Dangdang.com reads trend for break-even

Most of the dotcoms which tried to tap China's book market disappeared within a year of the Internet fever collapsing, according to one of the survivors.

'In its heyday, there were over 300 dotcoms that claimed to provide online bookstore business. In reality only 60 to 70 of them actually operated,' Dangdang.com co-president and co-founder Peggy Yu said.

'After a year, only two still operate - German bookseller Bertelsmann's BOL China and us.'

Dotcom executives' inexperience in business operations, and the mainland's ill-prepared e-commerce infrastructure were key reasons for the failure of most of the online booksellers, according to Ms Yu, who heads the 'biggest Chinese-language online bookstore in China'.

'Some of the dotcom executives just had a concept and didn't have any experience in marketing or running a business. They spent lots of money on advertising without a clear message.'

After the Internet fever collapse, those who failed to generate revenue to back up their dotcom concepts were unable to find new funding and were forced out of the market.

The collapse in global technology stocks put Dangdang.com's Nasdaq listing on indefinite hold.

But the company says it has sufficient capital to see it through to a break-even level by the end of the year.

Online shopping in China has been hindered by a lack of e-commerce infrastructure - such as an electronic payment system and logistical support.

Just 1 per cent of Dangdang.com's customers paid with credit cards. Most had to conduct a money transfer by way of their banks, or get a money order from the post office, Ms Yu said.

There was also no well-established courier services.

'At the beginning it was very difficult. It took us a year to teach the bicycle boys [couriers] to understand our requirements.

'If not for the infrastructure hurdles, our business could have a faster monthly growth rate, say, between 40 per cent and 50 per cent,' she said.

Launched in November 1999 in the style of Amazon.com, Beijing-based Internet bookstore Dangdang.com said its sales revenue had growth of at least 20 per cent every month.

The only meaningful competition it faced was posed by the Bertelsmann operation.

It entered the mainland publishing business in 1996 through a partnership with the People's Daily.

It then went on to launch its Internet bookstore services last December, more than a year after Dangdan.com.

Ms Yu said BOL China had yet to pose any real threat to Dangdang.com's operation, as Bertelsmann's scale of operations was still relatively small.

'Its sales revenue is only a quarter of Dangdang.com's turnover,' Ms Yu said.

Despite the setback in terms of the mainland's online shopping environment, the inefficiency and the unfriendly operating style of the nation's retail bookstore business still offered good openings and plenty of potential for an online bookseller, Dangdang.com said.

'There are 12,000 physical bookstores in China, of which 7,000 belong to state-owned Xinhua Book Stores,' Ms Yu said.

'They are so inefficient and the way they display books is so messy that you can hardly find the books you want.

'I would say that going to a bookstore in China is torture.'

Due to physical constraints, even the largest bookstores can only house 6,000 to 7,000 titles.

This was a fraction of the more than 200,000 titles which were on offer through Internet bookstores such as Dangdang.com, Ms Yu said.

Deep discounts on the prices of the books - between 20 per cent and 50 per cent - also helped to boost the client base, she said.

With annual turnover in the bookselling business in the region of 40 billion yuan (about HK$37.49 billion), Ms Yu believes there is plenty of scope for growth.