Retail in general p1

Fung Business Intelligence Centre: New technologies and new business models reshape China’s commercial landscape

Sales data of retailers in selected cities during New Year Holiday Sichuan and five other regions implement tax refund scheme for overseas visitors

E-commerce p2

Juhuasuan: Consumers of imported goods are predominantly post-80s and post-90s and females

Alibaba to roll out first “Spring Festival Shopping Festival” in mid-January Monthly sales of Tmall Supermarket’s fresh produce exceed 100 million yuan Baidu rolls out mobile marketing platform “Baidu Zhitongche” for local service

providers WeChat Payment connects with Amazon China China plans more cross-border e-commerce comprehensive pilot zones Qianhai of Shenzhen plans to set up new cross-border e-commerce business division First cross-border e-commerce O2O experiential store in Xinjiang opens for business First cross-border O2O experiential store opens in Nanning City Two experiential centers in Tianjin FTZ and Haikou open during the New Year Holiday Miniso launches Bishe.com to tap cross-border luxury goods market Apple Pay to roll out in China in January; Jumei to support Apple Pay simultaneously

Department stores and shopping malls p6

Wangfujing raises 3 billion yuan to construct shopping centers in six cities and develop O2O platform

Supermarkets and hypermarkets p6

Wal-Mart China closes its Hefei store to optimize business presence Carrefour China launches mobile app for its online platform; to expand O2O business

across China Apparel p7

Ochirly to enter Suning.com to strengthen apparel O2O operations Simple Style teams up with Dangdang.com and Inman to open 3,000 multi-brand stores

over next five years Bosideng joins hands with South-Korean Smart F&D to tap school uniform market in

China FMCG p8

Nielsen: High-end products and shopping convenience are the trends in FMCG sector in China

Kids products p8

Redbaby returns to Tmall

31 December 2015 – 7 January 2016

1 China Retail Weekly Updates (31 December 2015 – 7 January 2016)

Retail in general

Fung Business Intelligence Centre: New technologies and new business models reshape China’s commercial landscape According to a report Ten Highlights of China’s Commercial Sector 2016 jointly published by the Fung Business Intelligence Centre (FBIC), the Secretariat of the Expert Committee of the China General Chamber of Commerce and the China Business Herald Research Institute, new technologies and new business models created by ubiquitous mobile connectivity in the “Internet-plus era” are reshaping and disrupting the commercial landscape. This presents tremendous opportunities for enterprises to innovate and transform their business models to adapt to new customer purchasing habits in the digital age. To keep pace with the evolving market, the report has identified a number of key issues for businesses to consider, particularly for investors hoping to consolidate their presence in the China market: 1) Build experiential opportunities; 2) Embrace technologies to provide better experience; 3) More open to partnerships and outside collaboration; 4) Refine supply chain operations; and 5) Be vigilant and keeping up-to-date with government policies. FBIC’s press release, 7 January, 2016 Ming Pao, 7 January, 2016 http://news.mingpao.com/ins/instantnews/web_tc/article/20160107/s00002/1452159239151 [Chinese only] Ta Kung Pao, 7 January, 2016 http://news.takungpao.com/hkol/jsxw/2016-01/3264795.html [Chinese only] Link to the Executive Summary http://www.fbicgroup.com/sites/default/files/Ten%20Highlights%20of%20China%E2%80%99s%20Commercial%20Sector%202016_ExecutiveSummary.pdf Link to Trends that will Matter Most in 2016 and Implications for Foreign Investors http://www.fbicgroup.com/sites/default/files/Ten%20Highlights%20of%20China%E2%80%99s%20Commercial%20Sector%202016_Implications.pdf Sales data of retailers in selected cities during New Year Holiday Shanghai: From 31 December 2015 to 3 January 2016, 434 large- and

medium-sized commercial enterprises achieved total sales revenue of

7.488 billion yuan, up 10.71% year-on-year (yoy). Among the retail sectors,

department stores had the highest sales at 3.225 billion yuan, up 8.77% yoy.

Nanjing: Monitoring data showed that total sales revenue of the 55 key

enterprises amounted to 1.561 billion yuan during the 3-day New Year

Holiday, up 11.86% yoy.

