An online-store owner on Taobao.com refused to budge on Tuesday after 100 off-line retailers accused the owner of violating corporate pricing rules by selling cheaper goods and staged a protest in front of the headquarters of Taobao.com.

A quick look at the store, "Shanhuolang," displays oats for sale manufactured by Sanzhuliang remain priced at 78 yuan ($12) per kilogram.

But the price for the same product sold by other off-line retailers is 136 yuan ($21).

Industrial analysts regard the gridlock as a wind vane of the rising disputes between traditional retailers and avant guard online owners as e-commerce gains popularity in China.

Conflict

About 100 oat retailers gathered in front of the headquarters of Taobao.com on July 19 and demanded that the largest e-commerce platform operator stop "Shanluolang" and other online retailers from selling cheaper oats and other oat-made products and provide them with detailed information of the online stores undercutting them.

Demonstrators carried banners reading "Taobao harms national brand" and "Say No to Dumping," blocked the company's front gate and crammed onto the second floor.

These demonstrators were mainly contracted retailers of Sanzhuliang, an Inner-Mongolia company specializing in the production of oats and oat-made products, according to the company's official web site.

Literally, "Sanzhuliang" means the third kind of staple food after rice and wheat.

"They harmed our interests," a retailer said.

However, the protestors refused to provide any identification or related materials requested by Taobao, according to the person in charge of Taobao's public relations.

Sources with Taobao told Xinhua that retailers protested because they believe online stores have stolen their business. The sources also noted this was the first time that retailers have protested against Taobao on the basis of cheaper online products.

The oats produced by Sanzhuliang are called "the most expensive food" by netizens. The product description says the oats are "widely accepted as one of the most nutritious foods in the world" and "an ideal kind of healthy food for patients with heart diseases or diabetes."

Some protestors applied cooked oats onto their arms. "Our products can protect the skin," a retailer said.

Zhou Huifen, who is in charge of a retail shop that sells Sanzhuliang products in Hangzhou, said "The oats priced 136 yuan per kilo isn't that expensive considering its high nutritional values and low volume of production, and a lower price is against corporate rules.

Refusing to be identified, the online store owner told Xinhua that the products sold at "Shanhuolang" are genuine, because there is only one company that produces the same oats.

"The wholesale price is 68 yuan ($10.5) per kilogram while the retail price is 136 yuan per kilogram" said the owner, admitting that restocking was impossible as retailers have been urging online stores to raise the price.

"Shanhuolang" ranks as the top seller on Taobao.com among more than 60 online stores that sell oats manufactured by Sanshuliang. So far, it has clinched 217 deals.

Pricing challenge

It is quite common for producers, retailers and agents to make deals on pricing, regions and channels in order to guarantee profits. Generally, selecting the price belongs to the producers, according to some retailers engaged in consumer-goods sales.

Sanzhuliang has announced on its website that selling its products at lower prices seriously violate the company rules and damage the interests of both retailers and the company.

The company made a statement on its website on March 23, 2011, promising to award 50,000 yuan ($7,750) to retailers who ferret out online stores on Taobao.com that disrupt prices.

Many consumers, however, don't think it fair to force the online store owner to raise his prices. "It is really absurd for retailers to attack Taobao just because online stores gain a competitive edge by offering lower prices," commented a netizen.

In a written statement, Taobao said that it has always protected the intellectual property rights and respected the rights of owners, vendors and consumers.

As online shopping gains popularity in China, Cao Lei, chief analyst of China E-Business Research Center, said that traditional distribution and pricing mechanisms are being challenged because consumers welcome the benefits of faster delivery and transparent prices brought by Internet.

Statistics from China Internet Network Information Center shows that the total volume of online shopping reached 457 million yuan ($71 million) in 2010.