2014 China Online Retail Market Study Part 1

Summary of Online Retail Market in China

Out-bound online shopping is expanding faster than ever:Key driving forces giving rise to online overseas shopping include product scarcity, product quality and competitive pricing

Fashion and personal care are amongst the most in-demand product categories in online overseas shopping

Users engaged in online overseas shopping are mainly characterized by young age and high income groups coming

from Tier-1 cities in China

Idle time intervals are the potential growth zones for mobile retail:Mobile retail has grown over 160% in 2013, accounting for a large proportion of the total online retail market

Mobile retail provides a more interactive shopping experience to users and hence triggers more impulse buying

A new trend is being witnessed where traditional retailers are showing an increasing tendency to develop O2O business

The online retail market in China has grown rapidly in recent years:The transaction volume was RMB1.85 trillion in 2013, accounting for 8% of the total retail value. It is also forecasted to surpass RMB3 trillion in 2015

More than 300 million online shoppers in China, close to half of the total internet population

Nearly 30,000 eCommerce enterprises in China, creating stiff competition for newcomers

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China online retail market study

2014.08

2014

Part 1

Summary of Online Retail Market in China

Out-bound online shopping is expanding faster than ever:Key driving forces giving rise to online overseas shopping include product scarcity, product quality and competitive pricing

Fashion and personal care are amongst the most in-demand product categories in online overseas shopping

Users engaged in online overseas shopping are mainly characterized by young age and high income groups coming

from Tier-1 cities in China

Idle time intervals are the potential growth zones for mobile retail:Mobile retail has grown over 160% in 2013, close to 30% of total mobile users are mobile shoppers

Mobile retail provides a more interactive shopping experience to users and hence triggers more impulse buying

A new trend is being witnessed where traditional retailers are showing an increasing tendency to develop O2O business

The online retail market in China has grown rapidly in recent years:The transaction volume was RMB1,850 billion in 2013, accounting for 8% of the total retail value. It is also forecasted to surpass RMB3,000 billion in 2015

More than 300 million online shoppers in China, close to half of the total internet population

Nearly 30,000 eCommerce enterprises in China, creating stiff competition for newcomers

1

China Online Retail Market Study

1.1 China Online Retail Market Updates 1.1.1 China Online Retail Transaction 1.1.2 China Online Retail Transaction (% of total retail) 1.1.3 Number of Online Shoppers in China 1.1.4 Number of eCommerce Enterprise in China

1.2 China Mobile Retail Market updates 1.2.1 Growth of China Mobile Retail Market 1.2.2 China Mobile Retail Transaction 1.2.3 China Mobile Shopper Behavior – Purchase Intention/ Scenarios/

Preferred Products

1.3 China Outbound Online Shopping Updates 1.3.1 Outbound Online Shopping Increased Rapidly 1.3.2 Reasons for Outbound Online Shopping 1.3.3 Popular Products of Outbound Online Shopping 1.3.4 Demographics of China Outbound Online Shoppers/ Where Do the

China Outbound Online Shoppers Come From?

Part 1

2



1.2 China Mobile Retail Market Updates 1.2.1 Growth of China Mobile Retail Market 1.2.2 China Mobile Retail Transaction 1.2.3 China Mobile Shopper Behavior – Purchase Intention/ Shopping Scenarios/

Preferred Products



Part 1

2

China Online Retail Transaction 1.1.1

2016e2015e2014e2013e201220112010 2017e

90%

80%

70%

60%

50%

40%

30%

20%

10%

100%

0%

4,500

3,000

1,500

6,000

0

3,600

3,020

2,450

1,850

1,303

784.5461.0

4,140

3

19.2%23.3%

32.4%

42.0%

66.1%70.2%

75.3%

15.0%

2010 – 2017 China Online Retail Market Transactions

Growth rate ( % )Transaction ( Billion Yuan )

Source: iResearch, “2013 eCommerce market core value analysis”, 2014.1

Reached RMB1,850 billion in 2013. It is forecasted to surpass RMB4,000 billion in 2017.The increase is mainly due to the rising number of online shoppers, higher internet penetration with more sophisticated logistic support.

