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China’s Growing e-Commerce Graveyard: These Companies Already Failed in 2017

China’s e-commerce market is a dog-eat-dog world, with new companies popping up every day, while older ones are throwing in the towel. How (not) to make it in China’s crazy world of e-commerce has become a hot topic of discussion on Chinese social media. What’s on Weibo takes a look at 3 big – once successful – Chinese online companies, and why they failed in 2017.

Manya Koetse

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China’s e-commerce market is a dog-eat-dog world, with new companies popping up every day, while older ones are throwing in the towel. How (not) to make it in China’s crazy world of e-commerce has become a hot topic of discussion on Chinese social media. What’s on Weibo takes a look at 3 big – once successful – Chinese online companies, and why they failed in 2017. (Premium Content).

It is still early in the year, but already some big online companies have exited China’s chaotic world of e-commerce. The release of an ‘e-commerce dead list’ (#2017电商死亡名单#) became top trending on Chinese social media on February 22, and triggered discussions on the status-quo of the market.

“One by one they collapse, one by one they pop up,” one netizen (@逛吃秦皇岛) says. With an ever-growing Chinese online population and the world’s largest e-commerce market, more companies seek to join, hoping to find a goldmine. Instead, many of them soon end up on the e-commerce graveyard. The popular idea about China’s e-market that “when there’s enough wind, even a pig can fly” (当风来了, 猪也会飞起来) does not seem to hold true for all online businesses.

Their collapse does not necessarily mean the end – for many, it is just a new beginning. “This whole business is like gambling,” one Weibo commenter responds. Another micro-blogger says: “E-commerce companies all soon become like conventional businesses. The large online companies are just too strong. It is easy to join [the market], but hard to survive.”

Let’s take a look at 3 big companies that have already collapsed this year, and what experts say goes wrong in their approach to the Chinese online market.

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“China’s 2017 e-Commerce Dead List”

Along with other Chinese media, China’s influential online e-commerce magazine Ebrun.com recently released a list of big companies that have closed their doors this year. We have selected the 3 biggest ones.

 

1. Dingfangbao 订房宝

Business: Online Hotel Bookings

With the slogan “You only sleep ten hours, why would you spend all your money for the day on it?” (只睡十小时,为何要花整天的钱), Dingfangbao was an up-and-coming online hotel booking site (app + website) selling high-class hotel rooms at low prices, focused at offering clients a luxurious room for the night.

The company started in late 2014 with its own formula that allowed customers to search for available hotel rooms after 6 pm. Through the Dingfangbao app and site, four and five-star hotels in big cities such as Beijing, Shanghai, Guangzhou, and Shenzhen could offer their rooms at competitive prices if they were not occupied or reserved by 6 pm. A win-win situation: Dingfangbao users could get a top room for a cheap price, and hotels wouldn’t be left with empty hotel rooms.

The Dingfangbao service (Dingfangbao literally meaning ‘booking treasure’) was especially aimed at business travelers who won’t arrive at their hotels until the evenings due to late meetings and leave again early in the morning.

With Japanese nude model/(adult) film actress Sola Aoi (苍井空) as their company ambassador, it seemed that Dingfangbao was also aiming at luring customers to luxurious hotels at nighttime for other purposes – similar to the ‘love hotels’ in Japan.

Japanese sexy actress Sola Aoi was Dingfangbao’s spokesperson.

Dingfangbao had a promising take-off in 2014, with various fundings and an initial angel investment of 6 million RMB (±870K$), followed by second- and third-round funding of a total of 13 million RMB (±1.9M$) in 2015 and 2016.

But on 27 January 2017, Dingfangbao announced that it would be stopping its services. CEO Sun Jianrong (孙建荣) told the media that although there certainly is a market for the Dingbaofang formula, the frequency with which its clients used these services was too low and not enough to cover their operational costs.

On Weibo, the company still has around 19000 followers. Sola Aoi, who has a staggering 17 million fans on her Weibo page, announced on February 8 that she would step down as the company’s spokesperson. A day later, the company officially closed its doors, although its website is still live at the time of writing.

 

2. Greenbox 绿盒子

Business: O2O Children’s Clothing

Online trendy children’s clothing brand Greenbox (绿盒子) was a success story when it first entered China’s O2O (online-to-offline) retail market in 2010. The company was already established by businesswoman Wu Fangfang (吴芳芳) years before, but it made a conscious shift from offline to e-commerce when Wu realized the potential of middle-class moms spending more time shopping for their kids on the internet.

