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Successful e-Commerce in China Successful e-Commerce in China Presentation Transcript

  • E-Commerce in China Operated by
    • Size and demographic structure of Internet-Users
    • Role of the Internet
    • B2C & C2C Market
    • Obstacles for E-Commerce
    • Legal and Technical Requirements
    • Case Study: eBay EachNet
    Content
  • China – World's Largest Internet Market
    • Online population is now at 220 million , overtaking the US as the world's number one (BDA China 03/2008)
    • China had 210 million Internet users, 163 million broadband users and 50.4 million handset mobile Internet users by December 2007 (CNNIC 01/2008)
    • Growth rate was up to 53.3%
    Growth of Internet Users in China View slide
  • China's Internet Penetration Rate Still Very Low Internet penetration rate in tier 1 provinces: Beijing: 46.6% Shanghai: 45.8% Guangdong: 35.9% Comparison Internet Penetration Rate among Countries View slide
  • Young and Educated Internet Population
    • Opposed to total population, Internet users are groups with higher education background
    • But Internet is diffusing to groups with lower education background
    • Since 1999, the ratio of users with tertiary education has dropped from 86% to present 36%
    • Chinese users are mainly youngsters
    • 31.8% are aged 18-24
    • Student users account for a heavy proportion
    Age Structure of Internet Users in China Education Structure of Internet Users in China
  • Low Income Internet Population
    • 74.9% or 157 million of the 210 million Internet users are urban users
    • Rural Internet users increased sharply by 127.7% last year
    • Urban users increased by 38.2% in 2007
    • Internet penetration rate for urban residents is 27.3% , for rural residents 7.1%
    • Almost 3/4 Internet users have an income of less than RMB 2,000 per month (CNNIC 2008)
    Income Structure of Internet Users in China
  • Entertaining Role of Internet Is In Front Row 1 st Application used when going online Application Rate 1. Instant message 39.70% 2. Online news 20.00% 3. Others 14.30% 4. Online games 9.30% 5. Search engine 7.40% 6. E-Mail 3.50% 7. Online music 3.40% 8. Online Video 2.40%
  • Online Shoppers Are a Group of High Class
    • Online shopping rate in China was 22.1% at the end of 2007 (CNNIC 01/2008)
      • 41.4% Shanghai
      • 36.0% Beijing
      • 28.7% Sichuan
      • 27.9% Zhejiang
      • 26.6% Jiangsu
    • 55 million Internet users have shopped online in 2007 (iResearch 2008)
    • Over 80% of the shopping groups reside in urban areas
    • The longer the history of surfing online, the higher the shopping rate is
      • Online before 1999: 42.4%
      • Online in 2007: 5.7%
    Online Shopping Rate of Users by Education Level
  • Level of Online Spending Remains Modest
    • Online shopping turnover (B2C & C2C excl. Online-travel booking) reached RMB 59.4 billion in 2007 (iResearch 2008)
    • Turnover of RMB 406 billion expected by 2011 (iResearch 2008)
    • Level of online spending per consumer was about RMB 1,000 in 2007 (CNNIC 2008)
    • Online Spending accounts for only 0.66% of total retail spending in China (total retail sales of consumer goods in 2007 reached RMB 8,921 billion; National Bureau of Statistics 2008)
    Shopping Amount of Internet Users within 6 Month
  • Taobao dominates C2C Market 2007 Q3 Market Share C2C Platforms China
    • Taobao trading volume in 2007 RMB 43.3 billion
      • ~ 80% of C2C turnover
      • ~ 70% of total online shopping turnover (B2C & C2C, excl. online-travel booking)
      • 53 million users
    • Taobao and Paipai charge no fees
    • eBay EachNet charges listing and transaction fees
    •  no C2C platform is making any money at the moment
    • Top selling products on Taobao in 2006 in terms of number of transactions
    • perfume and cosmetics (40 million items)
    • telephone recharge cards (20 million)
    • Health care commodities (20 million)
    • Books (9.4 million)
    • Shoes (4.5 million pairs)
    • Lighters (4.3 million)
    • Underwear (2.3 million pairs)
    • Mobile phones (2.2 million)
    • Top Selling Products on Taobao in 2006 by transaction volume
    • Mobile phones and other communication equipment
    • Cosmetics
    • Notebooks
    • Online game merchandise
    • Computer hardware
    • Digital cameras
    • Jewellery
    • Exercise equipment
    • Mobile phone recharge cards and IP cards
    • Mobile accessories
  • Obstacles for E-Commerce
    • Fake goods, Credit card theft
    • Small number of credit card users – 75 mil. credit cards in circulation by 2007
    • Payment systems are safer now – no longer a technical problem, but a problem of confidence
      • E-commerce Logistics
        • Size and vast distances in China – delivery for most companies limited to major metropolitan areas using couriers
