Introduction to China's online retail market
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Transcript of Introduction to China's online retail market
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China’s E-commerce market
Dr Michael Ling
An introduction
to
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01 02 03 04
A global
perspective
China’s
ecommerce market
China’s online
consumers
China’s online
companies
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A. Streaming music
B. Online shopping
C. Smartphone GPS
D. Streaming TV
E. Food delivery service
1.Which one of these services you can’t live without today?
Self-test
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2.What are your favorite online shopping websites?
Self-test
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3.What products or services do you often buy online?
Self-test
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Self-test
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3.Can you name some of the popular online shopping websites in China?
Self-test
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Self-test
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9
A global perspective
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10http://finance.yahoo.com/news/research-‐markets-‐worlds-‐leading-‐e-‐154500570.html
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01 Global B2C e-commerce growth, 2014
11
63.8%
11.8%
China
US
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China dominates the world’s ecommerce12
BRIC
01 China dominates global ecommerce
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01 Global B2C e-commerce market
https://www.statista.com/statistics/379046/worldwide-retail-e-commerce-sales/
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01 B2C e-commerce market in Asia Pacific
https://www.statista.com/statistics/379046/worldwide-retail-e-commerce-sales/
In 2014, Asia Pacific accounted for
39.6 percent of global online retail.
North America was ranked third with a
26.9 percent share.
The share of online retail in Asia
Pacific is forecast to double between
2015 and 2019
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01 The U.S. B2C e-commerce market
https://www.statista.com/statistics/379046/worldwide-retail-e-commerce-sales/
In 2015, the United States online retail
accounted for 22.2 percent of global
market. This share is projected to
decrease to 16.9 percent in 2020.
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01 Over 65% Internet users purchase online
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17
01 World’s leading ecommerce companies
• Amazon, Wal-Mart, eBay, Best Buy (US)
• Alibaba, JD.com, Suning (China)
• Flipkart, Myntra (India)
• Otto Group (Germany)
• Groupe Casino, CDiscount (France)
• Tesco (UK)
• Rakuten (Japan)
http://finance.yahoo.com/news/research-‐markets-‐worlds-‐leading-‐e-‐154500570.html
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China’s e-commerce
market
18
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19
02 PE/VC investment in China’s e-commerce
Cvsource, Deloitte Research
“Internet Plus" initiative has
greatly promoted the
development of e-commerce,
Igniting new rounds of
investment boom.
The financing of e-commerce
reached $4.84b in 2015, and
$5.22 billion in the first half of
2016, with a growth of 104
percent yoy.
The aggregate investment in
is expected to stay high due to
Internet consumption growth
and favorable policies
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02
49% (vs. a global average
of 40%) of the Chinese
population made at least
one online purchase in
2014.
By 2020, China’s e-
commerce market will be
larger than the markets of
the US, Britain, Japan,
Germany, and France
combined.
In 2014, China’s e-
commerce market
reached CNY12,300
billion growing at
21.3%.
China is the world’s largest e-commerce (B2B and
B2C) market with a size of CNY 12,300 billion
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21
02 China’s online retail market
iResearh
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02 Online retail is composed of B2C & C2C segments
• The B2C segment includes manufacturers selling directly to consumers (e.g. Dell, Lenovo), or retailers selling to consumers (e.g. Amazon, Suning, Tmall).
• The C2C segment includes individuals selling to one another, or small businesses selling to consumers (e.g. Taobao).
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02
The B2C segment is
projected to overtake the
C2C segment.
In 2014, China’s B2C
segment was CNY 1,288
billion or 45.8% of total
online retail.
The growth in B2C was
68.7% compared to
35.2% growth in C2C.
China’s B2C and C2C segments
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02
A common payment
method is through COD,
Alipay or Wechat Pay.
Online retail is composed
of market platforms and
merchant-owned online
stores.
Average EBIDTA of
online businesses is 8-
10 percent.
China’s online retail market
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02
The market platforms and
their ecosystem offer a full
range of services to the
merchants.
Over 90 percent of China’s
online retail transactions
take place over market
platforms.
Tmall, a B2C platform,
earns commission on
products sold.