In 2010, Greenbox received two rounds of funding from Trust Bridge Partners (TBP) of 20 million RMB (3M$), and of 100 million (14.5M$) from DCM. Children clothing brands such as Miss de Mode, M.I.L. Boy, Jenny Bear, and a special Disney brand all belonged to Greenbox, which soon was named one of China’s top 10 e-retailers.

Greenbox tapped into the children’s clothing at the right time, as this retail segment has become especially booming business over the past few years. Together with the surge in other children-related products, there has been a shift to bigger sales of these ‘non-traditional products’ that show that China’s ‘Mummy Economy’ (妈妈经济) has become increasingly more relevant.

Wu Fangfang, the founder of Greenbox.

Soon after the brand was established, it became one of the most popular children’s clothing brands (ranking no.1 for three years in a row) on Alibaba’s online malls Tmall and Taobao. But Greenbox was not solely sold through Alibaba; it was also available through other online shopping platforms such as JD.com and Dangdang. The brand also had its own shop on WeChat.

In 2015, Greenbox started opening up physical stores besides its online ones. It had around 100 (flagship) stores in China’s first-tier cities, solely focused on online sales for the second- and third-tier cities. Was the company taking on more than it could? According to some Chinese media, the brand was “blindly expanding” and growing too fast, too soon, which led to recurring financial difficulties throughout the years. Their financial problems severely worsened in 2016, as the children’s clothing became increasingly competitive. In January 2017, the brand finally announced its bankruptcy.

On Weibo the brand still has 76000 fans, but it has been inactive for months. Some netizens are surprised that the well-known brand has quit, and wonder what this means for the future of other successful ‘Taobao brands.’

 

3. An Home 安个家

Business: Online Real Estate

An Home (安个家) was established in April of 2015. Headquartered in Shanghai, it was independently funded (10 million RMB, 1.5M$) by CEO Liang Weiping (梁伟平). Its business offered online real estate services with a focus on its mobile app, attempting to rival with traditional real estate services.

Different from offline realtors, An Home aimed to be an online (mobile) platform where its home-seekers, homeowners, and consultants could connect with each other, making the process of buying and selling a house less time-consuming and more efficient.

An Home was a promising start-up for which Liang Weiping gathered a team coming from prosperous companies such as Tencent and Alibaba.

But by late December of 2016, Liang admitted to Chinese media that the company was facing financial hardships, and that they had not succeeded in finding the right way to compete with their offline rivals through online channels. As booming as all corners of China’s e-commerce market might seem, people might not be ready for O2O when it comes to real estate.

One of the reasons for its failure was that eventually, no matter online or offline, access to a large number of houses is the key to winning over the real estate market – and it was precisely this issue where the company feel behind compared to the more traditional channels.

Late 2016, CEO Liang sent out a letter to all of its staff that An Home had to halt operations due to financial difficulties. The company has now closed its doors.

What Can We Learn from the Graveyard Companies?

The aforementioned online companies are not the only ones who did not make it this year. Bollain Home Textile (帛澜家纺天猫店), founded in 2012 and selling bedding and home textiles through over 50 online stores in China, has collapsed after running behind approximately 16 million RMB (2.3M$) in its payments to suppliers and staff.

Online recruitment company Job Tong (周伯通招聘), established in 2013 as a major social recruitment platform and even receiving a 28 million RMB investment from NetEase, also went down earlier this year – its online competitors, including lagou.com, liepin.com, and zhipin.com, simply grew too strong.

 

“Even the most clever housewife cannot cook without rice”

 

And then we have not even mentioned foreign brands such as Lotte and others that closed their doors this doors in the highly competitive Chinese e-market.

So what is the lesson to be learned from these start-up failures? Of course, there is not one answer.

But Chinese e-commerce guru Wang Yongjun (王勇军), who has over 2,5 million fans on his Weibo account (@老高电商圈子), thinks he knows what China’s e-commerce start-ups need.

Wang runs a large networking group called the ‘Laogao Club’ for online entrepreneurs in China that are active on Taobao, Tmall, JD.com, etc, and in response to the ‘2017 failing e-commerce list’, published a blog on February 22 in which he gives some main points on how to succeed in this dog-eat-dog e-commerce world.

