June 10, 2015CONFIDENTIAL AND PROPRIETARYAny use or further distribution of this material without specific permission of Export Now is strictly prohibited

How U.S. Brands Can Win in China e-Commerce

E-Commerce Solutions

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China e-Commerce overview

China’s e-commerce market is the largest in the world…

…and is dominated by marketplaces

2Source: McKinsey Global Institute, China e-tail revolution: Online shopping as a catalyst for growth (March 2013);KPMG, E-commerce in China: Driving a new consumer culture (January 2014); iResearch (July 2014)

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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

US China Japan UK Germany

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50

20 12 11 7 8 7 7 10

50

80 88 89 93 92 93 93 90

03 04 05 06 07 08 09 10 11

China

76

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USA

Marketplaces

Independent merchant sites

• Online retail sales in Chinareached $425 billion in 2014, and estimated to reach $560 billion in 2015 (In the US - $305 billion in 2014, $349 billion for 2015)

• In 2015, 12% of China retail sales will be e-commerce, vs 7% in US

• Total internet users in China reached 650 million in 2014

• Over 600 million smart phone users in China

• B2C e-commerce in China is a building block for globalization—it can drive B2B growth, offline sales, and pave the way to other Asian markets

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~ 12% of revenue and ~26% of profits come from Greater China. Top selling sports brand in China

Over 900,000 Buicks estimated sold in China in 2014 ( ~80% of global sales)

Opened its first store in China in 2010, opened its 100th store in Nov. 2014

Starbucks China grew from 250 stores in 2009 to 1000 in 2013; China is now the 2nd

biggest market next to the US

China hosts 8 of Ikea’s 10 biggest stores, and Ikea’s China-based revenue has reached USD 1 billion

Over 1,200 restaurants in 317 cities in China,

China is the no. 3 biggest market behind Germany and the United States

China is Apple’s fastest growing market, with a record-breaking 29% growth in sales last year

Both Disney’s largest retail store (56,000 sq ft) and newest Disneyland Resort (USD 5.5 billion project) are currently under construction in Shanghai.

Source: Press clippings, SEC filings

Foreign brands have a strong appeal to Chinese consumers

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Tmall 61%JD.com21%

VIP3%

Yixun1%

Amazon2%

Suning4%

Yihaodian1%

Dangdang2%

Gome2%

Others3%

China e-Commerce Overview: Leading B2C Players

Tmall has over 350 million active buyers

Source: iResearch Consulting Group (February 2015); Statista.com (April 2015) 4

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Leading platforms by category

Source: Resonance China (December 2014) 5

Taobao Tmall JD Yihaodian Dangdang Amazon.CN Suning Jumei Other

Apparel & accessories

61.0% 33.5% 2.4% 0.2% 0.0% 0.2% 0.0% 0.0% 2.7%

Household appliances

20.4% 13.1% 51.9% 1.4% 0.8% 0.5% 9.5% 1.9% 0.5%

Electronic products

15.0% 10.4% 54.8% 2.6% 1.0% 7.4% 4.1% 0.0% 4.7%

Cosmetics 51.3% 23.4% 7.9% 0.8% 0.6% 0.3% 0.2% 11.8% 3.7%

Personal care 29.1% 22.4% 25.6% 15.4% 0.5% 2.0% 0.5% 2.9% 1.6%

Food 44.7% 33.1% 5.2% 12.4% 3.3% 0.3% 0.2% 0.0% 0.8%

Beverage & Wine 27.1% 26.0% 25.3% 18.2% 1.2% 1.7% 0.2% 0.0% 0.3%

Household cleaning

24.0% 22.9% 25.1% 26.4% 0.0% 0.0% 0.3% 0.0% 1.3%

Babyproducts

48.3% 34.6% 13.0% 2.0% 0.5% 0.4% 0.8% 0.0% 0.4%

Books & Audio 11.6% 21.3% 14.2% 0.0% 35.2% 17.6% 0.0% 0.0% 0.1%

Platform / e-tailer sales share

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Tmall Flagship StoreBenefits• Premiere showcase for foreign brands in China• Consumers’ most trusted platform

• Registration process eliminates sellers who do not have proper brand ownership, licensing and/or copyright

• Authenticity guarantee to consumers• Takedown procedures for counterfeit product

