Termination of Partnership with Alipay May Cost 360buy 10% of Customers

Recently 360buy announced on its official website that it had terminated the cooperation with Alipay, which immediately triggered the doubt and suspicion of Internet users. According to Dratio, a well-known third-party data analysis agency in China, this decision may cost 360buy 10% of customers. Dration noted in its Analysis of Third-party Payment Market that over 30 percent customers of 360buy had used Alipay, among them, 22% will stop purchasing goods from 360buy after it ceased cooperation with Alipay. Therefore, on the whole the 360buy would stand to lose at least 7%-10% of its customers.

Currently 360buy owns 2.3 million of customers. Calculated by the above-mentioned ratio, 360buy will suffer a loss of 2 million customers, which proves the 360buy’s previous comment on this issue (saying that the end of partnership with Alipay will have little influence on 360buy’s business) failed to hold water.

Liu Qiangdong, Chairman of the Board of the 360buy, said in this May that Alipay charges 5 million to 6 million more than other means of payment…as 90 % of 360buy’s customers choose cash on delivery, only 10% of clients prefer online payment. And their first choice is often 99bill, not alipay, which only constitutes 1%-2% of the total sales. Therefore, the loss of Alipay will not have much impact on the website’s business.” Liu also believe that as fewer customers choose online payment, dropping Alipay would have little influence on the customers’ shopping experience.

However, many analysts argue differently. Some Media conducted a series of calculation base on Liu’s speech and concluded that if 360buy indeed has to pay at least 5-6 million yuan to alipay every year, then times 0.4%, the current cooperation rate between 360buy and large-scale e-commerce providers, we can reached a conclusion that Alipay’s annual turnover on 360buy should be 1.25 billion to 1.5 billion RMB. Then calculated in accordance with Alipay’s share of 1%-2% in the total sales, it can be gathered that 360buy’s sales revenue in 2010 could be as high as 150 billion yuan. If Liu is correct, then how come 360buy’s plan to achieve a $ 28 billion RMB sales target in 2011 has been achieved a few years ahead of schedule?

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