There are many online shopping sites
that provides various types of goods such as Amazon, E-bay and many more
but the one that conquers it all is 360Buy, the biggest online 3c (Computer,Communication,and
Consumer Electronic) retailer of the B2C market in China.It
is also one of the most popular and powerful E-Business website in the China's
E-Business field. In 1998 ,Mr Qingdong Liu founded the company in Beijing . In 2004, 360Buy closed all of its local stores,
and started the e-commerce business based on its original B2C site.With the
development of the company ,the goods which sell
online become diversified .Now it has been offering more than one
million product selections and thousands of brands across 12 categories
including home appliances,digital communication products, computer, home
furnishing, apparel, maternal and child supplies, books, food and so on .From 2004 to now ,360buy is growing 3 times
faster than the industry average and it is having a 50.1% share in China’s
self-run B2C market (360Buy,2013).At present,
360Buy already has 51 million registered users with 6000 suppliers across the
whole wide world.The average daily page views of 360Buy exceed 100
million, and the number of orders per day exceeds 500000 .
A few years ago , online shopping may not be acceptable for most customers, because it is very hard to make them trust goods show on the screen , and they prefer to buy goods that they can touch and try .But with the development of technology and transport,people feel that buying goods online is safe and more convenient and the price is cheaper than the real shop , thus shopping online becomes a trend . The products that 360Buy sells are mostly essential in people’s life. Customers can find many substitute goods in other shop , and the change of price will lead to a larger change quantity of good. it means the percentage change in quantity is more then the percentage change in price ,thus the goods in 360Buy would have an elasticity demand .
From the increasing amount of the customers over the years, 360buy has proven that the products they sell is high quality.Moreover, form good service 360Buy performed , customers get high satisfaction of purchase .This means that ,360Buy has developed a sense of loyalty towards their customers and consequently making market deman less elastic.
As the law of demand ,the quantity of good demanded will raise as price fall and will fall as price as , and the other thing is remain the same .(Sloman J. 2013)
The graph is show .when the price of goods decrease form P1to P2 , the quantity of demand will increase form Q1 to Q2.
Generally ,the demand of 360Buy will also increase for other reason .During Chinese new year , Christmas day or any important festivals. During these days, people’s desire to purchase will be highly increased. They prefer to buy goods online for they own use or buy gifts for their friends and relatives because it is convenient and cheaper than real store. The demand curve will shift to the left.
As the law of supply ,an increase in price results in an increase in quantity supplied, the other things keep the same .In other words, there is a direct relationship between price and quantity: quantities respond in the same direction as price changes. This means that producers are willing to offer more products for sale on the time at higher prices by increasing production as a way of increasing profits.
The graph is show .when the price of goods increase form P0 to P1 , the quantity of supply will increase form Q0 to Q1.
If the other factors is changing such as input prices , change in technology , government policy and the number of supplier ,it will also effect the supply .
360Buy adopt a oligopoly market structure.Oligopoly means there are a few company exist in the market and share a large proportion.In oligopoly market , there are various barriers to entry of new firms and each company is interdependent to other.360Buy is oligopoly because it is the biggest b2c online shopping mall in China and has over 50% share in China’s self run B2C market. Moreover 360Buy is mutually dependent with other online shopping mall such as Tmall, Suning and Dangdang.
In the Chinese B2C online market , 360Buy is mutually dependent with other online shopping mall such as Suning ,Gome and Dangdang, each firm is affected by its rival’s action .In order to gain a bigger share in online market ,360Buy choose tempted to compete with thir rivals ,it is called non- collusive oligopoly.
The goal of 360Buy is seek the maximum profit .When 360buy choose to raise the goods’price to earn more profit,other rivals will not follow ,so that 360Buy will lose their competitive power and it will decrease a large share of market .thus demand is elastic for price increases.On the contrary when 360 buy choose to lower the goods’ price to attract more customers ,the rival company will immediately react a new price ,they will cut the price as well ,because they do not want to lose thir competitiveness and market share .Therefore,the demand is inelastic for price fall.
The kinked demand theory of oligopoly
illustrates the high degree of interdependence that exists among the firms that
make up an oligopoly.
In 2012 August 13 ,the
CEO of 360buy Mr Liu launched a price war in Chinese online market . he
announced in his micro blog that his company will get a zero percent gross
margin from large home appliance sales in the next three years, and he promised to sell large home appliances at a
price about 10 percent lower than its major rivals Gome and Suning. To fice
this situation ,Sunning immediately get reaction the CEO of Suning also
announce on his micro blog that the prices of all Suning’s online platform will
be lower than 360buy. And that it will compensate consumers who bought products
at a price higher than 360buy. In the meantime, another major online retailer,
Dangdang, has joined the competition. Its CEO Li Guoqing said on his micro blog
that Dangdang is ready to face the challenge, and welcomes consumers to shop
around(Iresearch 2012)
360buy raised a high
profile by offering low price to attract the users. Its prices were lower than its
rivals. Although the brand merchants do not allowed such low price, 360buy will
give discount coupons to their customers.Through this price war , the China’s
E-business market get highly growth. According to a an investigation by the
government in 2012 ,China’s e-commerce industry grew 45 percent year-on-year in
the second quarter to reach $45 billion in transaction volume(Pehub,2012)
The short run is a time
period which at least one factor of production is fixed .In short run of
production.By training their employees, they will improve thiei ability and
work more efficiency .For example , the website will more beauty and attractive
, if the employee have high artistic skill .
In long run ,all factors
of production is variable .In long run production,360Buy is conforming with the
economics of scale, the economics of scale means when increasing the scale of
production leads to lower cost per unit of output.
In long run ,all factors of production is variable .In long run production,360Buy is conforming with the economics of scale, the economics of scale means when increasing the scale of production leads to lower cost per unit of output.
In the
long run of production , 360Buy invest a huge amount of money to built its own
logistics system, .Now
,360BUy’s self-built logistics system is strong consisting of seven large logistics
centers, storage centers in 27 cities, nearly 1,000 distribution stations,300
from mentioning dots, covering 1076 administrative districts. (Value2020,2013)
By using their own logistics system , the cost of delivery will be decrease
extensively.Moreover ,360Buy also open their logistic system for third- part
vendors use , it will bring more profit dor the company .
In my opinion ,360Buy is
very successful in China’s online shopping market . By offer low price but high
quality products and complete service system , 360Buy get a lot of loyalty
customers .Recently ,360Buy launches its own application for the smart phone
users and it has already set oversea website to development international
market .I believe 360Buy will keep growing in the future .
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Reference list
Sloman J.,Wride A.,Garratt
D.( 2012) Economic 8th ed. Rotolito Lombarda, Italy :Pearson pp 41 - 150
Iresearch,(2012)Chinese
Appliance Retailers in Price War.
http://www.iresearchchina.com/news/4367.html[Accessed
on 19th October 2013]
http://www.pehub.com/2012/11/13/reuters-chinas-360buy-closes-round-7-3b-valuation/[Accessed
on 19th October 2013]
Value2020,(2013)E-Commerce –
B2C – Strategy of Jingdong Mall (360buy)
http://value2020.wordpress.com/2013/06/[Accessed
on 20th October 2013]
360Buy,(2013)Introduction to
360Buy
http://help.en.jd.com/help/question-3.html[Accessed
on 21th October 2013]
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