        • high delivery cost due to the small scale of some logistics enterprises
        • Over 70% of all purchases in the B2C market are paid cash-on-delivery (Analysis International)
        • COD presents challenges and risks for online merchants
    • Buying online is a dramatic change from conventional shopping practices
      • Consumers in China still prefer to look over the goods, determine their quality, and then, if satisfied, pay in cash
      • Online commerce, in comparison, is an alien experience that only increases risk
    •  Challenge for Internet companies to win consumers' confidence
  • Failure of eBay EachNet
    • In 2003, eBay entered China’s C2C market by acquiring EachNet (USD 180 million )
    • EachNet, founded in 1999, was China’s No. 1 auction with peak market share of more than 90%
    • Alibaba invested USD 52 million in 2003-04 to enter C2C market (Taobao.com)
    • In 2004, Taobao occupies over 50% of China’s C2C market; eBay’s EachNet about 35%
    • The battle continues – eBay spent another USD 100 million to strengthen its presence in China
    • In 2006, eBay sold 51% of it’s China division EachNet to Tom Online
    • eBay Eachnet continued to lose market share to Taobao - today, Taobao has over 80% of the C2C market share in China
  • eBay Did Not Focus on Building Up Trust
    • eBay's listings fees were only one of the reasons why customers used Taobao over eBay Eachnet
    • Many Internet users dislike eBay because of its service
      • eBay's Paypal did not seamlessly integrate escrow into the sales process
      • Taobao's popular Alipay made escrow an important component of the online buying experience
      • Later attempts by eBay to incorporate escrow were too late to help it regain lost market share
    • Initially EachNet did not allow buyers and sellers to communicate directly, while from the very beginning, Taobao allows for direct instant messaging between the two parties
  • Regulatory System WTO-Protocol China's Regulation Telecom Services Basic Telecom Service "BTS" Value-Added Telecom Service "VATS"
    • Registered Capital
        • National/Interprovincial min. RMB 2 bn .
        • I ntraprovincial min. RMB 200 m .
    • Foreign Equity Ratio Limit: 49%
    • Telecom Operating License
    Internet Information Service = any provision of Information through Internet to web users  Registration or VATS License + Registration
    • Registered Capital
        • National/Interprovincial min. RMB 10 m.
        • I ntraprovincial min. RMB 1 m.
    • Foreign Equity Ratio Limit: 50%
    • Telecom Operating License
  • Fundamentals for a High Quality Website
    • Design
      • Original CI guidelines can / should be followed
      • Colorful designs possible
    • Technology/Hosting
      • Content Management Software and Web Server have to be UTF8 enabled
      • Website Hosting in China recommended (Speed)
    • Online-Marketing
      • Baidu.com is the biggest player (> 60% market share)
      • Google.com follows with about 20%
      • Chargeable services are dominant (Keyword buying)
      • Viral marketing strategies (Blogs, Forums)
  • The Meaning of Colors Meaning Color China Europe Black „ color of death“, darkness, glory, winter, north death, darkness, mourning White mourning, bad luck, age, autumn, west cleanliness, brightness, hygiene, virginity Red Traditionally: joy, good, wealth, bright, summer, south, recently: government, authority danger, forbiddance, war, sexuality Yellow traditionally: emperor, earth, middle and china, recently: pornography caution, envy, avarice, cowardice Blue algid, ill sky, water, reliable, authentic Brown misfortune laziness, old-fashioned Grey cheap, dull elegant Gold glory, royal, wisdom, perfection money, sun, nature, friendliness Green life, vitality, spring, east nature, hope
  • The Meaning of Symbols Meaning Symbol China Europe Magpie 鹊 que joy, fortunate marriage thievery, robbery, defraud Owl 鸮 xiāo disaster, scare, crime wisdom, clever, bright, intelligent Rat 鼠 shǔ wealth, avarice, demonical possession dirt, cloacae, illness Spider 蜘蛛 zhīzhū luck fear, disgust, threat Clock 送終 short life, wish death time Swastika 卐 wàn luck, numerousness, all war, death, terror Fish 鱼 yú wealth, luck Christianity, Jesus Christ Dragon 龙 lóng power, strength, wisdom, luck, emperor power, danger, chaos Bamboo 竹 zhú integrity, pertinacity, conservativeness, long life -
  • The Meaning of Numbers Positive 6 problem-free, promising, smooth 8 fortune, wealth 9 forever, long-lasting Negative 4 sì ( 四 ) sounds almost like death, dying ( 死 ), disaster 10 shì ( 十 ) sounds almost like „4“, therefore death 13 failure, imperfection 14 yao si sounds almost like “going to die”
  • Contact W eb2 A sia Room 2022-2026 No. 1438 Shaanxi Road (North) Shanghai 200060, China Phone: +86 21 32270872 Mobile: +86 159 2100 2780 Fax: +86 21 32270875 E-Mail: [email_address] Web: http://www.web2asia.com