360buy vs. Amazon duel for e-commerce

Shopping online has gotten more popular in recent years and soon expected to dominate the global retail sales market. Consumers can make purchases while sitting at home next to a computer.

As more on-line shopping websites have opened up in China, customers can find better bargains than by walking to nearby shops.

US-based Amazon.com ranks as the number one seller of online products worldwide. In China, Beijing-based 360buy is the second-biggest business-to-consumer website by revenue, and recent media reports disclosed the company will get more aggressive with its overseas expansion.

The company outlined a plan hoping to generate annual revenues of $100 million within the next three years. The Financial Times quotes Shi Tao, 360buy vice-president, as saying, "that would be the break-even point for the business," adding "that it is very possible that this will help boost profitability for the company overall because this is a higher margin business."

According to research firm Analysys, 360buy sells a wide range of goods to Chinese consumers online, which accounts for 27.7 percent of total transaction volume on Chinese websites valued at $2.4 billion in the second quarter this year.

360buy has just launched an English-language website that targets the US, Europe and other Western markets to rival Amazon.com and eBay. The site offers 400,000 products such as wedding dresses, tailor-made clothes, Chinese-language books, consumer electronics and apparel.

Richard Liu, founder and chairman of 360buy, explained corporate strategy during an exclusive interview with China Daily.

"When exploring markets outside China, 360buy.com will stick to its low-price strategy. I believe 360buy.com should help clients save money. This philosophy has not changed in the past, at present, and in the next 100 years. This is how we create value."

360buy takes a simple business approach, which is to sell goods at lower prices than their foreign competitors.

Shi told the Financial Times, "on average, our price can be 10 to 20 percent lower than on eBay." The company is considering a long-term strategy to build warehouses in the US or other countries, but only if there are strong demand.

Despite its success with generating large sales revenues in the domestic market, the on-line retailer struggles to earn profits, due to fierce competition. Its Chinese competitors have engaged in price wars, while 360buy offers free delivery that drives costs higher. 360buy appears to have no choice but to expand into Western markets, no matter how risky and costly.

Hong Bo, a Beijing-based IT commentator, told the China Daily, "the overseas market, with a 'big arena' and light competition, holds great business potential for Chinese companies to explore. Before 360buy's move, plenty of domestic companies such as Alibaba, had done a good job overseas. The success stimulated more firms to join in."

Although Chinese manufacturers had enjoyed much success producing products at lower prices, 360buy faces greater challenges to overcome Amazon.com. Labor costs are surging in the country and when factories move westward 360buy must develop a stronger logistics network.

Many Chinese toll roads charge high fees and delivery truck drivers must pay for diesel fuel as well. It would take a week to 10 days for a cargo ship from China to unload at a US port and then American trucks must deliver it to a warehouse and afterwards a package will arrive at the final destination.

Yes, one could pay for air cargo delivery, but at much higher prices.

So if 360buy intends to compete against Amazon.com, the on-line retailer must rise up to its challenges to keep prices low and create a more efficient logistics network to ensure shipments get delivered on time.

However, the company didn't become a successful on-line retailer in the country as a fluke. 360-buy had implemented a detailed plan to succeed in China and if its corporate executives establish smooth operations then the website retailer holds a good chance to overcome Amazon.com in global sales revenues a few years down the road.