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- 2. From brick-and-mortartoclick-and-mortar
Beingoneofthefastestexpandingeconomiesinthe
world,China’sgrowthisechoedintheglobalonline
marketaswell— itisrightatthecenterofthee-com-
merceboomsweepingtheworld.AsperForrester,
ChinadisplacedtheUStobecometheworld’slargest
onlineretailmarketin2013,withtotalsalesreaching
USD307billion.ExceedingUSD453.61billionin2014,
thisfiguthisfigureisestimatedtocontinuegrowingatacom-
poundannualrateofabout20% everyyearprojected
toreachUSD1trillionby2019.
Inthisreport,welookatthetrendsprevalentinChina’s
e-commercesectorwhileanalyzingthestrategiesto
maximizeprofit.Thereportalsoprovidesadetailed
explanationofthee-commerceoperationmodel.
EYconductedastudytogainmarketinsightsand
identifybestpracticesinrelevante-commerce
industriesinChina.industriesinChina.
Source:UnderstandingChina’se-commercemarket,”ChinaInter-
netWatchwebsite,
http://www.chinainternetwatch.com/1306/Understanding-Chinas-
E-commerce-Market,accessed30March2015
In2010,
23% ofChina’s
urbanpopula-
tionshopped
online.
Thefigure
isexpectedto
goupto44%
(nearlydouble)
by2015.
“E-CommerceSalesinChinaWillReach$1TrillionBy2019ThanksToMobile,SaysForrester,”TechCrunchwebsite,http://techcrunch.com/2015/02/04/china-1trillion-ecommerce/,accessed30
March2015.
“ChinaOnlineShoppingMarketOver10%ofTotalRetailin2014”,ChinaInternetWatchwebsite,http://www.chinainternetwatch.com/12685/online-shopping-market-2014/,accessed30March2015“E-
CommerceSalesinChinaWillReach$1TrillionBy2019ThanksToMobile,SaysForrester,”TechCrunchwebsite,http://techcrunch.com/2015/02/04/china-1trillion-ecommerce/,accessed30March2015.
China rstandAsianext
Basedonthesurveyresults,theinterviewedexecu-
tiveshaveadoptedacountry-centrice-commerce
approachinChina.ThefocusislessonotherAsian
countries,oftenbasedonmarketreadinessand
infrastructureconstraints.Manyglobalcompanies
considerthat“ifwecandoChina,thentherestof
Asiaiseasy”.TheChinesemarketisalreadylarge
enoughtocapture.”JapanandKorearanksecond
andthird,respectively,asAsiancountriesthatare
e-commerceready.Theyalsohavecountry-centric
operationsduetolocallanguagepreference.Dueto
itssmallsize,Singapoitssmallsize,Singapore’smarketisnotthemain
focus;however,IndonesiaandMalaysiaarehigh
potentialmarkets.
Brandingandlearningon
third-partyplatforms
Retailersandapparelcompaniesarecompeting
fiercelyonthird-partye-commerceplatformslike
T-mall.Theyhavealowbargainingpowerwiththe
platformproviders.Lesswell-knownbrandshavea
hardtimegettingthethird-partysalesconsultants
tosupportinsellingtheirproducts,andarede-
pendentoncustomerreviews.Moreandmore
companiesarehiringtheexpertstoincreasecus-
tomertrafficandwritereviewsinordertoincrease
theirpopularity.Beingonthethirdpartyplatformis
thefirststepforcompaniestolearnandbuildtheir
ownin-housecapability.Particularlywithapparel
brands,competitionissofiercethattheytrytoim-
provetheirbrandimagetodifferentiatethemselves
ffromothers.Sincetheyearnlowmargins,themain
purposeis“branding”anddrawingcustomersto
theirownwebshoporphysicalstore.
- 3. E-commercesuccessfactors
TheEYOperatingModelEffectivenessgroupinterviewed25seniorexecutivesofglobal
companieslocatedinChina.Fromtheoutcome,itappearsthat65% ofthecompanies
haveactivelyinvolvedglobalC-levelexecutivesintheire-commercestrategy.45% ofthe
companieshavethelocalmarketteamtodefinethestrategy.Newe-commercefunctions
arebeingintroducedwithdifferentmultidisciplinarybackgrounds,i.e.,salesandmarket-
ing,ITandprocurement.Thevaluedriverandthee-commerceexperiencedeterminethe
governancestructure.
