Price Competition Reduction Strategies in Chinese B2C E-Commerce Markets: A Case Study

Abstract

The internet has transformed the way people search for products and significantly reduced search costs. This paper reviews past literature in price competition theory, and examines the competitive landscape of major B2C firms in China’s e-commerce industry, where online retail markets have seen exponential growth over the last two decades. It shows that firms in Chinese online retail markets are facing heightened price competition due to reduced search costs for consumers and minimal differentiation in product offerings. Evidence shows that firms around the world are practicing price fixing and price obfuscation to reduce price competition for higher profits. This paper cites several examples from Tmall and JD to argue that both the platforms and the individual retailers selling on the platforms attempt to implement innovative methods to practice price obfuscation with the goal of limiting customers’ ability to compare and also of reducing price competition. Some of these anti-competitive practices are commonly seen both in China and in other parts of the world, while some are more unique to Chinese online marketplace. Finally, the paper proposes several approaches that regulators could consider to prevent increased prices and to protect consumer welfare.