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E-Commerce China Dangdang Management Discusses Q2 2012 Results - Earnings Call Transcript

In our destination categories, we achieved bigger buying power than before. We also added premium brands are in the products exclusively available on Dangdang, always helped us with very good product mix. And there are traffic promotions throughout the quarters.

As for market place, we started to shift certain products to our market place programs from previous self procurement programs, such as many consumer electronic products. One sports apparel and outdoor gear.

Throughout the first half of this year, our market place programs has attracted high quality third party merchants, who have similar positioning as Dangdang does in customer targeting of mid to high end customer base.

In terms of pricing, there were unprecedented competitions in the second quarter and our Dangdang team did it intelligently and with good result. Some players use irrational pricing tactics. As pricing levels dropped below procurement cost though access is of suppliers buying back their own products at a profit and the small retailers purchasing from certain new E-Commerce companies below their own procurement costs. The low quality of the sales either back to suppliers or to small shops make this unsustainable way of building long-term competitive strength in the market.

At Dangdang, however, we have a disciplined way of dealing with this tactics. We plan and timed our product promotions to take place in different periods of the quarter than the other players. We made many efforts to make sure Dangdang’s existing customers not some suppliers or other retailers from our – benefit from our programs. The fact that we maintain our pricing lead played a important role in our achievement of quarterly growth rate of 53%.

Let me now go over some other points regarding operations. Marketing, either in the highly competitive landscape, our new customers’ acquisition cost was only RMB22 in the second quarter. We had over 5.7 million active customers in the second quarter. We maintained a rational marketing strategy and prepare ourselves to make adjustments as required by changes in the competitive environment.

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