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Prestudy China eCommerce Growth, 27.10.2015

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Prestudy China eCommerce Growth, 27.10.2015

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Prestudy China eCommerce Growth, 27.10.2015

  1. 1. China’s ecommerce boom opens up for new opportunities INNOVATION BUSINESS ACCELERATOR ERIC CHENG, ERICC@INNOVBA.COM OCTOBER 22, 2015
  2. 2. China ecommerce Market Overview  Despite a macroeconomic slowdown in China, online consumer spending is growing at close to 50 %, particularly in fast-growing second and third-tier cities.  The Chinese Government is supportive of ecommerce as it’s in line with their long-held policy aim of driving domestic consumption.  China has around 417 million online consumers.  According to China’s National Bureau of Statistic, China online shopping accounts for about 10.7 % of total retail sales of consumer goods.  According to eMarketer ecommerce will account for nearly 30 % of all retail sales in 2018. $472,91 $672,01 $911,25 $1 208,31 $1 568,39 0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00% 0 200 400 600 800 1000 1200 1400 1600 1800 Y 2014 Y 2015 Y 2016 Y 2017 Y 2018 BillionUSD Year Retail ecommerce sales in China 2014-2018 Retail eCommerce Sales % Change % of total retail sales
  3. 3. Ecommerce Market – Two Main Players control 80 % of the Market  Around 90 % of the online retail transactions in China occur on marketplaces – including Taobao, TMall – where manufacturers, retailers and individuals list products to sell to consumers.  Alibaba’s Tmall holds the largest market share with more than 60 % of retail ecommerce sales in 2014. Alibaba has an even more commanding share of mobile retail ecommerce and C2C sales, at over 85 %. 61,40% 18,60% 3,20% 2,90% 1,70% 1,40% 1,30% 1,30% 1,10% 0,70% 6,50% 0% 10% 20% 30% 40% 50% 60% 70% Tmall JD.com Suning vip.com Gome Yihaodian Dangdang Amazon.cn Yixun Jumei Other B2C Retail E-commerce Sales Share in China, by Site, 2014
  4. 4. Ecommerce Trends & Developments MOBILE BRICK AND MORTAR ARE TURNING INTO “PRODUCT SHOW ROOM” GROWTH IN RURAL AREAS THE RISE OF CROSS- BORDER ECOMMERCE FROM C2C TO B2C
  5. 5. Connected Consumers – Drivers  According to Nielsen research, the typical online buyer of imported products in China is female, younger than 30 and with an income of more than RMB 11,000 per month.  Frequently cited reasons for shopping online include:  Accessibility  Convenience  Low prices  Greater assortment  Detailed product information & customer reviews  Confidence: consumers place higher levels of trust in the authenticity of purchases made on major B2C platforms such as Tmall, JD.com and Yihaodian
  6. 6. Connected Consumers –Product Categories
  7. 7. Connected Consumers – Information Channels
  8. 8. Cross-Border ecommerce  International ecommerce is called cross-border ecommerce.  Cross-border retail ecommerce has grown in recent years as the number of channels, payment methods and offerings has improved.  There are 18 million online cross-border shoppers in China, 78 % are cross- border mobile shoppers.  Chinese cross-border shoppers spent RMB 216 billion in 2013 – with up to 35.9 million expected to spend up to RMB1.0 trillion a year by 2018.  Top 5 cross-border purchase categories over the past 12 months are  Clothes, shoes and accessories (RMB 22.0 billion)  Health and beauty products (RMB 17.6 billion)  Computer hardware (RMB 13.5 billion)  Jewelry, gems and watches (RMB 13.1 billion)  Personal electronics (RMB 12.9 billion)  Cross-border online shoppers’ top shopping destinations: US (84 %), Hong Kong (58 %), Japan (52 %), UK (43 %), Australia (39 %).
  9. 9. Cross-Border vs Ordinary Trade
  10. 10. Ecommerce Search Engines  The top 3 search engines are Baidu, 360 and Sogou. Google, Bing and Yahoo, together with other small Chinese search engines only total to of 2.03 % of the entire search engine market.  Baidu is often compared with Google but actually operates differently.
  11. 11. Ecommerce Marketplace vs Brand Store Marketplace store (Tmall, JD)  90 % of all sales  50 % of the brand’s SKUs (mainly bestsellers)  Heavy marketing  Needs a perfect quality of service (chat function, etc)  Sales are public  Volume driven  Enclosed world –the marketplace owns the customers and the data  Vague search results on Baidu Brand store (.cn store)  10 % of all sales (some brands have less than 1 % sale on their own website)  Full assortment of SKUs  Branding  History  Values  E-magazine  Shop locator  OmniChannel  eCRM
  12. 12. Digital marketing in China is dominated by local players Tmall Taobao Baidu Alipay Wechat / Weibo Youku / Tudou Amazon eBay Google Paypal Facebook / Twitter Youtube
  13. 13. Future Trends & Market Demand  Aspirational trading up  Chinese buyers continuously look for products that:  have strong brand heritage outside of China  replace local brands that are not trusted (particularly if the end user is an infant or is elderly)  are innovative and novel  are lifestyle products (e.g. healthcare, vitamins and education)  are ‘natural’ alternatives to artificial products.
  14. 14. Summary  Despite a macroeconomic slowdown in China, online consumer spending is growing at close to 50 % a year, particularly in fast-growing second and third-tier cities.  Mobile is the most commonly used device for making online purchases.  Apparel is the most popular and widely purchased product. Packaged foods are the most frequent products people purchase online.  Some18 million Chinese are already paying premium prices for foreign products like food, cosmetics and luxury items. These are directly imported through ‘cross- border’ ecommerce trading platforms in seven cities.  The reduced import taxes and simpler quarantine and inspection procedures within these B2C cross-border channels presents new entry channels and opportunities to Finnish companies.  Digital marketing in China is dominated by local players.  China’s online consumers will continue to trade up and look for specialized imported products.

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