The Impact Of Online Price War On China Essay

The Impact Of Online Price War On China Essay

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The online price war, which is caused by unfair practices in China, has been a serious problem in recent years. Millions of retailers have participated in China’s online economy since 2000 due to the huge market and profit. According to the statistic in 2008, China’s online retail market was worth USD 18.8 billion, with a sustained stable growth rate of over 100 percent each year (Gong et al., 2013). Two wide-ranging online price wars happened last year. The majority of large-scale online retailers, such as alibaba, Jingdong, Suning and Gome were involved. A variety of economic issues have been caused by online price wars, which is troubling for the market economy, owning to the frequent unfair practices. It has also led to deleterious effects on social sustainability, such as the aggravated unemployment issue. This report will identify the effects and implications of online price war, focusing on China, analyze the causes and suggest possible solutions.

The unfair online price war may lead to grave economic issues. Firstly, profit margins will be generally reduced if online retailers regard price war as a long-term strategy. The extremely low price may lead customers to paying for the products they do not need indeed, which could contribute to the increase of sales volume. However, such impulsive purchases can hardly last for a long time. According to the statistic, the profit margin of Chinese home appliance industry is as low as 5% in more than a decade (Hu and Tang, 2014). Excessive online price war will even result in a zero profit consequence, which would bring an extreme difficulty to online retailers (Hu and Tang, 2014). Secondly, quality and after-sales service would be possibly ignored by online re...

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...ance their core competencies. Haier, which is one of the most famous Chinese enterprises worldwide, has explicitly rejected to attend the online price war between Jingdong, Suing and Gome in 2012. On the contrary, Haier concentrates on product research and circumspect after-sales service. Rely on the humanistic marketing philosophy, Haier has successfully become the biggest household appliance enterprise in China.

The main cause of online price war is the excessive price competition in e-commerce. It will be an extremely tough progress to stop online price war. Concerned efforts, including legal constraints, governmental supervision and changing strategies of the retailers, are required to avoid online price war. Despite the difficulties, this problem must be addressed because the wide-ranging online price war is unsustainable for both society and economy.

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