Dangdang: more than China's Amazon.com?

Stuart Lauchlan Profile picture for user slauchlan August 18, 2013
Summary:
China's Dangdang, a Beijing-based, New York Stock Exchange-listed competitor to Amazon.com, is in the process of transforming itself into an wide-ranging ecommerce marketplace.

CFP424490216-140205_copy1
All US firms eye up the Chinese market as a relatively untapped market, but of course this doesn't mean there isn't home-grown competition.

Take China's Dangdang, a Beijing-based, New York Stock Exchange-listed competitor to Amazon.com that is in the process of transforming itself into an wide-ranging ecommerce marketplace.

Dangdang’s main product categories include household merchandise, cosmetics, digital, home appliances, books, audio, and dozens of clothing and maternal and child categories.

Launched in 1999, Dangdang's stats are impressive:

  • The firm has more than 1,000 employees and customers in 50 countries.
  • Over 40% B2C customers in China have shopped with Dangdang.
  • There are over 10 million new registered customers per year.
  • More than 100,000 buyers transact via the site every day.
  • Around 30 million people a month visit the website.
  • The online store holds 200,000 kinds of books and 10,000 kinds of software and audio products.

Moving away from its online bookstore roots towards a wider marketplace is a key strategic priority says Peggy Yu Yu, cofounder and Executive Chairwoman. Yu Yu was working on Wall Street in the mid-1990s when she came across Amazon.com.

CFP399227387-175732_copy1
Peggy Yu Yu

When she return to China, she and her husband set up the first database of Chinese-language publications, which formed the basis for Dangdang's online sales.

Now there are other objectives in mind, she states:

"We are on track in transforming Dangdang from an online bookstore into an integrated online shopping mall targeting mid- to high-end customers. We [have] increased the number of products available to provide our customers with growing assortment of quality brand-name products to choose from across multiple categories.

"We have thousands of merchants on our marketplace. In terms of breakdown of brand versus stores, we have both of them. Some of the brands have their flagship store on Dangdang; in other cases, we have specialty stores, maybe a specialty baby store that not only sells baby stroller but also sell baby shoes.

"Some of the brands have had ecommerce experience in other platforms before. Now we think that more and more brands are doing that. In general, we think that the stores are more experienced in terms of doing orders, shipping orders and getting customers their answers. But I think that both brands and the stores will grow very nicely on the Dangdang platform."

Dangdang demographics

Each store or brand has its own positioning, adds Yu Yu, but needs to hit the Dangdang demographic:

"Some stores cater to more mature audience and some stores cater to maybe teenagers. Dangdang caters to medium-to high-end customers with higher-than-average education level and larger wallet size and they tend to live in top 20 cities. So going along with this Dangdang positioning, we decide what categories [we have] and inside categories, what kind of merchants and products we bring along to them.

"Because of customer targeting, we are very, very selective as to what kind of stores or brands we invite to Dangdang to ensure that our mid-to-medium-to-high-end customers are satisfied. We are very selective. There are certain brands and stores that want to open on Dangdang, but we don't accept them because we want to make sure that the service quality, the packaging and everything are in line with Dangdang's self-procurement or what Dangdang customers historically get."

A different demographic is reached out via the Dangdang store which opened in late 2012 on Tmall, a Chinese-language website for B2C online retail operated by by Alibaba Group, a privately owned Hangzhou-based family of Internet-based E-Commerce businesses. Yu Yu explains:

"Tmall customers and Dangdang customers are very different. Dangdang's customers tend to be based on Tier 1, Tier 2 large cities. We analyzed and looked at the customers we get from our Tmall store, and the Tmall customers tend to be from Tier 4, Tier 5 cities.

"They are younger people, they are from smaller cities, they are the kind of customers Dangdang normally doesn't targeting or do branding or have access. So I think the Tmall business is a nice supplement of customer base to Dangdang business."