Mr. Wang, founder of the Laogao Club, explains how businesses can become successful on platforms such as Taobao or JD.com.

According to Wang’s article (in Chinese), which received many views on Weibo on February 22, building up an online community is key for any e-commerce business in China.

“Even the most clever housewife cannot cook without rice”, Wang argues, seeing an online following as the key ingredient to any online-based business. Drawing in communal media followers costs time and energy – haste makes waste.

The ‘guru’ says that online businesses can’t just gather their following by simply arranging a KOL (Key Opinion Leader) or online celebrity (see the first Dingfangbao example) for their brand; it is something a brand has to do themself, since they are the core that needs to attract fans.

 

“No matter how good you are, or how good your product is, it is worth nothing without an online community.”

 

“No matter how good you are, or how good your product is, it is worth nothing without an online community,” Wang writes. In a time when netizens are drowning in the information that is presented to them, it is essential that brands and companies are precise in targeting their relevant audiences and shooting their arrows in the right place.

Wang strongly advises companies to set up the right online environment that suits their target audience, and to pick the right timing to market their messages. Sometimes brands are lucky when their campaign goes viral, but mostly it is about smart strategy.

Before converting your assets into cash, it is important to continue to be valuable to followers and give them a reason to stay. Wang stresses that it is never a good idea to start the money-making machine too soon – you first need to make sure you have a steady and loyal group of online followers that is attached to your brand/company.

 

“Don’t drown the pond to get at the fish.”

 

“Don’t be overhasty, don’t drain the pond to get to the fish” (不能操之过急、竭泽而渔), is one of the messages of the Laogao Club for their online entrepreneurs. You can only transform your brand and starting making money once your ‘fans’ trust your brand/company enough and feel connected to its ‘flavor.’

Keeping up the quality of your services and products, and always making sure it brings more than just a ‘bargain’, it is therefore key to survive in the fiercely competitive Chinese e-commerce market.

Reading from the Laogao Club’s road to e-success, we could draw the conclusion that Dingfangbao had not worked enough on creating its own communal following of trusting and loyal fans before attempting to converting its assets into cash. An Home jumped into the pond before there were any fish at all, and Greenbox went ahead of itself and became too hasty to expand.

“If you enter the pit, be cautious”, some netizens respond on Weibo: “It is risky business.”

“There are too many people who don’t understand and think they are already running an e-business simply because they openened an online company. It looks good on paper, but in reality, it’s nothing,” another person writes.

– By Manya Koetse

©2017 Whatsonweibo. All rights reserved. Do not reproduce our content without permission – you can contact us at info@whatsonweibo.com.

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Manya Koetse is the founder and editor-in-chief of whatsonweibo.com. She is a writer, public speaker, and researcher (Sinologist, MPhil) on social trends, digital developments, and new media in an ever-changing China, with a focus on Chinese society, pop culture, and gender issues. She shares her love for hotpot on hotpotambassador.com. Contact at manya@whatsonweibo.com, or follow on Twitter.

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China Digital

Discussions on Didi After $1.2 Billion Fine for User-Data Violations

“Don’t even worry about rectifying, just go away,” some commenters wrote about Didi after learning the car-hailing company illegally and excessively collected user data.

Manya Koetse

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One of the topics trending on Chinese social media this week is Chinese ride-hailing giant Didi and the precarious situation the company is in. Online discussions are ongoing after the Cyberspace Administration of China (CAC) imposed a fine of 8.026 billion yuan [US$1.19 billion] on Didi Global on July 21 due to its alleged violation of at least three major laws, namely China’s Network Security Law, Data Security Law, and the Personal Information Protection Law.

Didi CEO Cheng Wei and President Liu Qing also each received a fine of one million yuan (US$148,000) personally as they were held responsible for the company’s violations.

Beijing launched a cybersecurity investigation into Didi on July 2nd of 2021, just days after the company’s June 30 US$4.4 billion initial public offering in New York. The investigation was launched “to protect national security and the public interest,” and also came at a time when Didi reportedly went against the CAC by pressing ahead with its New York stock listing despite allegedly being urged to wait until a cybersecurity review of its data practices was conducted. Shortly after, the CAC ordered domestic app stores to remove all of Didi’s services.

