DONGFENG VILLAGE, China (Reuters) - It was a Cinderella story: a pig-rearing and vegetable-growing community in China's eastern Jiangsu range that remade itself into a encampment braggadocio millionaires and costly cars, all by plywood, skill and a Internet.
In 2007 Sun Han, a 30-year-old de facto e-commerce arch in Dongfeng Village, fell in adore with a designs of Swedish seat hulk Ikea and motionless to make identical seat of his possess to sell on a Internet.
Others in his encampment shortly followed fit and a fairytale of resources was born.
What were once unfeeling plots have been converted into workshops and storefronts. Sun's factory, sitting on customarily over an hactare of land, now churns out knock-off Ikea shelves and beds to fill a 200 orders he gets a day on his dual online shops.
But a story might not have a happy finale for everyone.
Intense competition has fuelled cost wars among seat vendors. That, total with cost hikes from China's heading online e-commerce platform, Taobao Mall, this year forced a closure of some of fledgling businesses in this dry encampment that is home to some-more than 1,000 Taobao seat sellers.
"There is some-more foe now, though we need to continue to innovate and accommodate patron needs," pronounced Sun, who looks some-more like a highbrow than a encampment business chief, in his black leather loafers, grey tweed coupler and half-rimmed spectacles.
Another seat builder in a village, Wang Le, is some-more blunt about a situation. As others have rushed to embrace those creation a copycat furniture, he says, distinction margins have been undermined for all.
"With everybody creation identical things and prices dropping, a foe is vicious," Wang, 29, said.
"You see that baby crib?" he said, indicating to an unprepared plywood crib on a building of a hoary section room in his factory. "A few years ago, we could have sole it for 600 to 800 yuan ($95-$125). Now we can customarily sell it for 300 yuan."
FALL FROM GRACE
Dongfeng village's tumble from beauty is suggestive of what is function in China's wider e-commerce market. Once a heavenly of private equity and try collateral firms, it is now set for a duration of intense competition and shake-out.
Money entering a zone and a comparatively low barriers to entrance have spawned a crowd of e-commerce companies that are jostling for consumers' attention. From boots to junk food, there are an estimated 25,000 online stores in China.
"Every private investor, many of them with some-more income than sense, tends to consider they can replicate a Amazon indication in China. And so that is what unequivocally combined a competition, this inundate of capital," pronounced Michael Clendenin, handling executive during Shanghai-based consultancy RedTech Advisors.
With 173 million Chinese people selling online, China's e-commerce attention is approaching to transcend 750 billion yuan ($118 billion) in sum sell value this year, some-more than a sum domestic product of Vietnam. It is approaching to spin a world's largest e-commerce marketplace in 2015, Boston Consulting Group pronounced in a news recently.
Though a waters for this marketplace demeanour promising, analysts advise that they are shark-infested.
"It's really rival and a margins are utterly low, so it's tough to make income in it... When we consider about books, how many are books in China? It's so low, though we still have to give giveaway smoothness for 29 yuan," pronounced Hong Kong-based Samsung Securities researcher Paul Wuh.
Amazon.com Inc., a largest online tradesman in a United States, customarily reports handling margins of 3-5 percent. By comparison, Chinese online book tradesman Dangdang Inc. reported disastrous handling margins in a third quarter.
Heavy spending on logistics, waging cost wars, holding high bonus promotions and splurging on large offline promotion are what it now takes to be an e-commerce actor in China and to stay during a forefront of consumers' minds.
"It's going to be a guys with a many to remove who are going to win in a end. And what do they win? They win a business that is low margin. It's customarily so tough," RedTech Advisors' Clendenin said.
WHO ARE THE BIG PLAYERS?
Alibaba Group, founded by former debate beam Jack Ma, is a biggest e-commerce actor in China. Its Taobao section is now a singular largest e-commerce height in China, winning some-more than 70 percent of all exchange done online and half of all parcels sent in China.
Taobao paved a approach for other e-commerce players to compete, initial by formulating e-payment complement Alipay and also by pioneering an altogether e-commerce ecosystem that caters privately to Chinese consumers.
For example, Chinese business have a high trust barrier, so they frequently compensate with money when their products arrive. By regulating a Taobao platform, they are also means to discuss directly with sellers around present messaging to ask about equipment on sale.
But Taobao is not spared a heated competition. Dangdang, Tencent Holdings, Wal-Mart Stores Inc and 360buy, corroborated by Russian internet investment organisation Digital Sky Technologies, are battling for a share of a pie.
Bricks and trebuchet apparatus retailers such as Suning Appliance Co and Gome Electrical Appliances Holdings are also beefing adult their online presence.
"When we review online sell compared with offline retail, a expansion rate can't be compared. One is 100 percent year-on-year expansion and a other is 15 to 20 percent," pronounced Marie Jiang, a Shanghai-based researcher with Pacific Epoch.
Some analysts design height players such as Taobao, who have a slightest financial outlay, and a normal sell players such as Gome and Suning, who have aloft logistics, to be a ones to flower in a end.
"This isn't a aged days of a Chinese Internet of aloft margins. It's a whole new proviso of a Internet where it's much, much, some-more competitive," Clendenin said, adding that a time when firms like hunt engine Baidu and Tencent, that operates amicable networking and online gaming sites, could build their businesses into monopolies are radically over.
Wang Bing, a pig rancher incited logistics association trainer behind in Dongfeng Village, has churned feelings about a remarkable rival spin in his industry. There are during slightest a dozen logistics companies handling out of Dongfeng encampment to support a e-commerce trade.
"When we initial entered a business, we knew positively zero about it. Now that I'm in it, we can see customarily how tough it is to compete," pronounced Wang, whose newfound resources has meant he can means a radiant white Hyundai that sits incongruously along Dongfeng's dry categorical highway as logistics trucks wheel by.
"But life now is so many better. Not customarily a small better, approach better."
($1 = 6.3735 Chinese yuan)
(Additional stating by Jane Lee; Editing by Jason Subler and Alex Richardson)
News referensi http://news.yahoo.com/spring-over-chinas-e-commerce-winter-sets-035054767.html
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