Chinese eCommerce- DangDang

Dangdang was established as an online book retailer in 1999 and has gradually evolved into one of the biggest B2C e-commerce companies in China. Dangdang was co-founded by the entrepreneur couple Ms Peggy Yu Yu and Mr Guoqing Li, who is a serial entrepreneur and a veteran in China’s publishing industry. Both co-founders have 10-plus years dedicated experience in the publishing industry and strong entrepreneurship. Dangdang is a leading pure-play B2C e-commerce company in China with an approximate market share of 9%, according to iResearch. We expect that Dangdang is the largest Chinese language online book retailer, in terms of online book sales revenue, and offers 590,000 plus book titles. In 2009, Dangdang had 6 mn active customers and 1.24 mn average daily UV on dangdang.com with 100,000 plus orders (warehouse capacity of 160,000) per day. In the book business, Dangdang has an exclusive partnership with >1,000 suppliers and rights to pre-sell bestsellers.

Apart from media and books, Dangdang is also one of the biggest online malls in China offering general merchandise products and a marketplace for merchants. It has proven self-built fulfilment and third-party delivery capabilities with nationwide coverage.

Key company milestones:

■ November 1999 – Dangdang.com was established

■ February 2000 – First round of venture capital funding

■ June 2001 – Launched online media store

■ February 2004 – Second round of VC funding, including US$11 mn from Tiger Global

■ April 2004 – Started offering GM products

■ July 2004 – Refused merger request from Amazon

■ July 2006 – Third round of VC funding, including US$27 mn from DCM, Walden

International and Alto Global

■ September 2006 – Rolled out mobile payment service

■ June 2008 – Starts new membership loyalty program

■ October 2008 – New homepage to promote general shopping platform image

■ September 2009 – Become the first e-commerce company providing mobile purchase services

Although the China e-commerce market remains a small portion of the overall retail market, its explosive growth power and behavioral-changing impact on the vast numbers of Chinese consumers allow no negligence.

Based on the CS China strategist team’s forecast (please refer to the China in 2015 report dated 1 January 2011), China’s private consumption will reach Rmb31,400 bn by 2015 (US$5,924 bn), which would be larger than any single country except the US. Different from developed markets, China’s consumer market is huge in volume terms whereas overall market size is capped due to much lower ASPs. However, this is, in fact, greatly beneficial to the emergence and fast growth of the e-commerce sector and online shopper community, as competitive pricing, unbeatable width and depth of product offerings and unique deliver-to-your-door logistics services are intrinsic features of the business segment. Meanwhile, it’s difficult for incumbent traditional retailers to catch up with these aspects, partly due to distinct business backend infrastructure and partly the nature of the business model, e.g., limited in-store product stocking and displays for traditional retailers.

By 2010, we estimate the total gross merchandise value (GMV) for the B2C e-commerce market will reach US$73.5 bn and could shoot up to US$253 bn by 2015, potentially larger than that of the US. Currently, only 13% of the gross merchandise value (GMV) generated is from B2C transactions while the majority still comes from C2C. We expect ecommerce (excluding B2B sales) to rise from 3% of retail sales now to 7% by 2015E. Also, we estimate e-commerce users will grow from 170 mn to 426 mn by 2015E, with ~50% of which being B2C online shoppers and penetrating one third of netizens.

As in the US, books are one of the earliest and well-recognised product categories in

e-commerce due to a standardised product format and simple logistic requirement. From a

survey by iResearch, the book and media category has the second-most frequently bought

products online, after apparel. While apparel takes a predominant 36% of market share as

the biggest category, books and media contribute 15% to overall e-commerce market

transactions in 2009 in China.