"The 8 billion yuan sales volume of Suning.com in 2010 was merely the 'initial order placement' (the final recorded order for home computers) sales volume." An unnamed footwear e-commerce executive revealed that "initial order placement" is the amount displayed after the system records the user's final order. However, after placing an order, users often cancel their orders.
Regarding the sales target of 30 billion yuan in 2012, Li Bin, General Manager of Suning.com, told reporters that according to the annual growth rate of 4-5 times in recent years, achieving this target would not be difficult. According to the official data of Suning.com, the sales volume in 2010 was 2 billion yuan, and it reached 8 billion yuan in 2011.
The product category expansion of Suning.com has been rapid, from clothing, sports, to virtual items and books, all launched within less than a year. However, the rapidly growing Suning.com often neglects its own "Achilles' heel," with some industry insiders believing that "Suning.com does not have the genes of e-commerce."
In logistics, Suning.com cannot afford to be complacent. According to Tian Benzhen, Brand Director of Xin7Tian Electrical Appliances Network, the logistics distribution of old electrical appliances requires higher standards from source enterprises, especially in reducing express delivery damage rates. For large appliances (refrigerators, washing machines, air conditioners), they are usually sold as semi-finished products and require installation upon delivery, meaning that after-sales service must be in place.
"The sales data of industrial and commercial entities is based on the final order volume, then deducting 17% VAT to obtain the enterprise's operating revenue," said the e-commerce insider.
Based on the industry data of 70%, the actual sales volume of Suning.com in 2011 might be only over 5 billion yuan. And its planned sales target of 30 billion yuan in 2012 could be "translated" into an actual sales volume of over 20 billion yuan.
Looking back at the book war, Li Bin felt that the marketing effect brought by the book war was very bad, attracting many users at a low cost of 30 yuan, while attracting a new user through advertising costs about 150 yuan.
However, this book war exposed the shortcomings of Suning.com in large item warehousing, logistics, and distribution. Many users reported that the delivery service of Suning.com was poor. "During the '0 yuan book sale' event, I bought 200 yuan worth of books on Suning.com, but it took 7 days for the goods to arrive in batches, and it took 5 trips to deliver them all. Not even order consolidation and complete delivery could be achieved," complained a user who had purchased books on Suning.com.
Category Expansion Challenges
"Suning.com's strategy is clear, and its organizational structure is clear. Whether or not it can achieve the 3 billion yuan target depends on operations," Li Bin frankly admitted that future online shopping will focus more on comparing services, experiences, and after-sales service. Although price is still the first factor, its weight in consumers' purchasing decisions has decreased from 95% previously to over 80% now, and may further decrease to 50%, or even lower.
Having spent "the equivalent of one year's endorsement fee for a top domestic dark star," starting from January 1, 2012, Suning.com rebranded itself simultaneously with a new domain name to signify its transformation.
Moreover, "at that time, when JD and Dangdang were moving towards department store models, they each had their own unmatched niche markets—JD in 3C products, Dangdang in books—but currently, Suning.com lacks such a strong niche market in online sales," said Jia Penglei, Editor-in-Chief of YiGuo Energy Network.
"Suning.com can do well in standardized categories, but it faces significant challenges in semi-standardized and non-standardized categories," said Li Chengdong, analyst at Paideya Network, who believes that procurement, operations, logistics, and warehousing differ across various categories, making it difficult for Suning.com to excel in all of them.
3 Billion Yuan Target
"Suning.com's brand expansion has been too fast, and it hasn't had time to mature," said an e-commerce executive. Currently, JD and Dangdang are steadily expanding their comprehensive offerings, focusing on improving one or two categories per year.
Currently, the logistics cost in the home appliance industry generally accounts for about 5% of the total order value. Wang Luanquan, CEO of Kubacom, an appliance e-commerce company, told reporters that for these well-operated home appliance and 3C e-commerce companies, the average delivery cost of a single home appliance is 50 yuan.
"Suning.com is very strong in home appliances and 3C products," Li Bin believes that China's online shopping habits are not yet formed, and consumer needs are changing dramatically. This presents the same challenge for every manufacturer. Li Bin emphasized that Suning.com's procurement and logistics cost advantages are difficult for other e-commerce companies to match. He gave an example: currently, Suning.com's logistics cost is one-third of the average level of the entire home appliance and 3C online shopping industry.
"In 2012, our target is 3 billion yuan in sales," said Li Bin, General Manager of Suning.com, confidently.
However, operations remain a test for Suning.com. On October 31, 2011, Suning.com's book channel went live, quickly igniting a fierce "0-yuan book sale." According to Li Bin, the book channel saw over 20 million page views on its launch day, selling over 70,000 books on the first day, 100,000 on the second day, and 150,000 on the third day.
Nevertheless, many people in the e-commerce industry believe that Suning.com has exaggerated its target of 3 billion yuan. "Suning's sales figures contain a significant bubble," estimated a CEO of a home appliance e-commerce company based on his extensive experience.
"In 2012, Suning.com will continue to focus on expanding categories such as books, clothing, sports, and virtual products. In the book category, we aim to rank among the top three in the industry," Li Bin told reporters.
"Generally speaking, considering returns and rejected shipments, the final order volume of online users typically accounts for 70% of the 'initial order placement,'" he disclosed. Currently, Taobao Marketplace's final order volume accounts for over 70% of the 'initial order placement,' while Taobao Mall is close to 70%.
On the contrary, Li Bin emphasized that "Suning.com's focus in 2012 will also include strengthening the construction of online shopping platforms, including front-end user experience and quick pre-sales delivery."
This is Suning.com's "second season" of category expansion. At the beginning of 2011, Suning.com's category expansion was aggressive. In May 2011, Suning.com's sports store went live. In September 2011, virtual items were launched. On October 31, the book channel went live. At the end of 2010, clothing categories were launched. Currently, Suning.com's SKU (stock keeping units, web product images) is between 700,000 and 800,000, whereas at the start of 2011, the SKU was nearly 90,000.
As the capital winter arrived and major e-commerce companies reduced their advertising investments, Suning.com went against the trend. Currently, it is aggressively promoting advertisements in major cities nationwide, and its comprehensive department store e-commerce image is widely known.
"Using 'initial order placement' data as one's sales volume is also a common practice in the industry," the executive noted. Recently, Vancl has also adopted this method. According to the commerce department's data, Vancl's sales revenue from 2008 to 2010 was approximately 1.2 billion yuan, 3 billion yuan, and 12 billion yuan, which differs somewhat from what Vancl's CEO publicly stated last year.
Operational Capability Test
"In the second half of 2011, Suning.com's monthly sales grew by 20%-30%. Compared to the second quarter, Suning.com's market share increased by 1.2% in the third quarter," Li Bin stated, mainly due to the promotion of 3C products and general merchandise sales.
"Suning.com needs to improve its order processing and response capabilities, which include cooperation in all aspects such as front-end, logistics, delivery, inventory management, etc.," said the aforementioned shoe e-commerce executive.