Online retailers in China sparked off a price war on Wednesday in a bid to undercut the competition and gain market share, but the general public were left unimpressed.
The price war was launched by Liu Qiangdong, CEO of 360buy.com, who said on Sina Weibo on Tuesday that 360buy.com will get zero gross margin from large home appliance sales in the next three years due to the prices it had set.
"Starting today, all large home appliances sold in 360buy.com will be at least 10 percent cheaper than those in Gome and Suning stores," Liu said.
He explained why 360buy.com initiated the lower prices, fingering rival Suning, in particular, for earning large profits from consumers. "The gross margin of large appliances sold in Suning reached as much as 25 percent, which means if you buy a 5,000 yuan (US$787.90) refrigerator at Suning, it earned 1,250 yuan (US$196.97) from you," the CEO said in a subsequent Weibo post.
His statement elicited swift countermeasures from Suning and Gome which, unlike the pure e-commerce retailer 360buy.com, operate their businesses through actual stores and online platforms.
"Suning's online store ensures all products including appliances to be priced lower than 360buy.com. If not, we will adjust the prices immediately and compensate consumers twice the price difference," the company announced via its Weibo account
Gome, too, responded by promising to sell its products cheaper than 360buy.com. "If 360buy.com sells it at 1 yuan, we will sell it at 0.95 yuan. Since 9 a.m. on Wednesday, all products sold at Gome's online shop will be 5 percent lower than 360buy.com," it stated on Weibo Tuesday evening.
The price war officially started at 9 a.m. Wednesday, which caused severe network congestions on all retailers' online platforms.
As of 1.32 p.m., 360buy.com announced its large appliances sales exceeded 200 million yuan (US$32 million) in just half a day, and almost half of its stocks nationwide have been depleted.
However, consumers took to the Internet to complain: not only were the Web sites difficult to access, sales products were always out of stock which made it impossible to order even if they were priced favorably.
The Chinese media also questioned the authenticity of the sales campaign. According to Eachnet, only 5,000 appliance products had their prices cut during the Aug. 15 price war, which accounted for 4.7 percent of the total 117,000 products available.
China's Ministry of Commerce subsequently issued a statement warning online retailers to keep their marketing campaigns in compliance with the law, and reminded them to protect the interests of consumers and suppliers.