China Focus: Low prices in e-commerce trigger protests from retailers

China Focus: Low prices in e-commerce trigger protests fromretailers

HANGZHOU, July 26 (Xinhua) -- An online-store owner on Taobao.comrefused to budge on Tuesday after 100 off-line retailers accused theowner of violating corporate pricing rules by selling cheaper goodsand staged a protest in front of the headquarters of Taobao.com.

A quick look at the store, "Shanhuolang," displays oats for sale manufactured by Sanzhuliang remain priced at 78 yuan (12 U.S.dollars) per kilogram.

But the price for the same product sold by other off-lineretailers is 136 yuan (21 U.S. dollars).

Industrial analysts regard the gridlock as a wind vane of therising disputes between traditional retailers and avant guard onlineowners as e-commerce gains popularity in China.

CONFLICT

About 100 oat retailers gathered in front of the headquarters ofTaobao.com on July 19 and demanded that the largest e-commerceplatform operator stop "Shanluolang" and other online retailers fromselling cheaper oats and other oat-made products and provide themwith detailed information of the online stores undercutting them.

Demonstrators carried banners reading "Taobao harms nationalbrand" and "Say No to Dumping," blocked the company's front gate andcrammed onto the second floor.

These demonstrators were mainly contracted retailers ofSanzhuliang, an Inner-Mongolia company specializing in theproduction of oats and oat-made products, according to the company'sofficial web site.

Literally, "Sanzhuliang" means the third kind of staple foodafter rice and wheat. "They harmed our interests," a retailersaid.

However, the protestors refused to provide any identification orrelated materials requested by Taobao, according to the person incharge of Taobao's public relations.

Sources with Taobao told Xinhua that retailers protested becausethey believe online stores have stolen their business. The sourcesalso noted this was the first time that retailers have protestedagainst Taobao on the basis of cheaper online products.

The oats produced by Sanzhuliang are called "the most expensivefood" by netizens. The product description says the oats are "widelyaccepted as one of the most nutritious foods in the world" and "anideal kind of healthy food for patients with heart diseases ordiabetes."

Some protestors applied cooked oats onto their arms. "Ourproducts can protect the skin," a retailer said.

Zhou Huifen, who is in charge of a retail shop that sellsSanzhuliang products in Hangzhou, said "The oats priced 136 yuan perkilo isn't that expensive considering its high nutritional valuesand low volume of production, and a lower price is against corporaterules.

Refusing to be identified, the online store owner told Xinhuathat the products sold at "Shanhuolang" are genuine, because thereis only one company that produces the same oats.

"The wholesale price is 68 yuan (10.5 U.S. dollars) per kilowhile the retail price is 136 yuan per kilo" said the owner,admitting that restocking was impossible as retailers have beenurging online stores to raise the price.

"Shanhuolang" ranks as the top seller on Taobao.com among morethan 60 online stores that sell oats manufactured by Sanshuliang. Sofar, it has clinched 217 deals.

PRICING CHALLENGE

It is quite common for producers, retailers and agents to makedeals on pricing, regions and channels in order to guaranteeprofits. Generally, selecting the price belongs to the producers,according to some retailers engaged in consumer-goods sales.

Sanzhuliang has announced on its website that selling itsproducts at lower prices seriously violate the company rules anddamage the interests of both retailers and the company.

The company made a statement on its website on March 23, 2011,promising to award 50,000 yuan (7,750 U.S. dollars) to retailers whoferret out online stores on Taobao.com that disrupt prices.

Many consumers, however, don't think it fair to force the onlinestore owner to raise his prices. "It is really absurd for retailersto attack Taobao just because online stores gain a competitive edgeby offering lower prices," commented a netizen.

In a written statement, Taobao said that it has always protectedthe intellectual property rights and respected the rights of owners,vendors and consumers.

As online shopping gains popularity in China, Cao Lei, chiefanalyst of China E-Business Research Center, said that traditionaldistribution and pricing mechanisms are being challenged becauseconsumers welcome the benefits of faster delivery and transparentprices brought by Internet.

Statistics from China Internet Network Information Center showsthat the total volume of online shopping reached 457 million yuan(71 million U.S. dollars) in 2010.