Online Price War: All Mouth, No Trousers?

A noisy price war among China's major shopping websites might look on the surface to be a win for consumers, but another beneficiary appears to be the country's shopping search engines.

Alibaba Group's eTao website, which allows online shoppers to conduct specialized product searches and compare prices among more than 5,000 Chinese e-commerce websites, saw its traffic surge by 93% in the last seven days as the price war peaked, according to statistics collected by website monitoring service Alexa.

The number of pageviews (as a percentage of global pageviews) recorded by eTao nearly tripled on Aug. 15, the day after Liu Qiangdong, CEO of major shopping website 360Buy, vowed to begin undercutting appliance prices of rivals Gome and Suning by at least 10%—even if it meant selling products at "zero gross profit" for the next three years.

Shopping search engine operators have been trying to sell themselves to consumers as a convenient way to make product comparisons and find the best online deals. While that's been an uphill struggle, sites like eTao, currently China's most popular shopping search engine, stand to benefit from the publicity stirred up by the sparring between 360Buy, Gome and Suning, whose executives have been taunting each other via Weibo messages for weeks, egged on by the media and bloggers.

Amid the claims and counterclaims, confused shoppers seemed to turn to price comparison services like eTao's real-time, in-browser tool RuyiTao, which on Aug. 15 had 10 million users, five times more than normal, according to Chen Lijuan, director of eTao. "The surge in RuyiTao usage by consumers indicates that there is a strong demand for price comparison tools to help them make smarter purchasing decisions," said Chen at a media briefing held yesterday in Beijing.

eTao officials declined to disclose internal traffic and usage numbers.

Although eTao is owned by Alibaba Group, which also owns giant shopping websites Taobao Marketplace and Tmall, the shopping search engine has positioned itself as an honest broker of consumer information. After the price war broke out, eTao started awarding gold, silver and bronze "medals" to major online vendors offering the best deals.

At the Beijing media briefing, though, eTao officials told reporters that according to the data it has been monitoring, the price war has been mostly a war of words calculated to work consumers into a buying frenzy.

Discounted appliances have been available only in small quantities and price reductions have not been as deep as vendors promised, eTao officials said. They suggested some shopping websites used deception by marking up prices before offering discounts, making the savings look greater—allegations similar to those appearing in stories in the Chinese press, which found that actual discounts were no greater than 10 percent.

Or, as the Brits say, the shopping websites making the most noise have been "all mouth and no trousers."