Guangzhou: Eight leading department stores (Guangzhou Grandbuy

[including Xindaxin, GBF and Grandbuy Gold Building], Guangzhou

Friendship, Tianhe City, Mopark, Simgo, Dongshan, China and U-City)

recorded total sales revenue of 420 million yuan, largely flat yoy.

2 China Retail Weekly Updates (31 December 2015 – 7 January 2016)

Beijing: During the 3-day New Year Holiday, the 50 key commercial service

enterprises monitored by the Beijing Municipal Commission of Commerce

reported total sales revenue of 1.64 billion yuan, up 6.8% yoy. The growth

rate was significantly lower than that in last year (13.3%).

Linkshop.com.cn, 4 January 2016 http://www.linkshop.com.cn/web/archives/2016/341362.shtml (in Chinese only) http://www.linkshop.com.cn/web/archives/2016/341361.shtml (in Chinese only) http://www.linkshop.com.cn/web/archives/2016/341350.shtml (in Chinese only) Ebrun, 4 January 2016 http://www.ebrun.com/20160104/161128.shtml (in Chinese only)

Sichuan and five other regions implement tax refund scheme for overseas visitors Starting from 1 January 2016, Sichuan Province has been implementing a tax refund scheme for overseas visitors. Some 33 retail shops in Chengdu have become a designated store for the tax refund scheme. Ito Yokado’s Wenjiang store in Chengdu has also issued the first tax-refund form to an overseas visitor. Sichuan is one of the six regions to implement the tax refund scheme for overseas visitors in the second phase, and is the first region in Western China to implement the scheme. On the same day, Tianjin City, Liaoning Province, Anhui Province, Fujian Province and Xiamen City also started to implement such scheme. Ebrun, 6 January 2016 http://www.ebrun.com/20160106/161614.shtml (in Chinese only)

E-commerce

Juhuasuan: Consumers of imported goods are predominantly post-80s and post-90s and females Alibaba’s group-buying platform Juhuasuan released its first report on cross-border shopping. From 1 April to 12 December2015, more than 10 million consumers bought 34 million items of import goods from 53 countries and regions through its cross-border channel. Imported products from South Korea, Japan and Germany were the most popular, accounting for half of the transaction value. Millennials (or post-80s and post-90s) represented the largest group of consumers, making up over 70% of the total. Female accounted for 77% of consumers, and most of them are well-educated, high-income women aged 29 to 35 from tier 1 cities. Ebrun, 31 December 2015 http://www.ebrun.com/20151231/160936.shtml (in Chinese only)

3 China Retail Weekly Updates (31 December 2015 – 7 January 2016)

Alibaba to roll out first “Spring Festival Shopping Festival” in mid-January Alibaba will soon launch its first “Spring Festival Shopping Festival” in mid-January, with Cuntaobao (http://cuntaobao.com/) rolling out a series of online and offline events on 6 January first. To ensure the quality of the Spring Festival products, some participating counties and cities of Shaanxi, Shandong, Guizhou and other provinces have signed deals with Alibaba. They will dedicate 5 million yuan to set up an “insurance fund for online transaction integrity” to protect public interests. If the products of government-designated sellers on Tmall or Taobao are found to have quality problems, consumers will be compensated from the fund. Relevant local governments will also investigate the incidents. Moreover, Alibaba will adopt standardized transport packaging to ensure the quality of products, fresh produce in particular. Linkshop.com.cn, 5 January 2016 http://www.linkshop.com.cn/web/archives/2016/341542.shtml (in Chinese only)

Monthly sales of Tmall Supermarket’s fresh produce exceed 100 million yuan Tmall Supermarket announced that the sales revenue of its fresh produce business exceeded 100 million yuan in December 2015, up 400% year-on-year (yoy), with sales in Beijing up 1,300% yoy. It was the leader among domestic fresh produce online platforms. In early 2016, Tmall Supermarket will focus more on the South China market, in particular Guangzhou and Shenzhen. Longsok.com, 5 January 2016 http://www.longsok.com/zixun/ebus/2016/0105/30152.html (in Chinese only)

Baidu rolls out mobile marketing platform “Baidu Zhitongche” for local service providers Baidu Inc. has launched “Baidu Zhitongche” (literally Baidu express bus), a mobile marketing solutions for local service providers. The service will combine mobile search and O2O services, and leverage Mobile Baidu, Nuomi.com (Baidu’s group-buying site) and Baidu Map to provide the service information of small- and medium-sized local service providers for potential consumers within a 5 to 30 km radius of their stores. Since the three Baidu platforms have huge user base, analysts believed their tie-up will strengthen Baidu’s O2O business, and greatly enhance Baidu’s status as an O2O gateway. Ebrun, 7 January 2016 http://www.ebrun.com/20160107/161689.shtml (in Chinese only)

WeChat Payment connects with Amazon China WeChat Payment has connected with Amazon China. After users have finished shopping on Amazon China, they can choose WeChat Payment for settlement.