• Full payment at time of transaction so no credit issues

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burberry.tmall.com 

Burberry• Tmall Flagship Store launched in spring 2014• 900,000 followers on Sina Weibo (China         

Twitter equivalent) • Verified Tencent WeChat account running

regular promotions and sending weekly       messages to followers

Calvin Klein • Tmall Flagship Store launched in fall    

2014• 200,000 followers on Sina Weibo        • Verified Tencent WeChat account

calvinklein.tmall.com 

Lifestyle Brands on China e-Commerce

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Entering China e-Commerce

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International seller

Chinese shopper

China strategy &market insight

Web store operations

Cloud-based IT platform

Inbound logistics

Digital marketing

Financial settlement

Regulatory compliance

Customer support

Order fullfillment

Many steps and barriers to entry

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For Chinese Consumers

▪ Chinese language▪ Favorite e-commerce platform(s) Rating Consumer protection

▪ Chinese-speaking CRM▪ Chinese payment instrument▪ Local delivery time/cost

Comfort Zone Transactions

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For Sellers

▪ Contract with US for China execution▪ English/Chinese management & account

support▪ Pay/receive in USD, EUR or other currencies▪ Work with service providers in either US or

Chinese time zone▪ No need for additional legal entity in China

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China Strategy & Market Insight

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• Every successful brand needs to adapt its strengths to the requirements of the local market

• We work with you to design China market entry or market build strategy, based on brand positioning, digital outreach, and SKU/pricing requirements

• Scan local platforms and sales channels to gain an understanding of your competitors’ practices

• Determine audience, sales and marketing channels, and overall China market strategy

• Social media listening to identify local consumer preferences

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Web Store Design and Setup

Store Setup & Development

Store Operations & Management

QR codes to support mobile engagement

Maintain brand identity while localizing creative assets and content

Incorporate social media for increased fan engagement

Customer service integration

“Dealer‐locator” to support O2O initiatives

• Platform registration• Store concept• Product lines• Assortments & SKUs• Merchandising• Pricing

• Ongoing merchandising refreshes• Promotions• Pricing updates• Order fulfillment• Customer service• Returns management

harleydavidson.tmall.com

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Order Fulfillment• In-country warehousing and inventory

management, as well as FTZ warehousing• Procurement and storage of packaging materials• Pick, pack and ship to customer's doorstep• Carrier management• In-country returns management• Forecasting and replenishment support

Customer SupportCRM sophistication crucial to conversion rate in China e-commerce

• 12/7 Multi-channel customer service operation• Pre-sales and order tracking inquiries, post-sales support• Post-sales feedback and rating score management• Product return requests and facilitation• Customer loyalty program management• Analytics and reporting

Logistics• Documentation support for China

inbound shipment from U.S and other countries

• Transport between port, customs, bonded warehouses, and fulfillment center

• Packaging: special needs, branding, inserts

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Digital Marketing

Build brand awareness and create demand across multiple channels and platforms

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2015Marketing Plan

• Digital marketing is the only way to identify, target, and source a diverse and nationwide audience

• Different channel players than the West, with varying levels of sophistication and pricing

• Volkswagen spent over $400 million on display advertising in China in 2014

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Regulatory Compliance China import and regulatory compliance,

including all registrations and interactions with customs, CIQ, CFDA and other agencies

Facilitation of CIQ, quality testing, and inspections

China-compliant label designs, registration, and modifications

Customs declaration and payment of duties and taxes, including breaking down shipments into smaller batches for import

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Financial Settlement Remittance strategy and management, including

foreign exchange Settlement reporting every 30 days Full transparency (gross sales, net revenue, avg.

selling price, transaction fees, tariff deductions, etc.)

Payment of VAT and other fees to Chinese government

Acceptance of all commonly used Chinese consumer payment methods (e.g., Alipay, Unionpay, etc.)

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About Us

What Differentiates Us Headquartered and incorporated in the United States China experience and cross-border expertise Global standards for transparency and governance Integrated solutions for China e-commerce

Who We Are Founded by former US Undersecretary of Commerce for International Trade, Frank Lavin Mission – China market entry and e-commerce success Have supported 50+ brands on China e-commerce platforms

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Representative Clients

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