--

3

19.2%23.3%

32.4%

42.0%

66.1%70.2%

75.3%

15.0%

China Online Retail Transaction ( % of total retail )1.1.2

20132012 2014e

5.0%

4.0%

3.0%

2.0%

1.0%

6.0%

7.0%

0.0%

10.0%

8.0%

6.0%

4.0%

2.0%

12.0%

0.0%20132012 2014e

8.0%

6.3%

9.8%

2012 – 2014 China online retail ( % of total retail )

2012 – 2014 US online retail ( % of total retail )

Source: 100EC, “2013 China online retail market insight report”, 2014.3 Source: eMarketer, “Comparative Estimates”, 2014.4

4

5.8%

5.2%

6.4%

Online retail in China has accounted for 8% of total retail volume in 2013, and it is predicted to hit 9.8% in 2014The growth of online retail in China is advancing at a more rapid pace when compared with the US, which experienced a growth of 5.8% in the same sector in 2013.

--

Source: CNNIC, “China internet development status report”, 2014.1

Number of Online Shoppers in China1.1.3 There were over 300 millions online shoppers in China in 2013, which is nearly half of the total internet population. YoY growth was at 48.9% during the same period. Enhanced technology improvements such as more secure payment processes, mobile purchase options, etc. are the key factors driving users to shop online.

-

-

2012 – 2013 Number of Online Shoppers in China

20132012

48.9%

42.9%

38%

25%

13%

50%

0.0%

300

200

100

400

0

5

% of total internet users

Online shoppers ( million )

242

302

Enterprise (Unit)

Compared to 2012, the number of eCommerce enterprises in China increased by 18%. A growing trend will be seen in 2014 which it is expected to result in almost 35,000 eCommerce enterprises.

-

Number of eCommerce Enterprises in China1.1.4

2014e20132012201120102009

30,000

20,000

10,000

40,000

0

34,314

29,303

24,875

20,750

15,800

9,962

2009 -2014 Number of B2B, C2C eCommerce enterprises in China

Source: 100EC, “2013 China online retail market insight report”, 2014.3

-

6




Preferred Products



7

The growing popularity of smartphones and improved ease of use of mobile devices give rise to mobile commerce. The number of mobile shoppers was 144 million in 2013, which is almost 30% of the total mobile population.The share of mobile online retail is increasing and expected to surpass 20% of the total share by 2017.

-

-

Growth of China Mobile Retail Market1.2.1

8

2017e2016e2015e2014e2013e20122011

80%

60%

20%

40%

100%

0

24.1%19.9%16.4%13.1%9.1%4.8%1.5%

75.9%80.1%83.6%86.9%90.9%95.2%98.5%

2011 – 2017 China online retail share (PC & Mobile)

China online retail share ( Mobile )China online retail share ( PC )


2012 – 2013 Number of mobile shoppers

20132012

30%

20%

10%

40%

0.0%

120

80

40

160

0

28.9%

13.2%

55

144

% of total mobile users

Number of mobile shoppers ( million )

9

Due to technological advancements in the area of mobile purchase and payment processes, impulse buying on mobile devices caused the transactions to surge by over 160% to RMB167.6 billion in 2013. The growth is projected to be doubled by 2014.

-

China Mobile Retail Transaction1.2.2

2017e2016e2015e2014e2013e20122011

360%

240%

120%

480%

0%

750

500

250

1,000

0

998.5

716.3

495.3

320.3

167.6

63.211.7

39.4%44.6%54.6%

91.1%

165.4%

440.8%

426.1%

2011 – 2017 China mobile retail transaction (billion Yuan)

Growth rate (%)Mobile retail transaction ( billion Yuan )


As the process of mobile purchase has become more convenient in China, it boosts users’ shopping decision-making process. 21.2% of users say they are more willing to browse eCommerce sites on their mobile devices rather than through PC, while 65% of mobile shoppers claim they shop less in physical stores after they tried online shopping.

