360buy invests massively in logistics in China

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360buy.com, the largest online store in China by market share, plans to spend 8 billion yuan ($1.2 billion) on improving its logistics and customer services over the next five years, after receiving an investment of $500 million from several venture capital companies.

Yi Rangyue, vice-president of Beijing Jingdong Century Trading Co, 360buy’s parent company, told China Daily on Wednesday that the company is going to build more logistics centers and place greater emphasis on customer service by cooperating with large PC makers, such as Acer Inc, to improve its competitiveness among numerous online stores.

Founded in 2004, 360buy has a similar business model to Amazon.com Inc. Initially focusing on the PC and cell phone business, the Chinese online retail giant has extended its product range to include electronics, daily essentials, books and cosmetics.

It achieved sales revenue of 10 billion yuan last year, with a growth rate of 200-percent year-on-year, led by China’s online Business-to-Consumer (B2C) market. According to the domestic research company iResearch, 360buy held a 32.5-percent market share last year, while its US peer Amazon, through its Chinese subsidiary Joyo Amazon, had 9.2 percent.
According to data from the China Internet Network Information Center, China has 420 million Internet users, more than any other county, with 148 million customers shopping online last year. The research company said that China’s online shopping sales revenue reached 498 billion yuan last year and that it might hit 1 trillion yuan next year.

As the profit margin for electronic products becomes thinner, 360buy will put more emphasis on its more profitable businesses, such as sales of daily essential merchandise, building logistics centers and developing more customer services.

“We are planning to shift ‘cost centers’, such as logistics and customer services, into ‘profit centers’,” said Wang Zhijun, vice-president of the company. “The profit from selling electronics products is low, so the trend is that large companies such as Hewlett-Packard Corp and IBM Corp are doing high-end services to make profit.”

The company has just bought 405 hectares of land to add to its existing 20 hectare warehouse to develop its logistics, and it aims to build Asia’s largest e-commerce logistics center in Shanghai.

“360buy spent a major part of its capital on building logistics and marketing,” said Chen Shousong, an analyst at the domestic research company Analysys International. Chen said logistics is the core part of e-commerce expansion. About 70 percent of 360buy’s capital, which came from first- and second-round investments, was allocated to its logistics development.

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