick-and-mortar
retailers’ profit model. E-business enterprises’ advantages in flattened channel, without time and space
limitations, in a free and fast transaction environment, with a low price, just are the soft underbelly of
brick-and-mortar retailers, which inspires them to innovate their profit model heterogeneously,
otherwise, they will be eliminated.
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2.2 Potential problems of the promotion war on November 11 Initiated by e-business enterprises
2.2.1 Existence in the imaginary declining and deceptive price, the consumer does not really get benefit
E-business enterprises’ evaluation group in DoNews makes a brief sampling contrast with commodity
prices before and after November 11 on five electronic shopping platforms such as Jingdong Mall, QQ
online shopping, Tmall, Dangdang, Suning and so on, as shown in Table 2. From which we find that the
several goods prices of five enterprises are basically without changes before and after November 11,
especially, the price of Samsung GALAXY SIII I9308 in QQ online shopping is even higher before
holiday than that after holiday, Tmall’s price has a little declination. The unit price on November 11 is
220 yuan and basically same with an annual average of 220-240 yuan ②, some e-business enterprises
attract customers through gimmicks such as the last-minute price and lowest price and so on, there is no
stocks after customers buy, marked price is inconsistent with the settlement price, their cheap price is
fake, consumers can not really get benefits.
Table 2 Comparisons on commodity prices of main e-business enterprises before and after November 11,
2012
(Unit: yuan)
Items
Jingdong
Mall
QQ online
shopping
Dangdang
Tmall
Suning
3 599
2 949
3 488
3 399
3 199
3 599
2 949
3 188
3 399
3 199
3 899
3 898
3 788
3 768
3 899
Price after
3 899
4 088
3 788
3 768
3 829
Price
before
749
679
645
500
603
Price after
749
679
645
450
No
25.4
27
23.4
18
18
23.4
Websites
Sony KDL-32EX550
LED television (32 inches)
Samsung GALAXY SIII I9308
NIKE male thin cotton-padded
coat 444750-011
Price
before
Price after
Price
before
Price
“Zhongshi Chen collection:
25.4
27
before
White Deer Plain”, Changjiang
Literature and Arts Press
Price after
25.4
27
Sources: DoNews. (2012-11-13). E-business enterprises evaluation list.
http://it.gmw.cn/2012-11/13/content_5656390.htm.
Consumers are difficult to obtain affordable because of strict use rules of other promotion. Such as
Suning, 51Buy, VANCL, Dangdang and so on mainly uses Shopping coupons promotion, but the rules
are very strict. The amount of a single order at least 99 yuan obtains 1,010 yuan coupon in Dangdang on
November 11, but the coupon’s exchanged rules are different involving the full 300 minus 30, 200
minus 40 according to specific categories including 9 types such as automotive supplies, office
stationery, mobile phone accessories and so forth.
2.2.2 Huge scale of transactions on November 11 make e-business enterprises produce bottlenecks in
supporting sections such as the technology, logistics and after sale service and so forth.
Sum of China’s e-business transactions are more than 20 billion yuan on November 11, 2012, the
express parcels are over 60 million, Huge size of transactions make China’s e-business enterprises
paralyzed in supporting links such as the technology, logistics and after sale service and so forth. The
overload of online shopping flow on the day makes many shopping sites congested and paralyzed, the
bank’s online banking system is maxed out. For logistics, from out of stock to the blasting warehouse,
②
Xu Jieyun, Zhao Lan. (2012-11-12). E-business enterprises’ promotion show on November 11: is Carnival or
overdraft? China Business News.
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from out of stock to shortage of labors, finally come to one’s rack with third-party logistics, logistics
enterprises only can make all employees do shipments, those with insufficient workers only make up the
number temporarily, as a result, they do not usually send out, leak and sent the wrong goods. As for
after-sale service, enterprises more attend without time.
2.2.3 Unprecedented prosperity made by e-business enterprises on November 11 really is consumers’
excessive spending and not sustainable
Promotion on November 11 is one model created festival for consuming by e-business enterprises, also
makes them appear a weird phenomenon focused on festival consuming. It is obviously a rude
promotional war, not only overdrafts consumers’ basic trust, but also market prospects. With the fatigue
of various festive spending from consumer, their excessive spending will tend to be cold. Huge
transactions from the lowest price promotion of all during the holiday also make suppliers stock out,
crush online banking and logistics systems paralyzed, still make after sale service naturally become
unreal.