-

China Mobile Shopper Behavior – Purchase Intention1.2.3

22%20%18%16%

10

21.2%

20.5%

18.5%

18.2%


2013 China Internet users online shopping preference ( PC & Mobile )

Source: CNNIC, “2012 China online shopping market research”, 2013.3

Do you visit stores less frequently after online shopping?

2%

65%

33%

Increase visits to stores

No Change at all

Decrease visits to stores

When compare to PC, I would like to browse eCommerce site on mobile

When compare to PC, I spent longer time to browse shopping sites on mobile

When compare to PC, I make purchase decision faster on mobile

I prefer mobile shopping experience more than PC

Idle time intervals make it more convenient for mobile users to shop. They can shop anytime and anywhere when a network is available. Leveraging QR code promotions on public transports, or in-store product comparisons, can further stimulate consumers’ impulse purchase decisions. For some internet users, mobile starts to replace PC when they shop online. Over 80% of them will shop via mobile when they are resting at home, and over 60% of them go for mobile shopping when there is no access to PC.

-

-

Resting at home

Before bedtime

After meals

No access to PC

Traveling

Working/ Studying

Early morning

Waiting

Having meals

100%80%60%40%20%0%


China Mobile Shopper Behavior – Shopping Scenarios 1.2.3

Scenario for China internet users to shop via mobile in 2013

11

20.0%

13.3%

20.0%

26.7%

40.0%

46.7%

53.3%

60.0%

86.7%

Mobile shoppers purchased a large variety of goods/services. Both virtual and physical products are amongst the most commonly shopped categories in mobile shopping. The changing consumer behavior has had a significant impact on traditional business models and is a key factor behind the increasing trend of O2O business.

-

-

12Source: InMobi, “2014 China mobile internet users insight report”, 2013.12

China Mobile Shopper Behavior – Preferred Products1.2.3

Products purchased by China mobile shoppers

60%50%40%30%20%10%0%

Physical products(fashion, consumer prodcuts)

Virtual products(app, game, e-book, videos, ringtone)

Finance related (bill settlement, P2P payment)

Entertainment(movie tickets)

Travel(flight, accomodation)

51%

45%

30%

26%

19%

Tried mobile shopping




Preferred Products

1.3 China Outbound Online Shopping Updates 1.3.1 Outbound Online Shopping Increased Rapidly 1.3.2 Reasons for Outbound Online Shopping 1.3.3 Popular Products of Outbound Online Shopping 1.3.4 Demographics of China Outbound Online Shoppers/ Where Do the China

Outbound Online Shoppers Come From?

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Online overseas retail transaction reached RMB76.7 billion in 2013. The projected growth rate is over 100% in 2014, reaching RMB154.9 billion by the end of the year.There are 2 types of outbound online shopping transactions in China: 1) Users who order directly from the eCommerce sites of overseas brands; 2) Users who order from local buyers/agents, who will then ship the products to China, commonly known as “DaiGou”.

-

-

Outbound Online Shopping Increased Rapidly 1.3.1

2014e20132012201120102009

150

100

50

200

0

154.9

76.7

48.3

26.5

125

14

2009 - 2014 China out-border online shopping transaction (billion Yuan)

Source: 100EC, “2013 China online retail market insight report”, 2014.3

The top 3 reasons for China online shoppers to purchase overseas are competitive prices (high taxation in China, especially luxury goods), product quality and the scarcity of products.

-

Product Scarcity

Product quailty

Competitive price

More variety

Better service

Recommended by friends

Security

Easy to "Click & Buy"

Easy to refund/ return

Others

Better logistic service

50% 60%40%30%20%10%0%

Source: iResearch, “2012-2013 Cross-border e-commerce report”, 2013.9

Reasons for Outbound Online Shopping1.3.2

Reasons for China online shoppers to shop overseas in 2013

2.7%

2.0%

2.9%

3.8%

5.5%

5.7%

6.0%

8.2%

21.2%

21.8%

20.3%

19.4%

2.3%

22.9%

23.6%

26.2%

30.4%

31.8%

34.5%

52.0%

50.6%

50.3%

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Main reason (Single choice)Reasons (Multiple choices)

