Page 67 - How China Is Winning the Tech Race

been difficult to turn down a
takeover offer of $75 million from “By the sheer fact we are a couple of years
Amazon.com, but Dangdang’s co- behind our peers in the West, we really could
cherry-pick from a lot of things being tested
founders must be pleased that they
in an elaborate and expensive way and
did. After Amazon acquired Dang-
decide what to do and what not to do.”
dang’s chief rival, Joyo, in August
2004 for $75 million, Joyo lost Peggy YuYu,
market share and the market lead. cofounder and copresident, Dangdang.com
The blame was placed on Amazon
headquarters in Seattle, which had
restructured management at the
cash-starved firm, cut costs, and integrated its new Chinese subsidiary into the
parent company. Within months of the Amazon takeover, Joyo’s founder and
chairman, Lei Jun, resigned. His exit soon was followed by that of several
more Joyo managers, executive vice president Chen Nian, president Lin
Shuixing, and vice president Chen Xiaohong.
In the prior executives’ place, Amazon hired a new president for Joyo
with no book publishing experience: Wang Hanhua, a former Asia Pacific
top manager for Motorola and director of research at Gallup Consulting in
Beijing. Amazon’s choice of an executive with no industry experience to run
its Chinese subsidiary echoed mistakes made by other large American
multinationals that acquired Chinese firms. The shake-up also drew criticism
from former Joyo vice president Liu Jun. He contended that Amazon was
repeating the mistakes of eBay and Yahoo!, which had failed in China because
their local managers lacked quick response skills for the fast-moving Chinese
marketplace.
As Joyo.com was in recovery from the sudden jolt of the Amazon
takeover, Dangdang plotted its next move. Again following the lead of
Amazon in the United States, which began selling toys and electronics goods
in 1999, YuYu started marketing general merchandise on its Web site in
2004 in addition to books. “I knew I enjoyed a good store, a good product,
and I thought if I can duplicate that for other consumers, it must have com-
mercial value.”
The bold move jump-started the firm’s growth. Today, sales of items such
as women’s blouses, bed linens, and toys account for 40 percent of Dang-
dang’s revenues compared with about 25 percent for the Amazon-owned

Dangdang.com—The Amazon-Plus of China 41