Dangdang.com is one of the largest online shopping retailers in the world. It started as an online bookselling company in 1999. Its founders, Peggy Yu and Guoqing Li were inspired by the success of Amazon.com. Currently, it sells an array of products such as domestic appliances, digital products and cosmetics. Its main policy is ‘more choice, lower prices and vast convenience to customers’. Its business model was based on the model that mirrors that of Amazon.com, although there are some differences in the model of the business to suit particular circumstances in China. For instance, the key asset of Amazon.com is its massive database of titles which it licences from wholesalers of books. Such facility was not available in China. Therefore, Dangdang.com was faced with the necessity to build its own within two years. It faced a number of problems during its early stages . The Chinese customers were not accustomed to shopping on-line and the internet was a bit slow to take off in the country. They were not used to the idea of paying for goods in advance before they arrived. They were also not used to making payments for delivery. The credit card market was not well developed in China. This meant that most of the transactions were based on the cash-on-delivery system. Delivery of books was made by freelance couriers. The basis of the business was credit cards and money orders. However, things slowly changed with time. Dangdang.com had one warehouse in Beijing. This was used for the distribution of 15% of the total sales. The remaining 85% was distributed from the other warehouses it owned around the country. Currently, it has a global collection and distribution network .
SWOT analysis is critical in decision making and in understanding of all situations in organizations and businesses. SWOT stands for strengths, weaknesses, opportunities and threats. Through SWOT analysis, Dangdang.com is able to carry out strategic planning, marketing, competitor evaluation, and product and business development. This analysis also enables it to identify the negative and positive factors which influence it both internally and externally . Some of the strengths of Dangdang.com include the barriers to market entry in the industry and monetary assistance. Due to various restrictions on companies to enter the market, Dangdang.com only faces competition from a few companies. This increases the chances of maximizing on the market opportunities. It also receives monetary assistance from a number of institutions inside and outside China thus facilitating its financial base for purposes of investment and growth . In China, Dangdang.com is number one B2C e-commerce brand. Its deep understanding of the publishing industry is one of its major strengths. It has a short cash conversation sequence in the book business. It also has a cost control policy which is stringent and company-wide. It has product fulfilment capabilities which are self-built thus guaranteeing operational efficiency. Its existing customer base is sizable, and the growth in acquisitions of new customers is rapid and at a reasonable cost . These strengths enable it to compete effectively in the market.
Its weaknesses include the tax structure, the relatively low margins and the prospective debt rating. One major challenge it faces is the high corporate taxation. This tends to hinder its growth. The huge debts it has also lower its growth rate. The market place is not well developed in comparison to that of its peers. Moreover, conflicts of interest between online distributers and publishers impede the development of e-book market .
Its opportunities include the growing economy which offers market for its products, venture capitalists willing to fund its expansion and programs, the global markets and new markets. The growing economy of China and the expansion of global markets create an opportunity for its growth. Through research and development, it is able to identify and exploit new markets worldwide. This is imperative for its growth. Its ability to acquire large capital amounts also creates an opportunity for it to improve its operations and grow. Its major growth driver is the rapidly growing general merchandise sector . It has a market share gain in the e-book market which is equally advantageous on its part. The prospective emergence of the e-book market in China creates new revenue opportunities. Expertise in product assortment as well as mapping and business scale create an opportunity in the margin expansion .
The threats facing the company include government regulations and price changes in the market. The strict regulations set by the Chinese government as well as price fluctuations worldwide hinder its growth . There is the additional threat arising from piracy in the e-book industry. There are bogus products which induce brand impairment. There is also competition in the product pricing by competitors . These threats impede its growth.
In 2002, Dangdang.com took approximately 4,000 orders each day, generating about 35 million Yuan at 25% gross margin. However, this represented less than 0.1 per cent of the entire market . Currently, sales are rapidly growing and the book market is equally being deregulated. However, Dangdang.com faces stiff competition in the Chinese market. One of the companies that grow at a fast rate is Xi-Shu. This company has 500 store franchise chain. Dangdang’s online competitors include German run Bol.com and Joyo.com . Despite the stiff competition, it has been able to maintain a competitive advantage. In terms of page viewers, it is the second largest e-commerce company . By September 2010, it had accumulated about 6.8 million active customers. In the first nine months of 2010, it had acquired more than 3.4 million new customers . Over 50% of its revenue, in 2009, was derived from its repeat customers. To improve ARPU, it used the cross-selling strategy. 20% of its repeat customers and 8% of its new customers placed bundled orders in 2010. Prospective marketing will aim at converting media customers to General Merchandise customers .