Jiayuan-Tmall-shop
Tmall

With the push towards becoming an integrated online shopping mall, Dangdang has ramped up its own marketing and branding campaign around fashion and apparel. Yu Yu explains:

"Dangdang used to have the image of being a bookstore, and now we are broadening our offering while on our way to become an integrated shopping mall. So we have strong and new categories, such as apparel, baby and maternity.

"From time to time, we want to do brand-focused marketing to tell people, 'Hey, we are no longer the Dangdang you used to remember 5 years ago. We are now a Dangdang with an apparel store, with a baby store'.

"We [have] employed new marketing tools, including advertisements on top-rated TV programs and other offline media with broad coverage. These efforts met with success. We saw an increase in new and active customers, customer orders and revenue per order. Making a significant investment in marketing and branding while successfully improving our bottom line performance is an important achievement for us."

Mobile training

From a technology perspective, mobile is inevitably playing an ever greater part in the Dangdang story with a new version of its personal recommendation system rolled out:

"We have kept investing in mobile technology as we believe it will have increasing influence on our customers' online shopping behavior. Mobile traffic accounted for almost 40% of overall traffic during the [last] quarter, up from the low-30s range in the last quarter.

"We believe our 'customer service in your pocket' feature will increase user stickiness to our mobile platform as more and more of our loyal Dangdang customers transition their online shopping to mobile device."

Mobile platforms lead to different user behaviour patterns than via laptops or desktops, says Yu Yu:

"When people use a laptop, they tend to be in the office and have a larger chunk of time. When they use mobile, they can be in the subway or in the elevator or waiting in line to get cash from ATM machine.

"Because the environment to use mobile applications is different from the environment to use a PC, that decides that the features we developed for the mobile platform are different from the features that we developed for PC.

"Dangdang needs to work hard on getting out more features that cater to the fact that fragmented pieces of time, 5, 10 seconds of time can be used very well by our customers."

A large part of the mobile push's success will depend on shaping existing customers habits:

"The first phase will be nurture customers to use mobile Dangdang very frequently, to use the 'customer in your pocket' feature very frequently. We are not spending much money on mobile acquisition yet because we think that we're in the stage of nurturing user habits.

"When we see using mobile application habits becoming more and more like a shopping behavior, then that will be the time we'll begin to spend more on mobile acquisition of customers."

An open book still

Dangdang-e-reader-02
For all the marketplace ambitions, Dangdang is still proud of its bookstore origins, says Yu Yu:

"With different players getting in and out of book segment, Dangdang's holding a large percentage of all books sold in China remains very, very strong. Our quarterly growth rate in the second quarter of this year was 22%.

"Given the fact that Dangdang is the largest store of books in China and the book itself is not a hyper-growth segment, we think that this growth rate is very good, and we look forward to deliver strong performance in our book segment going forward."

She also does not foresee the rise of the e-book as undermining or cannibalising revenues from sales of traditional books:

"We increased the number of titles we carry on our e-book platform. We also had another test launch of Dangdang readers, [around] which we're collecting data. Sales of e-books at this time are still very small. In our experience, people who download the application for e-books also tend to buy books for the paper format as well.

"I think that e-book in China will take a very different path as what it did in the US or maybe European countries.The starting point is very low, and we are seeing a very gradual increase. Our focus will be adding more titles we carry and encouraging people to use their mobile and their pad and other applications for download for testing for experience."

As for what's next for Dangdang, Yu Yu has some clear priorities:

"We are going to continue what we call the category expansion strategy. We want to strengthen our destination categories -  apparel, fashion, baby, maternity, home and lifestyle - so that the sales contribution from general merchandise becomes larger and larger.

"Another major theme is that we are going to continue to make investments in our technology because we see technology bringing us operational efficiency and helping us to better utilize our data to help us to cross-sell to our customers on different categories.

"Without adding categories to the current customer base, how we get customers who used to buy sheets from Dangdang into buying baby products or into buying his next pair of shoes, will be something that we concentrate on.

"And for the mobile initiative, we see a really, really strong trend in people tapping into their mobile application for all kinds of things, from reading, getting news, looking at Dangdang sales promotion activities to getting orders."

A grey colored placeholder image