Now that the investigation into Didi is completed, the CAC states that there is conclusive evidence that Didi committed 16 law violations including illegally obtaining information from users’ smartphones – such as collecting information from users’ clipboards and photo albums – and “excessively” collecting personal data, including facial recognition and information relating to age, occupation, home/work addresses, and family relations (also see Zichen Wang’s write-up on this here).

Didi Chuxing, China’s biggest taxi-hailing service, has over 550 million users and 31 million drivers. Besides taxi-hailing, Didi also offers other app-based transportation services, such as private car-hailing and social ride-sharing.

It is not the first time for the company to be in hot water. In 2018, the murders of two young women by Didi drivers caused national outrage and sparked concerns over customers’ safety when hailing a car through the Didi company.

On Weibo, various hashtags relating to Didi went trending over the past week, such as “Didi fined 8.026 billion yuan” (#滴滴被处80.26亿元罚款#), “Didi excessively collected 107 million pieces of passengers’ facial recognition information” (#滴滴过度收集1.07亿条乘客人脸识别信息#), and “Cyberspace Administration of China imposes administrative penalty on Didi” (#网信办对滴滴作出行政处罚#).

Some Weibo users wonder why Didi is just receiving a fine rather than being immediately shut down over the serious violations they committed. “You still not shutting them down?” was a popular recurring comment. Although rumors surfaced over Didi’s car-sharing business going bankrupt, some expert bloggers claimed the company still would have enough financial power to go on after paying the fine.

The CAC has not provided details about the exact nature of the previously reported government’s “national security concerns” regarding Didi, but on Weibo, some netizens share their ideas on the matter: “Didi has a lot of people’s data. Just by hailing a car, they determine your cellphone number, your occupation, address, family member information, The U.S. could carry out targeted bribery or intimidation of some important people in China, as well as obtaining the geographic data Didi has, which would mean a heavy blow to China’s cyber security.” Another commenter wrote: “Didn’t they already sell this illegally obtained user information? Is it a threat to national security?”

Others worry about their own privacy, writing: “Do people still have privacy nowadays? We talk about one thing today, tomorrow we’ll be bombarded with advertisements for that very same thing.”

But others mentioned that the general consumer will keep using Didi when booking a taxi via app, simply because it’s still the major player in the market.

On Weibo, Didi responded to the administrative punishment via their official Weibo account, writing:

We sincerely thank the departments in charge for their inspection and guidance, and we thank the public for their criticism and supervision. We will draw a lesson from this, and will pay equal attention to the importance of security and development, and we will further strengthen the construction of our network security and data security, enhance the protection of personal information, effectively fulfill our social responsibility, serve all of our passengers, drivers, and partners, for the company’s safe, healthy, and sustainable development.”

“Don’t even worry about rectifying, just go away,” some commenters wrote.

Read more of our articles about Didi Chuxing here.

By Manya Koetse
With contributions by Miranda Barnes

 

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China and Covid19

Beijing Communities Asking People to Wear Electronic Monitoring Wristband during Home Quarantine

“It’s almost like wearing electronic handcuffs. I don’t want to wear this,” one tech blogger wrote after being asked to wear a monitoring wristband during home quarantine.

Manya Koetse

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Social media posts from Beijing residents claiming that they were asked to wear electronic monitoring wristbands during home quarantine have prompted angry reactions on Weibo.

“Last week, I went on a work trip to Guangzhou and before I returned to Beijing I did the nucleic acid tests in time. I also reported my home isolation to authorities and received the antigen tests. In the middle of the night, I then received a notification from my community that they are giving me an electric bracelet to wear,” one Beijing resident writes on Weibo on July 14: “If they need to monitor my health, I’ll cooperate with temperature checks and nucleic acid tests at the door, but I cannot accept this so-called 24-hour electronic monitoring.”

