Introduction to China's online retail market
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Transcript of Introduction to China's online retail market
China’s E-commerce market
Dr Michael Ling
An introduction
to
01 02 03 04
A global
perspective
China’s
ecommerce market
China’s online
consumers
China’s online
companies
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
2.What are your favorite online shopping websites?
Self-test
3.What products or services do you often buy online?
Self-test
Self-test
3.Can you name some of the popular online shopping websites in China?
Self-test
Self-test
9
A global perspective
10http://finance.yahoo.com/news/research-‐markets-‐worlds-‐leading-‐e-‐154500570.html
01 Global B2C e-commerce growth, 2014
11
63.8%
11.8%
China
US
China dominates the world’s ecommerce12
BRIC
01 China dominates global ecommerce
01 Global B2C e-commerce market
https://www.statista.com/statistics/379046/worldwide-retail-e-commerce-sales/
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
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.
16
01 Over 65% Internet users purchase online
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
China’s e-commerce
market
18
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
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
21
02 China’s online retail market
iResearh
22
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).
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
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
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
26
02 Services provided by market platforms
27
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.
02 China’s top e-commerce categories
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
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%)
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%)
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
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.
China’s online
consumers
34
03 Chinese consumers make twice as many online
purchases as US consumers
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)
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.
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.
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
40
China’s online
companies
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
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.
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.
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.
04 JD.com
• JD.com, which focuses on electronic
items, is a leader in the “3C” (computer,
communications, and consumer
electronics) segment.
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
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
48
01 China’s B2B e-commerce platforms
https://www.statista.com/statistics/243845/market-share-of-b2b-online-retailers-in-china/