Taobao, a C2C platform,
uses an advertising
model
China’s online retail predominantly takes place on
market platforms
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02 Services provided by market platforms
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02 Benefits of market platforms
• Economical
• Full service.
• Platform traffic.
• Business opportunities for small online merchants.
• Popular e-tail brands (such as the ‘Tao’ brands (淘品牌), which are grown out of workshops or OEM factories.
• For example, in 2011, 16 of the top 30 e-tailers in Taobao are ‘Tao’ brands. E.g., Fangcaoji 芳草集, a cosmetics product, increased its monthly sales from CNY 2 million to CNY 20 million in six months.
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02 China’s top e-commerce categories
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02
Unlike the US, China’s retail is fragmented as
the top 5 retailers in each major category has
less than 20% market share.
As there are no dominant category players,
China’s rapid online retail growth will cause a
fundamental shift in the retail industry
bypassing the national model and jumping
into a multi-channel model.
China’s online retail industry is fragmented
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02
Pure online plays, such as Tmall, JD.com and
Suning have established a dominant role in
online retail.
Tmall, JD.com and Suning led the B2C segment
In 2014, the B2C market was:
• Tmall (owned by Alibaba) (61.4%)
• JD.com (18.6%)
• Suning (3.2%)
• ……
• Amazon.cn (1.3%)
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02
Apparel
Tmall (75%)
JD (9%)
VIP.com (6%)
Amazon.cn (0.3%)
3C
Tmall (47%)
JD (38%)
Suning (8%)
Gome (4%)
China’s e-commerce platform share by products
Books
Dangdang (45%)
JD (22%)
Tmall (17%)
Amazon.cn (16%)
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02
M-commerce is projected
to outgrow PC-based e-
commerce.
Growth is driven by
smartphone penetration,
which will reach 80% by
2020.
One-third of online retail is mobile
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02 Growth and challenges of China’s ecommerce
• Mobile commerce.
• Broadband population and penetration.
• 3G+ coverage.
• Bank card usage.
• Increasing disposable incomes.
• Social networks.
• High churn rate (10%).
• Reduced loyalty.
• Low switching cost.
• Low conversion rate (1%).
• Costly acquisition of new users.
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China’s online
consumers
34
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03 Chinese consumers make twice as many online
purchases as US consumers
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03 Demographics of Chinese online consumers
• Gender neutral: 52% male and 48% female.
• Predominantly young with 60 percent below
age 30.
• Mostly high income earners (> CNY 5,000 pm).
• Concentrated in the coastal and major cities
(e.g. Beijing, Shanghai, Guangzhou, and
Chongqing)
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03
China’s middle-class
customers tend to
exhibit brand loyalty and
make repeat purchases.
Consumers in tier-1
cities tend to purchase
vacations, cars, and
fashion products more
frequently than those in
tier-2/3/4 cities.
Consumers often research
and order products online,
prefer speed and
convenience.
Chinese online consumer behavior
Brand loyalty is exhibited
strongly by consumers in
tier-1 cities.
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03 Chinese online/total consumption patterns vary
substantially across the country
• Lower consumption (e.g. Dongguan).
• Higher consumption (e.g. Changsha).
• Similar consumption (e.g. Shanghai).
• The Chinese consumer market is
incredibly large, diverse, fragmented
and heterogeneous.
• A ‘one-size-fits-all’ e-commerce strategy
is inadequate.
