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Gome E-Commerce Subsidiaries to Join Taobao Mall

21st Century Business Herald, 10/08/11

Han Depeng, general manager of Chinese home appliance and consumer electronics retailer Gome's (0493.HK) online mall, Gome.com.cn, revealed plans last month to have the Gome subsidiary join Hangzhou-based C2C & B2C e-commerce site Taobao's Taobao Mall e-commerce platform. This follows the earlier partnership between Taobao Mall and B2C consumer electronics site Coo8.com, operated by another Gome subsidiary, Kuba Technology. Han's time with Gome includes an earlier stint with the company's Jinan branch.

Coo8 vice president Peng Liang revealed on September 29 that, "Coo8 had RMB 726 mln in sales in H1 2011, and opened branches in 18 cities. Since our purchase by Gome, the number of staff has also risen from 200 to 1,500."

Peng added: "We've had to compete with over a thousand new group buy sites this year, and advertising and other marketing costs have risen sharply; all e-commerce sites, and independent B2C sites in particular, have seen operating costs at least double. It used to be that independent B2C sites were resisted the idea of joining e-commerce platforms like Taobao Mall or Tencent's (0700.HK) QQ Buy ("QQ Wanggou"), but now the entire industry is seeing lower profits amid steadily rising costs, driving independent B2C sites to join open platforms operated by companies like Taobao and Tencent."

In addition to its team of 1,500 staff, Coo8 has set up a team of 100 tasked with handling the Taobao partnership. According to Peng, "The back-end coding system used by Taobao Mall used to be incompatible with Coo8, but we worked out solutions to technical problems like this and now more than 10,000 different Coo8 products can be found through Taobao's search engine. This not only helps raise the company's profile, but we also benefit from Taobao's own promotional and logistical resources."

Despite having joined Taobao Mall, Coo8 has so far decided to pass on partnering with Tencent's e-commerce platform. "Tencent doesn't have the right attitude," Peng said. "Its platform isn't as open as Taobao's, possibly due to the fact that Tencent has already invested in a lot of e-commerce retailers."

Sun Weimin, deputy chairman of Chinese consumer electronics and home appliances retailer Suning (002024.SZ), one of Gome's key competitors, has said that the company will not be joining any e-commerce platforms. "Suning Appliance plans to launch its own e-commerce platform, one which will cover home appliances, 3C products, general merchandise, automotive and other areas. Investment into logistics and back-end development for the platform will reach as much as RMB 10 bln, so why would we become involved with an e-commerce platform with which we're in direct competition?"

Peng's response was to point to home appliance e-commerce retailers now undertaking diversification and expansion efforts such as 360Buy and Suning Yigou, saying that once these companies reach an SKU count of 100,000, a clash with Taobao's Taobao Mall will be inevitable, all the more reason for e-commerce retailers pursuing a horizontal model to stay off such a platform.

Keywords: Coo8.com HR Sun Weimin consumer electronics e-commerce Taobao Internet B2C Tencent Gome Suning home appliances 002024.SZ 0493.HK 0700.HK Peng Liang Kuba Taobao Mall Han Depeng Suning Yigou QQ Buy retail

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