Due to the concerns in price and quality, fashion, personal care and baby products are the most in-demand product categories amongst the online shoppers making outbound purchasesBrands in these industries should keep an eye on the market opportunity to meet the demand of the consumers

-

-

20%10%0%

Digital products 7.7%

IT products 9.4%

Baby products 12.6%

Fashion 16.0%

Personal care 12.9%

40%30%20%10%0%

Source: iResearch, “2012-2013 Cross-border e-commerce report”, 2013.9 16

Popular Products of Outbound Online Shopping1.3.3

Books & Music 5.8%

IT products 6.0%

Household goods 7.3%

Fashion 37.8%

Vitural card 11.4%

Top 5 items purchased online in China Top 5 Items purchased online overseas

Age of China online shoppers in 2013 ( shop in China & Overseas )

Above 51

41-50

36-40

19-24

Under 18

31-35

25-30

40%30%20%10%0%

15.7%

0.6%

39.7%

25.3%

10.9%

6.8%

1.1%

16.2%

0.9%

33.3%

24.3%

12.2%

10.3%

2.8%

Shop OverseasShop in China

The majority of online shoppers in China are aged between 25 to 35, while outbound shoppers are more affluent. Over 80% of outbound shoppers are aged 35 or below, with income mainly between RMB3,000 to RMB5,000.

-


Demographics of China Outbound Online Shoppers1.3.4

17

30% 40%20%10%0%

Income of China online shopper( shop in China & overseas ) in 2013

5.0%

2.8%

6.9%

18.0%

30.9%

2.3%

1.3%

3.4%

9.2%

25.3%

No income

Under 1,000

1,000-2,000

2,001-3,000

3,001-5,000

18.3%

8.7%

6.8%

1.8%

0.8%

23.2%

15.6%

13.4%

4.0%

2.3%

5,001-8,000

8,000-10,000

10,001-20,000

20,001-50,000

Above 50,001

Shop OverseasShop in China

Most of the online shoppers who purchase overseas are living in Tier 1 cities in China, like Beijing (12.2%), Shanghai (13.2%), Guangzhou (14.1%), etc.However, recently a new trend has emerged that shows more and more online shoppers are coming from Tier 2 cities or below, accounting for nearly 30% of the total outbound online shoppers population.

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-

Guangdong

Beijing

Jiangsu

Shanghai

Shandong

Fujiang

Heibei

Zhejiang

15%12%9%6%3%0%

18

3.7%

4.0%

5.2%

7.2%

9.2%

12.2%

13.2%

14.1%


Where Do the China Outbound Online Shoppers Come From ?1.3.4

Top 8 cities of China outbound online shoppers

Recommendations for Brands & Marketers

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Foreign brands should make products available in China ASAPBrands should closely study the dynamically evolving shopping behaviors of the users, with particular focus on products that are currently not available in China, before DaiGou agents identify and cash in on the opportunities

Mobile marketing can also be a helpful push for O2O businessMobile apps or mobile site are essential to encourage customers to interact with the brand while they are shopping, for example, scan QR codes to find out more about the products or mobile site for product comparisons

Do not fully rely on physical stores, especially when some cities cannot be reached out to

Cooperate with renowned eCommerce sites and build a branded channel to reach a larger group of target customers

Timely offers are crucial for newly established online retail businesses to generate traffic.

Set up your own branded eCommerce site; expand business from offline to online

To conclude, the China online retail market is growing at a rapid pace. Nearly half of the internet population are online shoppers. They like to make use of the idle time intervals and surf on eCommerce sites. This game changing behavior is a very important lead for O2O business. To help brands better assess the potential and the changing market scenario, iClick would recommend:

personal care & beauty industry online retail update

Part 2 is coming soon . . .

Thank youWebsite: i-click.comOf�cial Weibo: Weibo.com/iclickasiaE-mail: [email protected]: iClick_China

The content and the conclusions in this report represent the Company's viewpoint only. The content is intended to be accurate and reliable. However, the Company does not guarantee the accuracy and completeness of both the content and the citations.

2014 China Online Retail Market Study Part 1

Marketing

Transcript of 2014 China Online Retail Market Study Part 1