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China E-Commerce Challenges and Opportunities
 

China E-Commerce Challenges and Opportunities

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Minh-Ha Nguyen’s presentation on the challenges and opportunities of doing e-commerce in China highlights: ...

Minh-Ha Nguyen’s presentation on the challenges and opportunities of doing e-commerce in China highlights:
• Trends in China e-commerce, including mobile commerce
• Challenges of doing business in China, including the myth of China e-commerce as a low-cost distribution channel and what drives the high cost of China e-commerce
• Benefits of e-commerce in China
• Opportunities available for China e-commerce companies
• Opportunities available for the product manufacturers supplying these e-commerce companies in China

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    China E-Commerce Challenges and Opportunities China E-Commerce Challenges and Opportunities Presentation Transcript

    • China E-commerce:Challenges & OpportunitiesMyths, Realities & Unlocking PotentialMinh-Ha NguyenOctober 26, 2012
    • China E-commerce:Background & Context
    • China has more than half a BILLION people online China Internet Users (In Millions) 538 513 457 384 298 210 2007 2008 2009 2010 2011 Jun-2012Source: CNNIC -2-
    • China already the world’s largest Internet population Internet Users By Country (2010 - 2015E) (in Millions) 1,000 CAGR= +9.0% 703 2010 750 2015E 500 457 +3.1% 238277 +1.5% +2.1% 250 +1.5% 102110 46 51 38 41 0 China USA Japan UK S. Korea Internet 34% 51% 76% 85% 80% 88% 74% 79% 77% 79% PenetrationSource: Boston Consulting Group -3-
    • China’s e-commerce market expected to become world’s largest by 2015 E-commerce Market Size By Country (2010 - 2015E) ($Billions) 400 CAGR= +34% +9% 305 2010 300 268 2015E 200 177 +5% +12% +8% 100 71 64 38 49 37 18 27 0 China USA Japan UK S. KoreaSource: Boston Consulting Group -4-
    • …and China’s e-commerce market still has more room to grow eShopper Population By Country (2010 - 2015E) (in Millions) +2.3x 400 329 2010 300 2015E 199 200 170 145 100 62 75 29 37 29 32 0 China USA Japan UK S. Korea eShopper % of 32% 47% 72% 73% 61% 68% 66% 73% 77% 79% Internet UsersSource: Boston Consulting Group -5-
    • Chinese Internet users very active across a wide range of online activities Chinese Online Behavior & Penetration (Millions of Users) 388 274 251 210 187 Online Online Social Microblog Mobile Internet Shoppers Payments Networking Users Users Users Website UsersPenetration 39.0% 34.8% 46.6% 50.9% 72.2%Notes: * Data as of June 2012Source: CNNIC -6-
    • China mobile Internet usage growing dramatically China Mobile Internet Users & Penetration 72.2% 69.3% 65.9% 66.2% 65.5% 60.8% CAGR= 46.0% +52% 388 39.5% 356 28.9% 318 303 277 233 155 118 73 2008.6 2008.12 2009.6 2009.12 2010.6 2010.12 2011.6 2011.12 2012.6Notes: * Data as of June 2012Source: CNNIC -7-
    • Internet access via mobile devices surpassed desktop PC, paving way for M-commerce China Internet Access By Device Type 73% 71% 72% 69% Desktop Computer Mobile Phone Dec-11 Jun-12Notes: * Data as of June 2012Source: CNNIC -8-
    • Grocery expected to be fourth largest online category by 2016Source: McKinsey -9-
    • Consumer acceptance towards buying Food & Beverage online varies by geographySource: Insights China by McKinsey (2010 update) - 10 -
    • Channel shift taking place in retail worldwideChina Retail Market Split, 2010 Online Penetration China Online Market Split, 2016 RMB Billions Percent RMB Billions 100% = 7.847 2010 2016 100% = 2.081 20% Apparel 20% 30% 31% Apparel 7 20 Consumer Apparel 13% Electronics Consumer 13 34 15% Electronics Home 28% Improvement Home Consumer 8 19 Electronics Improvement 26% Grocery 1 5 Home Grocery 47% Improvement Health & Beauty 4 16 Health & 9% Grocery Beauty Health & Beauty Toys & Games 5 11 Toys & Games Toys & Games 2% 2% Baby & Mom 1% Baby & Mom 1% Other GM 1% 2% 1% Other GM 1% Baby & Mom 4 19 2010 2016Source: McKinsey - 11 -
    • China E-commerce: Challenges
    • China e-commerce: Myths vs. Realities • Promise of China E-commerce:True o More goods to more people more quicklyMYTH o Low-cost distribution channel REALITY: • China e-commerce as low-cost channel for physical goods is a myth • However, it’s not all bad news! E-commerce does offer many benefits - 13 - - 13 -
    • China e-commerce faces daunting economics,driven by 5 key factors:1. Immature Logistics Infrastructure2. High Marketing Costs3. Difficulty Charging Price Premium Online4. “Spoiled” Chinese Consumers5. “Gaming” by Chinese Consumers - 14 -
    • China E-commerce: Opportunities
    • It’s not all bad news:E-commerce does offer numerous benefits• Quickly reach large number of consumers across China• Brand awareness, brand building• Instant consumer feedback − Improve inventory management − Maximize pricing effectiveness − Generate new product ideas• For multi-channel players: − Complements B&M offering (infinite shelf space) − Increases overall market share (vs. single channel)• Plus… undeniable trend: − Channel shift taking place worldwide − Shift moving away from Taobao and towards B2C - 16 -
    • Unlocking Potential:Opportunities for E-commerce Retailers • Employ lower cost marketing channels ProactivelyManage Costs − Social media − Word-of-mouth • Sell unique goods • Establish reputation for quality + service Increase • Make your website a “destination” Topline • Have functionalities that drive sales • Smart marketing • Execute well • Have plan for mobile commerce… now!Be One Step Ahead • Be scrappy (think like a start-up) - 17 -
    • Unlocking Potential: Opportunities for Manufacturers • Benefits: Develop True − Preferential treatment (promo space) Partnership − Consumer insights With E-tailers − Combat counterfeit, food safety issues − Increase awareness, trial, usage • Potential ideas: − Price promotions if it drives volume − Non-price value-added benefits − Creative ways to provide unique goods • Especially categories that are:Establish Direct − High-involvement Consumer Relationship − Authenticity concerns • Potential ideas: − Direct delivery − Provide related information − Leverage social media - 18 -
    • Thank you!Minh-Ha Nguyenminhha@sinopundit.comBlog: SinoPundit.com