Excessive growth in e-commerce industry creates operational stress

Excessive growth in the e-commerce industry is pushing the costs of advertising and human resources higher, putting more pressure on the operations of e-commerce companies, an expert told the Global Times on Sunday, referring to the plan by Tencent Technology Co to launch a B2B2C platform in the fourth quarter of this year.

“All large firms want to capitalize on the e-commerce boom, because they see the good development prospect of the industry, and everyone wants to grab a share of the market as soon as possible,” Feng Lin, an e-commerce expert at the Hangzhou-based China e-Business Research Center, told the Global Times on Sunday.

Wu Xiaoguang, senior executive vice president of the Shenzhen-based Tencent Technology Co, announced the plan at a conference Friday in Beijing.

Wu noted that the platform is under development currently, which is similar to C2C & B2C e-commerce website tmall.com, and will attract more B2C companies.

Tencent has invested a large amount of money into e-commerce business, including okbuy.com (online shoes sales), elong.com (online flight tickets and hotels booking), kela.com (online diamonds and jewelry sales).

Besides Tencent, Shanda Interactive Entertainment Ltd announced in July it would invest 2 billion yuan ($3.13) to promote its e-commerce portal pinju.com. Other B2C portals like 360buy.com, Joyo Amazon and dangdang.com are also devising strategies to attract more firms to join the portals.

The online trading volume reached 3.2 trillion yuan in the first half of the year in China, according to Zhejiang-based e-commerce platform gtobal.com.

“A large amount of venture capital has been invested into the e-commerce industry, which has led to rapid, and sometimes blind, expansion of the e-commerce companies. A lot of companies do not even expect to make any profits in the short term, as they are focused on scale and market share,” Feng said.

It has been reported that a number of group-buying websites have spent heavily on expanding the market recently, but many of them cannot maintain the daily operation and have started to reduce staff and cut costs. Group-buying website gaopeng.com was reported to have cut the number of staff on Friday.

Global Times

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