I've been investing in Chinese companies for about seven years. I read as much as I can and follow a large number of firms. When DangDang.com (DANG) went public in December I thought it was an interesting company, but its post-IPO price of $25-30 was simply too much for me to swallow. But now, after a $20 sell-off, I think DangDang is starting to look good.
There are several reasons why DangDang is starting to look impressive, but the main reason is that its traffic has doubled since last October according to a leading traffic measurement service in China called ChinaRank.org.cn.
In its IPO SEC filing, the company stated that its website had received approximately 1.61 million daily unique users in October 2010. Around its IPO I went out and checked its traffic on Chinarank.org.cn and roughly confirmed these numbers to be accurate. Since then I've been regularly checking its traffic and seen some very solid growth.
According to Chinarank, Q1 traffic to DangDang increased nicely to around 2.375 million unique users per day. Traffic then popped to around 3.525 million daily uniques in Q2. Assuming these numbers are right, sales are likely exploding right now.
So you can understand the numbers, here is some color on how this chart works. The chart below represents a 'Reach Per Million User' score in China. A 5000 score seen throughout Q1 on the chart below needs to be multiplied by 470, because there are around 470 million web users in China. So, 5000 X 470 = 2.375 million daily unique visitors. As you can see, Q2 traffic popped to around a 7500 reach per million user score. 7500 X 470 = 3.525 mil daily users.
It looks to me like DangDang.com traffic has doubled in the past seven months or so. DangDang's CEO was on CNBC the other day talking about how her family is buying stock for themselves off the open market. She also talked about robust growth for DangDang.com. These traffic scores confirm what she was saying.
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I also see DangDang as having a competitive advantage over the #1 ecommerce player in China, TaoBao. TaoBao is like the wild west, where any dirt ball can try to sell you something. Its model is part eBay, part Craigslist, where there isn't really a lot of trust. DangDang sells its products itself or through trusted leading partners, more similar to an Amazon (AMZN) model. It has warehouses, logistics centers, offers same day shipping in seven cities, next day shipping in nearly 40 cities, etc.
Over the long term I see buyers choosing DangDang over TaoBao because of the consistency of the experience, the far better customer service levels, much fewer fraud issues, a better return policy, quick shipping, etc. The same reason Amazon is beating eBay (EBAY) is why DangDang has an advantage over TaoBao. And now it looks like business for DangDang is taking off.