4 China Retail Weekly Updates (31 December 2015 – 7 January 2016)

WeChat Payment said that its tie-up with Amazon China means an expanded presence of WeChat Payment. It will also connect with even more e-commerce platforms in the future. An industry analyst believed that WeChat Payment aims to connect with more e-commerce platforms and expand its user base. Ebrun, 7 January 2016 http://www.ebrun.com/20160107/161694.shtml (in Chinese only)

China plans more cross-border e-commerce comprehensive pilot zones China’s State Council has decided to expand the scope for policies and management systems garnered from the Cross-border E-commerce Comprehensive Pilot Zone in Hangzhou, Zhejiang Province to other areas across the country. The central government will pick a batch of cities in the Eastern, Central and Western China with solid economic foundations and large volumes of trade and e-commerce to set up new cross-border e-commerce pilot zones. In the new pilot zones, successes of the Hangzhou pilot zone will be replicated and promoted. First, six major systems concerning information sharing, online financial services, smart logistics, e-commerce credit, data supervision and risk prevention will be established. Second, two platforms aiming to build an intact industrial chain and ecosystem for cross-border e-commerce will be established. Ebrun, 7 January 2016 http://www.ebrun.com/20160107/161634.shtml (in Chinese only)

Qianhai of Shenzhen plans to set up new cross-border e-commerce business division The trial operations of cross-border e-commerce in Qianhai of Shenzhen have shown an exponential growth. Authority of Qianhai Cooperation Zone is planning to set up a new division to take charge of cross-border e-commerce business. The Authority will further expand the scale of trial operations of cross-border e-commerce. It will also actively help all types of e-commerce, logistics and payment enterprises connect with the logistics and warehousing enterprises in the free trade port area as well as the supervision and regulatory authorities such as the customs. Ebrun, 6 January 2016 http://www.ebrun.com/20160106/161511.shtml (in Chinese only)

First cross-border e-commerce O2O experiential store in Xinjiang opens for business Yining Cross-border E-commerce O2O Experiential Store has been opened for business in Ili International E-commerce Industrial Park, the first of its kind in Xinjiang Uyghur Autonomous Region. Currently, the experiential store offers about 600 types of products from over 300 domestic and overseas brands. It adopts both online and offline sales models, therefore consumers can make purchase on-site or on its online store. The experiential store provides a local

5 China Retail Weekly Updates (31 December 2015 – 7 January 2016)

delivery service and a free home delivery service for the urban areas of Yining City. Ili International E-commerce Industrial Park said that it will expand the area of the experiential store to 2,000 sqm in the future. Ebrun, 5 January 2016 http://www.ebrun.com/20160105/161378.shtml (in Chinese only)

First cross-border O2O experiential store opens in Nanning City The first cross-border O2O experiential store in Nanning City of Guangxi Province, established and operated by Australian cross-border e-commerce site Aomai.com.au, was opened on 1 January 2016. The experiential store will not conduct any physical transactions, and it will only provide products for experiential trials and other services. Consumers can use their mobile phone to scan the QR code of a product to make purchase at Aomai.com.au. Orders will be delivered to consumers through international direct mail. Ebrun, 4 January 2016 http://www.ebrun.com/20160104/161281.shtml (in Chinese only)

Two experiential centers in Tianjin FTZ and Haikou open during the New Year Holiday The Tianjin-Europe Trade Center in Tianjin Free Trade Zone (FTZ) and the Yanghezi Cross-border Product Experiential Center in Haikou City were officially opened during the New Year Holiday. Products sold in these centers are 20% to 30% cheaper than those available on the market. With a total area of 40,000 sqm, the Tianjin-Europe Trade Center houses a number of stores including bonded direct-sale malls and multi-brand fashion stores, offering products from dozens of countries. The Yanghezi Cross-border Product Experiential Center covers an area of more than 6,000 sqm, housing eight stores and offering over 7,000 types of imported goods. Ebrun, 4 January 2016 http://www.ebrun.com/20160104/161121.shtml (in Chinese only)

