The latest e-commerce initiatives by Sina and Jingdong Mall look like smart moves that leverage their core strengths to move into new areas
We're seeing some interesting moves today on the dynamic e-commerce front, with new signals that Sina (Nasdaq: SINA) intends to make a serious play into the space using its popular Weibo microblogging service as its primary platform. At the same time, the industry's second largest player Jingdong Mall is throwing out a new challenge by preparing to enter the B2B space now dominated by industry leader Alibaba.
All of this underscores just how rapidly the e-commerce space is evolving, as companies realise just how important the business will be to China's fast-changing retail landscape. E-commerce sales have exploded in China over the last few years, with B2C sales rising 80 per cent in the first half of last year alone. At that rate, China's B2C business was on track to reach 430 billion yuan (US$68 billion) last year, and should easily pass the 1 trillion yuan mark in the next two years.
Let's look first at Sina, which is desperately trying to find ways to make money from its wildly popular Weibo microblogging service that now has some 500 million registered users. According to the latest media reports, Sina is developing a new platform for e-commerce advertisers called Xiaoxi Tong. The product, whose name translates to "Information Connect", is now in beta testing, and will allow e-commerce firms to send private messages to their Weibo followers.
This move is just the latest in the e-commerce space by Sina, which has also recently launched an e-payments service and is setting up a platform that will the millions of Weibo users to buy goods from e-commerce companies. The recent e-commerce push follows the collapse of talks last fall that would have seen Alibaba buy a stake in Weibo as part of a strategic tie-up with Sina.
That tie-up would have presumably let Alibaba become Sina's e-commerce partner; but this latest series of Sina initiatives indicates it now wants to develop e-commerce by itself. I personally like this new Xiaoxi Tong service, as it combines Sina's established strength in social networking with a marketing service and communication channel that many merchants should find attractive.
Sina should continue to look for similar ways to build its e-commerce business, and avoid trying to compete with existing players by setting up more traditional online shops and shopping malls. If it retains this more focused strategy, I would give its e-commerce initiative a good chance of success. That could help Weibo to finally reach its goal of becoming profitable within the next year, a critical step before an IPO that was highly anticipated a couple of years ago but was later shelved due to the profitability issue.
From Sina, let's take a quick look at the latest news from Jingdong Mall, whose talkative founder Liu Qiangdong is saying he plans to enter the B2B e-commerce business. Industry followers know that Alibaba began its life as the operator of a B2B platform. It listed that platform, Alibaba.com, in Hong Kong in 2007 but privatised the company last year after the business stagnated and the unit was shaken by a number of scandals.
According to the latest reports, Liu says Jingdong, which also goes by the name 360Buy, will target businesses that are end users of the products they buy for its B2B initiative. That appears to mean the new service won't chase companies that buy and sell components to each other, but rather will target companies that buy finished products like PCs and office supplies.
This kind of strategy sounds smart, since Jingdong already offers many of these finished products to its existing customers through its traditional B2C platforms. But that said, Liu also has a habit of launching way too many initiatives that are far removed from his core B2C business, like offering real estate and travel services.
I suspect this latest move, which Liu reportedly disclosed during a recent speech, is part of Jingdong's campaign to get investors excited as it prepares to make an IPO. The company tried but failed to make such an offering last year after it met with a lukewarm reception from investors. But Liu has indicated his company should turn profitable sometime in 2013, and I wouldn't be surprised to see Jingdong try to relaunch its IPO campaign in the second half of this year.
Bottom line: The latest e-commerce initiatives by Sina and Jingdong Mall look like smart moves that leverage their core strengths to move into new areas.
To read more commentaries from Doug Young, visit youngchinabiz.com