SEOUL, Korea, Mar 28 (Korea Bizwire) – According to data released recently by the China International Electronic Commerce Center, the number of social commerce sites closed for business since the beginning of the first social commerce site in China has been 5,376 out of total 6,246 operators.
The closure rate is as high as 86 percent. This is much higher than the figure announced by the same center in 2012 when it said 3,482 sites went out of business from 6,177 (closure rate of 56%).
The best case in point showing the state of affairs of the Chinese social commerce scene is “Didatuan” that has decided to close its business only recently. Established in 2010, the company has grown rapidly, ranking No. 10 in the following year. Since early last year when it acquired Velo, a discount coupon brand, however, the company fortune has reversed. A Didatuan official said his company would pursue different business models away from social commerce.
In light of the report that 86 percent of social commerce operators die off prematurely and one of the best-known social commerce operators folded its business in favor of a new business model, one may wonder whether China’s social commerce business is in danger of decline. But the truth is, the business is alive and well and it’s going to grow leaps and bounds.
Not unlike Korea, it has been only five or so years for the average Chinese to hear about social commerce. Since 2010, too many new social commerce companies have been established.
Naturally a bubble was formed in the industry and it is time for the bubble to pop. That’s exactly what’s going on in the Chinese social commerce industry now, extinction of the weak and survival of the fittest. Under these circumstances, only competitive firms with viable business models have been left.
Even though the number of firms is in sharp decline, the overall transaction volume is growing at an explosive rate. According to the International Electronic Commerce Center, the total transaction amount in the social commerce industry last year was 53.3 billion yuan (about 9.2 trillion won), up 52.8 percent from the previous year.
Regulators shouldn’t be afraid to axe IT tie-ups (Global Times, Mar 20)
Chinese internet: Mobile wars (Financial Times, Mar 19)
Why China is 10 years ahead in social commerce (Marketing-Interactive, Jan 3)
As the social commerce ecosystem has become stronger, with a rapid rise in transaction volume, large Internet firms such as Alibaba, Tencent, and Baidu are plunging into the social commerce business themselves. Now, the market is largely divided into Internet heavyweights vis-à-vis incumbent social commerce firms like Meituan, Dianping, 55tuan, Lashou Wong, Nuomi, and Manzuo Wang.
Baidu, for example, took over all the shares of Nuomi hitherto held by Renren Wang. Suning acquired Manzuo Wang while Tencent bought up a 20-percent stake in Dianping.
Currently, Meituan is the No. 1 social commerce operator in China after taking an equity investment from Alibaba, with over 200 offices across the nation. Its sales revenue in 2013 is estimated at 16 billion yuan (about 2.7 trillion won), up 188 percent from 2012.
In the current market landscape in which giant Internet operators gradually gobbling up strong social commerce operators, it is likely that the social commerce industry will become firmly established within a few years from now.
Written by Lina Jang (firstname.lastname@example.org)