The Humble Origins of Dang Dang, China's Online Retailing Giant
Peggy Yu Yu, co-founder and co-president of Dang Dang (www.dangdang.com), and her husband, Liu Guoqing, are typical of the entrepreneurs who studied abroad and then established their own enterprises upon returning to China. Dang Dang was first launched as an online seller of books. It has now grown into China's largest online retailer offering almost everything from digital products to cosmetics and has also become the world's leading online seller of Chinese-language books, movies and music.
After filing with the US Securities and Exchange Commission for initial public offering in November, E-Commerce China Dangdang (under the symbol DANG) will be traded in the New York stock market this week. The IPO will not only raise new funds to strengthen operations but also bring a fortune of around US$400 million for Yu Yu and her husband, who jointly founded Dang Dang a decade earlier.
Like numerous aspiring entrepreneurs jumping on the e-commerce bandwagon, the pair established Dang Dang in 1999 ahead of the burst of the "dot-com bubble". Before that Yu Yu worked as a finance management consultant specializing in corporate mergers and acquisitions.
Born in Chongqing City, which is also called "Yu" for short, Yu Yu majored in English language at the Beijing Foreign Studies University (BFSU). Following a stint at an American company, she went to the US for advanced study and earned her MBA in finance and international commerce in 1992. From 1992 to 1997, she was engaged mainly in M&A business, including running her own firm Tripod International.
While still working on Wall Street in 1995, Yu Yu developed a keen interest in Amazon.com, Inc. and conceived the idea of operating a respectable online bookstore herself. After returning to China in 1997, she found the Chinese market was still not mature enough for online bookselling business due to the lack of a database of book titles and the limited number of Internet users at that time.
She and her husband decided to start from scratch to set up the first database of Chinese-language publications, which not only formed a foundation for Dang Dang's business operations but also attracted attention from investors. Earlier venture funds came from investment firms like IDG, Softbank, and Luxembourg Cambridge Holding Group (LCHG).
In the past 10 years, Dang Dang has built up one of the world's largest online shopping malls which now offers more than 300,000 kinds of books, software and other products to more than 6 million customers around the globe.
The growing pains for Dang Dang included long and hard-fought battles with closest rival Joyo.com, which also ranks among the top online retailers on the Chinese market, in the form of seemingly endless price cuts and continuously expanding product lines.
One of the highlights was when global online retailing giant Amazon.com, Inc planned the acquisition of a suitable Chinese online retailer and set its sights on Dang Dang. Following rounds of negotiations, Yu Yu did not accept the offer to buy her company out because she would only accept Amazon as a shareholder.
Amazon immediately turned to Joyo.com and acquired the archrival of Dang Dang for $75 million, forcing Yu Yu to face even more ferocious challenges from Joyo/Amazon.
The brutal and dogged competition has eaten away profits for both sides. Dang Dang managed to start generating earnings only from May of 2009. It incurred net losses of 70.5 million Chinese yuan in 2007 and an additional 81.8 million yuan the following year. Net earnings amounted to 16.9 million yuan in 2009 and 16 million yuan for the first nine months of 2010.
Yu Yu acknowledged that Dang Dang has generally followed similar business operations models established by Amazon. She has long closely observed the strategies and tactics adopted by Amazon as well as the pitfalls it encountered as part of the lessons for operating outstanding and successful online shopping.
DANG - Daily Candlesticks
As of 4/25/11 according to alexa.com
DangDang.com ranked #71 in china
Joyo.com ranked #74 in china