Similar stories by Beijing residents returning back to the city after traveling have popped up on Chinese social media over the past few days. Tech blogger Dahongmao (@大红矛) – who has over 170,000 followers on Weibo – also shared their wristband experience, writing:

After returning to Beijing from a business trip, I reported to the community on my own initiative, and also volunteered to take the tests and stay in home isolation. Seeing that I could go out, a lady from the community called me and said that there was a new policy again and that all people in home quarantine must wear an electronic bracelet, and that it would be delivered to me that night. She explained that it is used to check the body temperature and that they could conveniently monitor body temperature data on the phone. I said that I had already strictly followed Beijing’s requirements in accordance with the anti-epidemic work. If this bracelet can connect to the internet, it definitely is also able to record my movements and it’s almost like wearing electronic handcuffs. I don’t want to wear this. If you want to know my temperature, just come to the door and check me, that’s fine, I’m also still clocking in to do antigen testing everyday. She said it’s a requirement from higher-up and that I shouldn’t make it difficult for her, I said I would not want to make it difficult for her but that she could tell those above her that I won’t wear it. If you insist that I wear it, you’ll have to come up with the documents that prove that it’s a Beijing government requirement and that this is not some unlicensed company trying to make a profit.

As more stories started surfacing about Beijing compounds asking residents to wear electronic bracelets during their home isolation, various hashtags related to the issue made their rounds on Chinese social media and photos taken by people wearing the bracelets also were posted online.

Photos of the wristband’s packaging show the electronic wristband is manufactured by Beijing Microsense Technology (北京微芯感知科技有限公司), a local Beijing company established in April of 2020 that is located in the city’s Haidian District.

These stories raised concerns online, especially because the wristband had not been announced as a policy by the city’s official health authorities.

“Resist the craziness,” one Weibo user wrote: “Our personal freedom is covertly being limited, and there’s people making a profit behind it.” “This is becoming more and more like one big prison,” one Zhejiang-based blogger wrote.

Tech blogger Dahongmao later updated their Weibo story about the bracelets, saying the community staff had come back to retrieve the electronic bracelets on Thursday afternoon because they had received “too many complaints.” News of the wristbands being recalled after too many complaints also became a hashtag on Weibo (#大量投诉质疑后社区回收电子手环#).

Chinese state media commentator Hu Xijin (@胡锡进), who is Beijing-based, also responded to the controversy, emphasizing that the bracelets had already been retrieved by community workers and that Beijing city would not force people to wear electronic wristbands during home quarantine. “I wonder if this adjustment was made due to the pressure of public opinion,” Hu wrote: “But even if it was, let us encourage this kind of respect shown in the face of public discontent and opposition.” He also made a video about the incident for his Hu Says series.

Earlier on Thursday, Hu had called some of the posts about the electronic wristbands “unfounded rumors” because people returning to Beijing from low-risk regions inside of China do not even need to isolate at home at all.

According to the official guidelines, individuals arriving (back) in Beijing must have a green health code and a negative nucleic acid test obtained within 48 hours. Only those individuals coming in from overseas must complete a 7-day centralized quarantine plus 3-day home isolation. Secondary contacts of confirmed cases will also be asked to do 7 days of home quarantine.

“Don’t say it’s just rumors,” one Weibo user wrote: “I’m wearing one [a wristband] right now. I had to, because my roommate returned from a trip.”

Blogger Dahongmao responded to Hu’s post about the wristband, saying: “Hu, if you are really concerned about this, then help to ask the relevant departments about these three questions. 1) Why doesn’t this consumer electronic product have the nationally required 3C certificate? 2) How come this anti-epidemic product doesn’t have medical device certification? 3) Without these two certificates, how did this [company] enter the purchasing list of the government for the Winter Olympics?”

As reported by Jiemian News, the same company that allegedly produced these wristbands also manufactured a smart wearable temperature measurement device called a “temperature band-aid,” which was used in the Olympic Village during the Beijing Winter Olympics.

On the late afternoon of July 14, the Beijing Municipal Health Commission responded to the online concerns about the electronic wristband, reportedly saying that home isolation is only necessary for people returning to Beijing from inside of China if they are coming from high-risk areas, and that there is no official policy in place regarding the need to wear electronic bracelets.

To read more about Covid-19 in China, check our articles here.

By Manya Koetse
With contributions by Miranda Barnes

 

Get the story behind the hashtag. Subscribe to What’s on Weibo here to receive our weekly newsletter and get access to our latest articles:

Spotted a mistake or want to add something? Please let us know in comments below or email us. First-time commenters, please be patient – we will have to manually approve your comment before it appears.

©2022 Whatsonweibo. All rights reserved. Do not reproduce our content without permission – you can contact us at info@whatsonweibo.com.

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