Weibo: Xiaomi, Dangdang On New Long Marches

Includes: DANG, JD
by: Doug Young

Cyberchatter over the past week was shining a spotlight on the huge task ahead for domestic Chinese smartphone makers, as they engage in cut-throat competition in their massive home market. A new survey posted by a top regional telecoms executive showed just how little loyalty Chinese customers feel towards most of the domestic brands, underscoring the fact that low prices are still their major attraction.

Meantime, fading e-commerce veteran Dangdang (NYSE: DANG) was also facing its own uphill battle, as its core online book business was reportedly on the cusp of being overtaken by much newer rival (Nasdaq: JD), China's second largest player. True to his usual form, Dangdang's talkative but short-sighted co-founder Li Guoqing was more focused on a new employee incentive plan than the looming negative milestone for a division that was once his company's core business.

Let's begin our microblogging round-up with the smartphone survey, which was noteworthy not only because of what it revealed but also because it's one of the first such polls I've seen on the subject of customer loyalty in China's fiercely competitive mobile market. Results of the survey were disclosed by Ge Changwei, a top marketing executive in the Zhejiang provincial office of dominant mobile carrier China Mobile (HKEx: 941; NYSE: CHL).

Ge revealed that Apple (Nasdaq: AAPL) was far and away the brand with the most customer loyalty in the first 5 months of this year, with 75.4 percent of people showing a specific preference for the brand. (microblog post) Fast-rising homegrown player Xiaomi came in a surprising but distant second, with a customer loyalty rate of 28 percent, followed closely by leading global manufacturer Samsung [(OTC:SSNLF) (Seoul: 005930)] with 27.9 percent.

Among the other domestic major players, PC giant Lenovo [(OTCPK:LNVGY), (HKEx: 992)] was the next highest with a rating of 18.8 percent. Telecoms equipment giants Huawei and ZTE [(OTCPK:ZTCOY), (HKEx: 763; Shenzhen: 000063)] didn't fare too well, scoring ratings of 12.7 percent and a mere 4.7 percent, respectively. I won't recount any of Ge's individual comments here, as most of them aren't really relevant to the bigger picture.

From an observer's perspective, these figures certainly show how little headway the Chinese companies have made in creating brands that consumers will make special efforts to buy. The numbers must look especially disappointing for Xiaomi, despite its relatively high ranking, since the company has made customer loyalty a central part of its marketing strategy that seeks to copy the phenomenal success of Apple.

Xiaomi's talkative co-founder and marketing guru Lei Jun acknowledged the big uphill climb his company faces, but put his usual positive spin on the numbers by saying they spotlighted the challenges ahead. (microblog post) One other smartphone executive who commented on the numbers and the challenge his company faces was Liu Tie, a PR executive at Oppo, a smaller player that also did surprisingly well with a customer loyalty rating of 21.1 percent, fifth on the overall list. (microblog post)

While Xiaomi and Oppo might be encouraged by their relatively high rankings, customer loyalty rates of 20-25 percent are certainly nothing to be too proud of. The exceptionally low figures for Huawei and especially ZTE should also come as a wake-up call to both companies, driving home the reality that most people still buy their phones for low prices rather than any fondness for their brands.

From the smartphone loyalty rankings, let's move to e-commerce where marketing executive Xie Yongzhi was trumpeting the fact that his company was on the cusp of surpassing Dangdang for online book sales. (microblog post) Xie didn't provide any details, including the basis of his assertion or any specific figures, so it's impossible to comment in too much detail on what he says.

But if the information is even close to the truth, the development would mark a major milestone for, which has been in the online book selling space for less than 3 years. By comparison, Dangdang is one of China's oldest e-commerce companies and online book selling was its main businesses after it first set up shop in 1999. The company has been rapidly losing share to newer and more nimble rivals like JD for several years now, but headstrong Dangdang co-founder Li Guoqing has shown a lack of will to make any major moves to try and reverse his company's decline.

Li didn't respond to JD's book claims on his own microblog, but instead spent the last week touting a new incentive plan for Dangdang's employees. (microblog post) Li actually first announced the plan a month ago, but apparently decided to re-raise the topic last week, potentially to deflect attention from his company's looming loss of the national online book selling crown.

There's certainly nothing wrong with such stock incentive plans, which are critical to retaining and motivating employees. But Li's focus on this more managerial issue when his company is facing a larger public relations crisis seems a bit misplaced at this particular time. Once again, it shows that Li is ignoring the latest sign that his company is quickly sinking into irrelevance.

Disclosure: None.