Questions raised over stores' price war(3)

Service is the key

Against the backdrop of the ongoing price war, the Ministry of Commerce has announced it will introduce more regulations to better guide the development of the nation's e-commerce market.

The ministry had in the past issued at least two specifications to regulate the behavior of e-commerce companies and more national standards will be announced as the industry's turnover increases, according to Wang Desheng, deputy director of the ministry's department of circulation industry development.

But he did not elaborate on the details of the rules, or clarify whether the price war is against any existing regulations.

But Lockyer believes it could be considered against Chinese law as indicated by the Commerce Ministry's recent statement warning companies to obey the laws and regulations regarding competition in their marketing activities.

"Most obviously there could potentially be a breach of the Provisions on Prohibiting Price Frauds that specifically prohibit marking up prices for price reduction reasons, providing fraudulent discounted prices and lying about price reductions to coax others into buying," she said.

A fraudulent discounted price is where the discounted price indicated by the seller is equal to or higher than the lowest price at which the same product has been sold from the same premises within the past seven days.

But in China, price wars are not, in principle, against any laws, she added.

As the e-commerce segment starts to mature, price wars are gradually losing out to other critical indicators such as shopping experience, according to Serge Hoffmann, a Bain partner in Hong Kong.

"In the past, consumers cited cheaper prices as the major reason they went online. But a large number of consumers now are motivated by convenience and product variety," he said.

For retailers, this means that after initial price wars, holding on to shoppers requires delivering superior customer service and focusing on cultivating customer loyalty, he added.

Shoppers' purchasing decisions, according to Hoffmann, are increasingly influenced by the retailer's credibility, reliability and overall service, specifically whether it has an easy return and exchange policy, safe and convenient payment system and fast, dependable delivery.

Traditional stores should differentiate themselves from online-only players by providing an improved value proposition, for example allowing customers to return web purchases to stores and showcasing their online products with store demos, he said.

But the reality is, despite the generous discounts offered by merchants, online buyers found they are getting discounted service as well.

Dong Juan, a 34-year-old company employee in Shanghai, has been checking on a 42-inch Skyworth TV since the price reductions began but she failed to buy it because the item was always sold out.

"They don't keep enough in stock and just pay lip service," she said. "They simply want to catch people's attention."