Miniso launches Bishe.com to tap cross-border luxury goods market Luxury goods e-commerce site Bishe.com has been launched. At present, it is only available on WeChat and offers products from limited product categories. Bishe.com is a sister brand of Miniso. The site adopts a direct sales model and sells the most popular products of overseas brands. Its product range includes bags, accessories, cosmetics, perfume, underwear, etc. Bishe.com will also sign movie star Huang Xiaoming as its brand ambassador and chief quality officer. Ebrun, 5 January 2016 http://www.ebrun.com/20160105/161376.shtml (in Chinese only)

6 China Retail Weekly Updates (31 December 2015 – 7 January 2016)

Apple Pay to roll out in China in January; Jumei to support Apple Pay simultaneously Apple said that Apple Pay will be available in Mainland China as soon as January 2016. Jumei.com will support Apple Pay simultaneously, meaning that Jumei.com will be one of the earliest batch of merchants authorized by Apple to use Apple Pay in China. Jumei.com can leverage Apple Pay to provide more convenient and diversified payment options for its users and to improve their payment experience. Ebrun, 31 December 2015 http://www.ebrun.com/20151231/161018.shtml (in Chinese only)

Department stores and shopping malls

Wangfujing raises 3 billion yuan to construct shopping centers in six cities and develop O2O platform Beijing Wangfujing Department Store (Group) Co. Ltd. announced a proposal for non-public shares issuance to raise 3 billion yuan for the construction of shopping centers in Harbin, Zhengzhou, Xi’an, Foshan, Nanchang and Yinchuan, as well as the development of an O2O omni-channel platform to be launched by the end of 2018. These projects are aimed at improving the company’s strategic presence in different business formats and developing an O2O channel. SanPower Group, another leading regional retailer, plans to subscribe for shares worth 1.5 billion yuan to acquire a 10.99% stake in Wangfujing through its wholly-owned investment subsidiary. Wangfujing is reportedly going to change its name to Wangfujing Group Co. Ltd. ChinaSSPP.com, 4 January 2016 http://www.chinasspp.com/News/Detail/2016-1-4/212097.htm (in Chinese only)

Supermarkets and hypermarkets

Wal-Mart China closes its Hefei store to optimize business presence Wal-Mart China announced that its Changjiang East Road Branch of Walmart Supercenter in Hefei City will be closed down from 12 January 2016 onwards, in a move to optimize its business presence. Wal-Mart China said that the closure is due to resource integration of the company, and is related to its overall business plan in China. Meanwhile, Wal-Mart continues to open stores in China, with 10 new stores opened across the country in December 2015, bringing the total number of stores in China to 433. Wal-Mart plans to add about 115 stores in China from 2015 to 2017. Linkshop.com.cn, 4 January 2016 http://www.linkshop.com.cn/web/archives/2016/341353.shtml (in Chinese only)

7 China Retail Weekly Updates (31 December 2015 – 7 January 2016)

Carrefour China launches mobile app for its online platform; to expand O2O business across China Carrefour China has launched a mobile app for its online platform, which will provide service in Shanghai first. Carrefour has also obtained the license of “Foreign Investment in the Value-added Telecommunications Business in Shanghai Free Trade Zone”, which means that Carrefour can carry out e-commerce business across China. Carrefour’s online platform can expand from Shanghai to more cities across the country. It can also allow third-party merchants to sell on the platform, which helps bring in more overseas brands. China Chain Store & Franchise Association, 31 December 2015 http://www.ccfa.org.cn/portal/cn/view.jsp?lt=2&id=423293 (in Chinese only)

Apparel

Ochirly to enter Suning.com to strengthen apparel O2O operations Apparel brand Ochirly of the Trendy Group, owned by the LVMH Group, will soon enter Suning.com. Ochirly and Suning Commerce Group will also carry out in-depth cooperation in platforms, logistics and B2C. Suning Commerce Group said that it will lend its full support to Ochirly, which will be a key account (KA) of Suning.com. After Ochirly has entered Suning.com, it will leverage both online and offline channels as well as point of sale (POS) terminals, PCs, mobile phones and TVs to maximize the strengths of the O2O model and expand its apparel O2O operations. Linkshop.com.cn, 6 January 2016 http://www.linkshop.com.cn/web/archives/2016/341591.shtml (in Chinese only)