2.2.4 E-business enterprises fall into the trap of homogeneous price war, and are unable to extricate
themselves
Seen from Tmall operation on November 11, the promotion war is essentially flow plus price. [1] China’s
B2C platform is lack of core competitiveness, their competitiveness remains price war which will
further strengthen consumers’ “bad habits” only for cheap price and make China’s e-business enterprises
away from the healthy gross profit collectively. [2]
2.3 Suggestions on the healthy development of China’s e-business enterprises
2.3.1 Improve and regulate online shopping transactions system and build a safe, comfortable, and
effective online shopping environment
Although China’s e-business develops rapidly, it is still not perfect for the relevant laws and regulations,
as well as transaction system. Various illegal phenomena often have occurred, such as the payment
system security, enterprises’ illegal operations, intentionally evaluating bad from consumers and so on.
Many consumers on online shopping payment frequently encounter Trojan’s malicious attacks sent by
the businesses; there appear some enterprises to buy their own goods, whose purpose is for better
advertised location through increasing transactions, and then get more customers on November 11; price
cheat and unreal drop; rules which sellers in Taobao, can upgrade their credit with more praise from
buyers have breed a large number of jobs focusing on bad evaluation, through which extorts enterprises.
Therefore, e-business enterprises should perfect and regulate online shopping transactions system,
establish a set of strict price warning system early, provide consumers with the safe, comfortable and
effective online shopping environment.
2.3.2 Regard quality and service as its core build the core competitiveness, avoid homogeneous
competition
With the guide of created festival consuming, online shopping is increasingly becoming an integral part
of people’s lives. However, whether B2C or C2C, product quality and after-sale service on online
shopping are often difficult to guarantee, there often appear the copy of named brands, fake and shoddy
goods, even if they are quality goods, many after-sale service is difficult to solve for long time because
of properties of virtual network and spatial far distance. Which legal rights safeguarded on online
shopping end up with nothing definite, or complain nowhere. In order to achieve consumers’ trust and
different competitive advantages, e-business enterprises should really improve product quality and
service levels, pay attention to brand marketing, build a win-win industrial chain with suppliers and
service providers, build the core competitiveness, and avoid falling into the trap of the homogeneous
competition with low price. [3]
2.3.3 Integrate internal and external resources to build a complete industrial chain including supply,
technology, marketing, logistics and after-sales service and so forth
Promotion war on November 11 has made e-business enterprises watchful on which must integrate
internal and external resources to build a complete industrial chain including supply, technology,
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marketing, logistics and after-sales service and so firth for digesting the huge transactions in a short
time.[4]
2.3.4 Make online and offline transactions interactive, and realize e-business enterprises’ sustainable
development
In general, it still relies on the traditional business model for the majority of brands to be a well-known,
e-business is a major force for the traditional economy to facilitate service and experience, and both can
interact and integrate to develop. Rehearsed C2B mode on November 11 (that is, the pre-sale mode,
making sales orders firstly, producing secondly, and then transport, further circulating, and finally
making a deal) is the prototype of online and offline integrated interaction. E-business enterprises can
put new products in online for pre-sale, and then push popular products mainly to ordering meeting, the
main push of online should also consider pre-sale. Therefore, enterprises can match links including
developing, design and supply chain management and so on with online, to form integration and
interaction of online and inline, and achieve sustainable development.
3 Conclusion
Since 2009, promotional festival on November 11 has been intensified, its turnovers every year are also
continuously increasing, and the total sales of Alipay in 2013 once reach to 35.019 billion. However, it
can’t conceal many problems behind the prosperity, we found that there are potential crisis, like price
deceptively drop, such technical guarantee, logistics and after-sale as bottlenecks, consumer overdrafts
and low homogeneous competition. Therefore, China’s e-business enterprises should do that for their
own healthy development: Firstly, improve and regulate online shopping transactions system and build a
safe, comfortable, and effective online shopping environment; Secondly, regard quality and service as
the core, build the core competitiveness, avoid homogeneous competition; Thirdly, integrate internal and
external resources to build a complete industrial chain including supply, technology, marketing, logistics
and after-sales service and so forth; Finally, make online and offline transactions interactive, and realize
their sustainable development.
References
[1]. Xi Dawei. Chen Nian Talks About E-business Enterprises’ Promotion Essentially is Flow Plus
Price. Chengdu Business. 2012-11-24
[2]. Ding Lei. E-business Enterprises’ Homogeneous Competition of Gimmick on Price Drop [N]. 21st
Century Business Herald. 2012-11-13
[3]. Lu Yingxin. Price War on November 11 is Beginning, Harm From Online Shopping Trap Cannot
Bear [N]. Guangzhou Daily. 2012-11-10
[4]. Jiang Chenhong, Jiang Rong. E-business Enterprises’ Big Promotion Reconstructs Industry Supply
Chain: C2B Rudiment Appears. China Business. 2012-11-18
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