Price wars won’t help e-commerce

Online retail sales on Nov 11 — known as Singles’ Day in China — hit a record high this year. The current price wars are a result of market competition, but their effects do not necessarily benefit consumers and the entire industry, says an article from The Beijing Times. Excerpts:

Online retail sales on Nov 11 — known as Singles’ Day in China — hit a record high this year. But extensive price wars among e-commerce companies won’t lead to a prosperous industry.

The current price wars are a result of market competition, but their effects do not necessarily benefit consumers and the entire industry.

  Usually the big promotions launched by e-commerce giants come at the expense of the products’ quality and post-sales services.

Consumers are happy to take advantage of the reduced prices, but they often overlook the products’ quality.

But even if consumers are benefiting from the low prices in the short term, the price wars are hurting the industry.

In the long run, price wars squeeze the profit margins of e-commerce companies. And consumers also end up paying for the decreased quality of services.

E-commerce companies may also have already seen the potential hazards ahead. However, two reasons have compelled them to launch price wars.

The first reason is linked to the increasing labor costs, which have led merchants to boost online sales.

The other reason is that if e-commerce dealers are successful at the end of the price wars, they will be able to raise much more venture capital, in a bid to carry out strategic restructuring plans.

Probably, the industry structure will change in the wake of the low-price campaigns.

Price wars may bring temporary booming sales, but they will hardly lead to a virtuous circle in the market.