Simple Style teams up with Dangdang.com and Inman to open 3,000 multi-brand stores over next five years Original apparel brand Simple Style announced that it will team up with Dangdang.com and Inman, a Taobao original brand, to establish a 7,000-sqm mega experiential store. The experiential store will combine the features of Taobao original brands, Dangdang bookstores and cross-border duty-free shops, offering a variety of products across different product categories. It also provides an animation and comics experiential area and a farming experiential area. Simple Style will also build on the experiential store to develop an O2O online platform. Simple Style said that 3,000 experiential stores will be built over the next five years, with a total operating area of 15 million sqm and targeted sales of over 300 billion yuan. The experiential stores will serve as world-class multi-brand stores. Ebrun, 4 January 2016 http://www.ebrun.com/20160104/161236.shtml (in Chinese only)

8 China Retail Weekly Updates (31 December 2015 – 7 January 2016)

Bosideng joins hands with South-Korean Smart F&D to tap school uniform market in China Bosideng International Holdings Limited announced that it will establish a joint venture (JV) for customized school uniforms with Smart F&D, a South Korea-based brand in customized school uniforms, in a move to tap the school uniform market in China. Smart F&D will mainly be responsible for design and technical support, while Bosideng will handle sales, marketing and business management. Bosideng hoped that the cooperation with Smart F&D will further enrich its product portfolio and develop new growth areas in segmented markets, thus boosting its profits. Ebrun, 31 December 2015 http://www.ebrun.com/20151231/160946.shtml (in Chinese only)

FMCG

Nielsen: High-end products and shopping convenience are the trends in FMCG sector in China According to Nielsen's latest report "2016 China Fast-Moving Consumer Goods (FMCG) Report", the growth rate of China's FMCG market in 2016 will surpass that of 2015. Consumers prefer high quality products, especially those with health benefits. Furthermore, as the demand for shopping convenience is becoming more prevalent, sales of FMCG at small retail shops and convenience stores will further drive the growth of FMCG sales. Nielsen predicts that, the overall FMCG sector will continue to grow at a steady pace. However, with the upgrading domestic consumption and consumers' continual pursuit of new and high-end products, retail sales value of major brands in many categories will increase faster than retail sales volume. linkshop.cn, 7 January 2016 http://www.linkshop.cn/web/archives/2016/341698.shtml

Kids products

Redbaby returns to Tmall Maternal and baby supplies e-commerce site Redbaby said that it will return to Tmall and open an independent channel on the platform in January 2016. Redbaby expects that its sales will exceed 10 billion yuan in 2016, boosted by the online traffic of both Suning.com and Tmall. Redbaby left Tmall after it was acquired by Suning in 2012. It decided to return to Tmall after Suning and Alibaba had formed a strategic partnership last year. Sina.com.cn, 31 December 2015 http://finance.sina.com.cn/roll/2015-12-31/doc-ifxncyar6050172.shtml (in Chinese only)

Fung Business Intelligence Centre The Fung Business Intelligence Centre collects and analyses market data on sourcing, supply chains, distribution and retail. It also provides thought leadership on technology and other key issues shaping their future. Headquartered in Hong Kong, FBIC leverages unique relationships and information networks to track and report on trends and developments in China and other Asian countries. In addition, its New York-based Global Retail & Technology research team follows broader retail and technology trends, specialising in how they intersect and building collaborative knowledge communities around the revolution occurring worldwide at the retail interface. Since its establishment in 2000, the FBIC (formerly known as the Li & Fung Research Centre) has served as the knowledge bank and think tank for the Fung Group. Through regular research reports and other publications, it makes its market data, impartial analysis and expertise available to businesses, scholars and governments around the world. It also provides advice and consultancy services to colleagues and business partners of the Fung Group on issues related to doing business in China, ranging from market entry and company structure, to tax, licensing and other regulatory matters.

Contact

Teresa Lam Vice President Asia Distribution and Retail

Fung Business Intelligence Centre 10/F LiFung Tower 888 Cheung Sha Wan Road Kowloon, Hong Kong

T: (852) 2300 2466 F: (852) 2635 1598 E: TeresaLam@fung1937.com W: www.fbicgroup.com

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