When open to pitfalls: Rapid category expansion or weakening operational strength

April 19, Dangdang announced that the wine channel to the Jiuxian Network exclusive operation, chief executive Guoqing (Weibo) lofty, "The open platform is Dangdang's strategic direction." "The introduction of vertical categories will give impetus to scale expansion."

Dangdang not only want to introduce, but also want to go out. At present, Dangdang's books and maternal and child categories are respectively with the day cat, QQ online shopping negotiations to settle matters. Soon, QQ online shopping book business will also be undertaken by Dangdang.

But Dangdang's series of open moves, or the pressure from its ugly earnings. Prior to 17th, the CFO Yang Jiahong left, the industry is regarded as Dangdang by the capital market pressure in miniature.

Billion state power network editor-in-chief Jia Pengrei in an interview, said, "when the recent expansion of the speed, which brings great risks to the operation." "and a fund partner who invests in the TMT industry, said Dangdang is not very clear on the use of open Platform for category expansion, but the current Shangdou open and forced to follow the choice."

Non-core business operation

"In the future, the wine is sold by Jiuxian network." "Jiuxian Network CEO Shang told reporters that Dangdang will be the technical interface open to the Jiuxian network, users when the purchase, the data will be directly transferred to the Jiuxian network, by the Jiuxian network responsible for delivery, distribution and after-sale management.

In addition, the two sides will be in the wine commodity prices, inventory, promotional activities, such as maintaining a high degree of consistency. Shang Show value Dangdang traffic and electrical commodity licensing, estimated this year Jiuxian net sales can reach 2 billion yuan. According to Hao revealed that 80% of the country's winery directly to the Jiuxian network shipments, is expected to 2012 Dangdang's liquor sales can reach 500 million yuan.

At the beginning of April, Dangdang has introduced China Taiwan East Mori shopping, users can buy Chinese Taiwan's cosmetics, health products and other daily necessities. Before the end of March, when with Gome (micro-blog) online Mall to build the Gome (micro-bo) city is also officially online. Recently, Guoqing is personally led to Quanzhou, in order to complete this year when the open platform to focus on the development of category "shoes clothing" 5 billion sales target.

However, Dangdang open platform but take the exclusive mode of operation, the wine channel outsourced to the Jiuxian network, rather than their own direct investment. This is somewhat different from other electronic business practices.

At present, liquor is not the core category of Dangdang, the choice of operating mode will not affect its core competencies. "A senior Electric company executive thinks, and Dangdang does not understand the category, if their own operations and management, will cost more labor costs."

But it's just tactic. "Once a category becomes the main category when users consume, Dangdang will take it back and run it itself." The senior executive said, such as mother and child, shoes and so on when the core category of the eye is by Dangdang itself operation.

or from financial reporting pressure

According to Dangdang 2011 Earnings: 2010 Dangdang books and audio-visual products, department stores, other revenue (open platform, advertising, etc.) accounted for the total revenue of 81.7%, 17.2%, 1.1%, respectively, 2011 accounted for 67.9%, 30.2%, 19%. Visible, last year Dangdang in the daily necessities category, the rapid expansion of the open platform.

From 2009 to 2011, Dangdang cost accounted for the total revenue of 77.5%, 77.8%, 86.2% respectively. Dangdang's main expenditures are commodity procurement costs, logistics costs, market costs and administrative costs, the first two of which are the largest expenditures. "In the 2011, Dangdang cost increased, the reason is to increase the investment in department products." Lee, a senior U.S. analyst, said.

"The procurement costs, advertising costs, and initial operating costs will be much higher when the new category expands by the self-employed, and it takes a year-long cycle to be profitable." Said the electric Shang.

And Dangdang earnings show, because the cost growth rate is too fast, 2011 its net deficit 228 million yuan. 2010, Dangdang net profit of 30.8 million yuan. Such financial data have disappointed the capital markets and lowered their "buy" ratings.

"When listed, the capital market will demand growth and profit." Dangdang also not so strong financial strength, for several years to maintain high growth, high loss of operations. And the financial situation has been losing money, so that its additional financing is quite uneconomical. "The fund partner in charge of the TMT industry has told reporters that choosing an open platform and doing business is the next good choice."

Compared to the own category needs to invest a lot of procurement and management costs, open platform cost much less investment.

A TMT industry investors believe that when the cat, to undertake QQ online shopping business, but also to play their own advantages, in reducing costs, expand the scale.

The worries of the open platform

Jia Pengrei that rapid category expansion is weakening the original strength of Dangdang. "Dangdang can be in the low customer price of the book category accounted for the overall revenue 80% to 90% when the realization of profitability, indicating that it in the book category of operating capacity, logistics control ability can not be belittled. But then entered the daily necessities, shoes and other categories, due to the lack of thinking through, so that marginal costs do not decline, nor diluted the overall cost. ”

This is actually the boundary problem of the electric business expansion. The basis of economies of scale is the diminishing marginal cost, and once the marginal cost remains unchanged, the expansion of the boundary. In this regard, the former messages Shang that "if the Business-to-consumer category, based on the characteristics of the supply chain, expansion has boundaries." If the choice of open platform, not generation shipments, the demand for the supply chain will be lower, the expansion of the border will be broad. ”

"In each category, there must be a choice of warehousing or not warehousing business, flat Taiwanese should be all the same." This means that an electric vendor with an open platform needs a supply chain management of all categories. But at present, there is no platform to know the category they have. "In this perspective, the expansion of the open platform also has boundaries," Jia Pengrei said. ”

In addition, the above electric business executives also have concerns, Dangdang can go to invite businesses to settle in, but because when the book started, book users are more price-sensitive. "Dangdang's clothing customer price in 100 yuan to 150 yuan, this interval is Amoy brand, traditional brand 30 percent to 50 percent price range." This means that the traditional suppliers in the new model is not sold, just a dump of the goods. ”