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China’s tiered cities
39
1st tier cities (4) Beijing, Shanghai, Guangzhou, Shenzhen 北京市、上海市、广州市、深圳市
1st tier cities (15 new addition)
成都市、杭州市、武汉市、天津市、南京市、重庆市、西安市、长沙市、青岛市、沈阳市、大连市、厦门市、苏州市、宁波市、无锡市
2nd tier cities(30) 福州市、合肥市、郑州市、哈尔滨市、佛山市、济南市、东莞市、昆明市、太原市、南昌市、南宁市、温州市、石家庄市、长春市、泉州市、贵阳市、常州市、珠海市、金华市、烟台市、海口市、惠州市、乌鲁木齐市、徐州市、嘉兴市、潍坊市、洛阳市、南通市、扬州市、汕头市。
3rd tier cities (70) 兰州市、桂林市、三亚市、呼和浩特市、绍兴市、泰州市、银川市、中山市、保定市、西宁市、芜湖市、赣州市、绵阳市、漳州市、莆田市、威海市、邯郸市、临沂市、唐山市、台州市、宜昌市、湖州市、包头市、济宁市、盐城市、鞍山市、廊坊市、衡阳市、秦皇岛市、吉林市、大庆市、淮安市、丽江市、揭阳市、荆州市、连云港市、张家口市、遵义市、上饶市、龙岩市、衢州市、赤峰市、湛江市、运城市、鄂尔多斯市、岳阳市、安阳市、株洲市、镇江市、淄博市、郴州市、南平市、齐齐哈尔市、常德市、柳州市、咸阳市、南充市、泸州市、蚌埠市、邢台市、舟山市、宝鸡市、常德市、抚顺市、宜宾市、宜春市、怀化市、榆林市、梅州市、呼伦贝尔市
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China’s online
companies
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04 Alibaba’s ecosystem
• Alibaba.com (B2B), Taobao (C2C), Tmall (B2C)
• Taobao and Tmall account for 80 percent of China’s
e-commerce.
• Mobile commerce accounts for 20% of Alibaba’s
business.
• Occupies 85 percent of China’s mobile e-tail
commerce market (compared to runner-up JD’s 5%
share).
• 11 Main (US shopping site) – sold to OpenSky
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04 Alipay and Ant Financials
• 350m users
• 80m transactions per day
• Handled USD 780 billions (2014) or 3x PayPal
• Half of China’s online payment mkt
• Yue’Bao (largest market fund in China).
• Sesame Credit scoring.
• MYBank internet bank.
• Zhao Cai Bao platform
• Ant Micro loan provider.
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04 Alibaba’s Tmall
• A B2C market platform, similar to
amazon.com, developed by Alibaba in
2008.
• Each brand or company set up a unique
“mall experience” for brands in their own
mall websites.
• “Shopping center” concept.
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04 Alibaba’s Taobao
• A C2C market platform, similar to eBay,
developed by Alibaba in 2003.
• Sellers post new and used goods for sale
or resale in its marketplace, either at a
fixed price or by auction.
• In 2012, Taobao held 80 percent share of
China’s C2C market with 500 million
consumer accounts and 800 million
product listings.
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04 JD.com
• JD.com, which focuses on electronic
items, is a leader in the “3C” (computer,
communications, and consumer
electronics) segment.
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04 Other popular ecommerce sites
• 中国制造网 http://cn.made-in-china.com/
• 慧聪 http://www.hc360.com/
• 当当网 www.dangdang.com
• 京东商城 www.jd.com
• 中国购 (大型综合电子商务平台)
• 凡客诚品 http://www.vancl.com/
• 百宝汇商城 http://ccmmb.taobao.com/
• 新蛋商城 http://www.newegg.cn/
• 中国巨蛋 http://www.juegg.com/
• 思和电器商城 http://www.nxsihe.com/
• 聚购商城 (工艺品与创意产品)
http://www.juugoo.cn/
• 实体企业转网上商城, such as 国美/库巴网www.gome.com.cn ; 苏宁 www.suning.com
• 实体市场转网上商城, such as 蚕丝网城http://www.zgcsc.cc/
• 原有电子商务公司建设的网上商城, such as
京东商城,中华网库商城系统www.shopex.cn
• 中国购 http://zhongguogou.cn/
• 易趣 http://www.eachnet.com/
• 返利网 http://www.51fanli.com/
• 拍拍 www.paipai.com
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The growth momentum of China’s e-commerce is likely to sustain.
Market platform is the dominant model in China.
The adoption of e-commerce by Chinese netizens is deepening in the first-tier cities and broadening into the lower-tiered cities.
Alibaba and its ecosystem becomes the trend setter for China’s e-commerce.
Mobile apps become the dominant drivers of e-commerce adoption.
Conclusion
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01 China’s B2B e-commerce platforms
https://www.statista.com/statistics/243845/market-share-of-b2b-online-retailers-in-china/