Dangdang.com uses a number of business and financial strategies in order to be competitive. Through generation of healthy cash flow due to wise apex planning and working capital management, it has been able to acquire and maintain a competitive advantage . Through, margin expansion via operating business scale and leverage, it has been able to be competitive. Investment in the IPO in expanding fulfilment capabilities, broadening product categories and enhancing e-commerce infrastructure have also given Dangdang.com a competitive advantage . In the same strain, the company has retained its dominant market share in the media segment and online books sales. It is equally rapidly expanding into the categories of general merchandise. In that front the company embarked on the relatively new concept of e-book marketing in turn initiating and pioneering the development of the e-book market in China. It has been able to increase the repeat customer sales as well as increase the order size via cross-selling. The company is enhancing the techniques of product assortment and mapping. It is exploiting M&A opportunities .
The company, therefore, survives in the face of competition due to a number of growth drivers. There is a rapid growth in e-commerce users and internet users in China. Through an optimised product portfolio and advertising strategy, Dangdang.com has been able to acquire new customers and increase its platform traffic. There has been prudent management of working capital and the number of long-tail SKUs has been rising. The company has been able to develop and launch an e-book platform. Cross-selling from book business to general merchandise business has also helped the company survive the competition as the former has been able to improve the general merchandize business. The increasing number of owned book titles as well as higher margins has also helped the company survive the competing forces. Dangdang.com operates fulfilment systems and cost-efficient logistics in China . It currently runs six warehouses in the country. The land hosting the warehouses is leased and the company has developed all the facilities. Its delivery costs are lower than those incurred by its competitors since the former’s deliveries are made by local delivery organizations. It completes the delivery about 90% of its orders within 24 hours. Currently, the error rate in the company’s operations is approximately 0.003% . It has also developed a new system to track the status of the deliveries. It has launched a new ERP system and warehousing roadmap in 3Q10.
In order for Dangdang.com to compete against Amazon.com, it should apply a number of strategies. Amazon.com is the leading online-retailer in regard to media products which go into entertaining and educating the consumers. Amazon.com is a powerful brand which is recognizable due to key factors. It is known as the pioneer of online technology for e-commerce. It developed a customer base which was over thirty million people within ten years. In order for Dangdang.com to compete with Amazon.com, it should intensify its methods of advertising its products so as to increase its customer base to match that of Amazon.com. It should also constantly upgrade its online technology for e-commerce . Dangdang.com should also use both Information Technology and Customer Relationship Management as the driving force for its business strategy in order to compete effectively with Amazon.com. This is because Amazon.com records data concerning buyer behaviour, thus enabling it to offer any specific item to an individual on the basis of preferences verified via the items visited or purchases .
Dangdang.com should employ the use of user reviews to share information and get feedback concerning that piece of information. This will help in stimulating sales and enable it compete effectively against Amazon.com. It should have a diversified product portfolio for instance CD/DVD and books. This will enable it to gain additional customers. It should produce a wireless device which reads electronic books. This device may have an option of downloading the e-book required directly using 3G wireless. Apparently, Amazon.com uses a wireless device known as kindle and buyers can buy electronic books using this device from ‘amazonkindle.com’ . Therefore, this application will place the company in the ranks of Amazon.com making it possible for Dangdang.com to compete effectively with Amazon.com. The firm can establish partnerships with the public sector to be able to use public libraries in order to provide a catalogue and search option for potential users. These libraries will also cover rare and antique books. It should establish relationships with publishers to launch authors and special offers that are absolutely for the firm. This will result in increased competitive advantage and growth since consumers like reading books of authors that they are familiar with. It should partner with several e-commerce retailing firms. It should also vend its proficiency to numerous store groups. In equal measure it should invest in strategies that ensure the customer expectation is achieved . This will promote the customer loyalty and brand attachment thus enabling it to compete effectively with Amazon.com.
In conclusion, Dangdang.com began with selling books on-line. However, it later transitioned to selling general merchandize. It operates in an e-commerce space that is crowded and its products, apparel and books, continue face stiff competition . The competitive environment in the e-commerce space of China is unfavourable since several e-commerce platforms leverage price advantages in order to compel competitors out of the market. This has resulted in an unhealthy business ecosystem . Despite the stiff competition, Dagdang.com has been able to survive in the market. It has acquired and retained many customers. Through applying exclusive strategies, it will be able to maintain a competitive advantage and compete effectively with leading online retailers such as Amazon.com.
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