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2014 China Online Retail Market Study Part 1

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Nearly half of the China internet population are online shoppers, they do not only shop via PC, but mobile devices; and there are more than 30,000 e-commerce enterprises exist in China at the moment, …

Nearly half of the China internet population are online shoppers, they do not only shop via PC, but mobile devices; and there are more than 30,000 e-commerce enterprises exist in China at the moment, the competition of China online retail market seems to be vigorous than ever. Check out this whitepaper to have a clearer picture of what’s happening in the market.

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  • 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 1 China online retail market study 2014.08 2014 Part 1
  • 2. 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
  • 3. 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 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/ Shopping 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
  • 4. China Online Retail Transaction1.1.1 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 1,303 784.5 461.0 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%
  • 5. 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 2014 The 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. - -
  • 6. 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
  • 7. 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
  • 8. 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/ Shopping 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? 7
  • 9. 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 ) Source: iResearch, “2013 eCommerce market core value analysis”, 2014.1 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 )
  • 10. 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 63.2 11.7 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 ) Source: iResearch, “2013 eCommerce market core value analysis”, 2014.1
  • 11. 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% Source: CNNIC, “China internet development status report”, 2014.1 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
  • 12. 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% Source: CNNIC, “China internet development status report”, 2014.1 China Mobile Shopper Behavior – Shopping Scenarios1.2.3 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%
  • 13. 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. - - 12 Source: 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
  • 14. 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/ Shopping 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? 14
  • 15. 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 Rapidly1.3.1 2014e20132012201120102009 150 100 50 200 0 154.9 76.7 48.3 26.5 12 5 14 2009 - 2014 China out-border online shopping transaction (billion Yuan) Source: 100EC, “2013 China online retail market insight report”, 2014.3
  • 16. 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% 15 Main reason (Single choice)Reasons (Multiple choices)
  • 17. 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 purchases Brands 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
  • 18. 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. - Source: iResearch, “2012-2013 Cross-border e-commerce report”, 2013.9 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
  • 19. 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. - - 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% Source: iResearch, “2012-2013 Cross-border e-commerce report”, 2013.9 Where Do the China Outbound Online Shoppers Come From ?1.3.4 Top 8 cities of China outbound online shoppers
  • 20. Recommendations for Brands & Marketers 19 Foreign brands should make products available in China ASAP Brands 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 business Mobile 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:
  • 21. personal care & beauty industry online retail update Part2iscomingsoon...
  • 22. Thank you Website: i-click.com Official Weibo: Weibo.com/iclickasia E-mail: sales_cn@i-click.com WeChat: 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.