Qihoo 360 Technology: Benefiting From E-Commerce in China

Qihoo 360 Technology (QIHU) is on track to benefit from the growing e-commerce market in China. The company has an innovative set of online security solutions including, 360 Safe Guard, 360 Anti-Virus and 360 Mobile Safe are believed to gain significant customer traction in the country and globally with expanding threats of phishing and spamming activities on a daily basis.

The advanced access layer of Qihoo comprises of 360 browsers that integrate Webkit and Trident technologies to provide users with optimized and highly secure internet access points, 360 Mobile Assistant is an integrated android-based mobile feature that allows users to simply download, install and control applications on key mobile devices by easily connecting through a USB cable.

The end-market is huge

According to a recent survey by Mckinsey & Co., China is believed to be globally the biggest and quickest expanding e-commerce market with a significant penetration of e-commerce trends in the day-to-day internet usage activities in the country.

The key product categories with rising e-commerce activities include, apparels, Smartphones, consumer healthcare, Baby Food, Bathroom Tissue, Biscuit and several others.
Further, online shoppers of China are increasingly becoming hugely rational or highly mature with the country’s rational shoppers making up about 40% of total urban e-shoppers. Specifically, the online shoppers in China spend 176% in excess of every purchase while purchasing from abroad as against domestically. Further, 11% of total purchases are priced more than ¥5,000 or $782 and a fourth of this total amount is spent in the range of ¥1,000 to 3,000 or $156 to $469 per global purchase.

For urban regions, mobile has allowed to pump the e-commerce growth. During 2015, approximately 71% of metropolitan online shoppers leveraged mobile devices to transact online, an increase from just 51% during 2014. Both purchasing and browsing with e-traders are expanding significantly with shoppers all through China following this expanding trend. Actually, among the rural citizens, online shopping trend enhanced 41% during 2014 over last year and greater than just 16% market penetration in urban cities.

In addition, social media too has greatly contributed to the e-commerce expansion in China. During 2015, nearly 26% of total respondents to Nielsen’s worldwide survey on innovative products illustrate social media advertisements being a key source of awareness about the innovative products, an increase of 11% over 15% during 2012. Therefore, social media is considered to be an easy and effective way for retailers and manufacturers to influence shoppers.

E-commerce in China is strong  

Despite China suffering a major setback from the continuing economic slowdown in the country, still its e-commerce segment is believed to be a key driver for China’s economic expansion with continually expanding smartphone ownership among citizens and notable internet penetration.

The macroeconomic conditions of China have continued to show consistent weakness all through the fiscal year 2015 with actual economy keen for a turnaround. The ongoing weakness in Chinese exports, reasonably poor investment expansion, and notably weaker housing market demand have continued to suppress the country’s growth prospects in spite of several monetary and fiscal policy measures being undertaken by the Chinese government to ease the supply and demand situation in the country.

E-commerce is expected to be the only sector which is surviving the ongoing global economic slowdown extremely strongly and the general retail segment is expanding notably quicker than the country’s GDP. Further, m-commerce transactions have increased hugely with the rising adoption of mobile internet in China.


Overall, the investors are advised to “Buy” equity in Qihoo 360 Technology Co. Ltd. Considering the company’s significant near-term and longer term growth prospects with slowly improving macroeconomic conditions in China that should drive sustainable and lasting company growth. The profit margin of 17.01% seems impressive. However, Qihoo needs to optimize its debt-burdened balance sheet with significant total debt of $1.64 billion against comparatively weaker total cash position of $1.13 billion only, restricting the company to make future growth investments.
Published on Jul 8, 2016
By Vinay Singh

Copyrighted 2020. Content published with author's permission.

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