Thewinningcombination— interviewfindings
Closecollaborationwiththird-partyplatformproviderstoensureaccuracyandconsistency
withbrandimagepresentation
Provisionforappropriatecompensationandinstallationofcontrolmechanismsatvarious
touchpointswiththecustomertoavoidpotentiallossofbrandvalueby3PLdelivery
Strategicdirectionandmanagementcommitmentratedmostimportantincaseofaself-
ownedwebshop
Merchandizingandpricingconsideredmostimportantwiththird-partyplatforms
Innovativecapabilitiestoprovide“talkoftown”experiences
Buildingofowndatabasewithcorrectandtrustworthycustomerdata
Accordingtoa2015workreportissuedbytheChineseGovernment,thereare649millioninternetusers
and557millionpeoplesurfingtheinternetthroughmobilephoneswithaninternetpenetrationrate
(estimatedtotalnumberofinternetsubscribersonthetotalpopulationofacountry)of85.8%.
E-commercegrowthiscloselylinkedwiththenumber
ofpeopleconnectedtotheinternet.
Internetpenetration
Thephenomenale-commercegrowthcould
nothavebeenpossiblewithoutacatalyst—
thesmartphone.Thefirsthalfof2014saw
26% ofChina’sonlinepurchasesbeingmade
throughits780millionactivemobiledevices.
Ofthose,58% wereregisteredinlower-tier
cities,wheretheusers’firstexperienceofthe
inteinternetwaslikelytobeonacellphone.
Indeed,therehasbeenastrongcorrelation
betweenonlineshoppingandsmartphone
penetrationsince2011.Fasterandcheaper
4Gnetworkconnectionsshouldhelpacceler-
atemobileusage.
Chinaisattheforefrontof
mobileinternetdevelopment
Source:“TrendsinChina’sE-CommerceMarket,”ChinaBriefingwebsite,http://www.china-briefing.com/news/2014/06/04/trendschinas-e-
commerce-market.html,accessed30Mar2015.
Chinaiscurrentlyexperiencing
hugegrowthine-commercewhich
isestimatedtobeworthUSD540
billionby2015.By2020,the
incincreasewillbemorethanthe
combinede-commercegrowthin
theUS,theUK,Japan,Germany
andFrance.
China’sinternetisagiant
shoppingmall
- 4. E-commerceupswing
“E-CommerceSalesinChinaWillReach$1TrillionBy2019ThanksToMobile,SaysForrester,”TechCrunchwebsite,http://techcrunch.com/2015/02/04/china-1trillion-ecommerce/,accessed30
March2015.
“ChinaOnlineShoppingMarketOver10%ofTotalRetailin2014”,ChinaInternetWatchwebsite,http://www.chinainternetwatch.com/12685/online-shopping-market-2014/,accessed30March2015.
“E-CommerceSalesinChinaWillReach$1TrillionBy2019ThanksToMobile,SaysForrester,”TechCrunchwebsite,http://techcrunch.com/2015/02/04/china-1trillion-ecommerce/,accessed30
March2015.
China’se-commerceindustrywillaccountfor18% ofthecountry’sretailsalesin2018,up
from8% in2013.Itprojectsthatduringthisperiod,theindustrywillcontribute30%–40%
ofincrementalretailsalesannually,becomingoneofthekeydriversinChina’sUSD3
trillionconsumptionmarket.
China’sfavoritewebsites
Source:“Top10mostpopularonlineshoppingsitesinChina,”ChinaDailywebsite,http://www.chinadaily.com.cn/business/2014-06/05/content_17563442.htm,accessed30
March2015.
E-commercegrowthiscloselylinkedwiththenumberofpeopleconnectedtotheinternet.
China’sbiggestonlineshoppingevent
ChineseSinglesDay
(11/11)isChina’sbiggest
onlineshoppingdayof
theyear.
Itismuchbiggerthan
America’sCyberMonday.
In2014,
Alibaba.comreporteda
recordsaleofUSD9.3
billion— a62% rise
fromthepreviousyear’s
USD5.75billion.
Source:“AlibababreakssalesrecordonChina’s‘SinglesDay’,”CNETwebsite,http://www.cnet.com/news/alibaba-breaks-singles-daysales-record/,accessed12March2015.
Deliveringontoday’scustomerexpectationsisforcingretailerstofocusonaholisticexperienceacross
allcustomertouchpoints.EYtunesintothetrendsandcansupporttheclientsinidentifyingthemarket
niches,keycustomersegments,andintegratingthedifferentomnichannelsandITsystems.
“China’seCommerceRevolution,”MorganStanleywebsite,http://www.morganstanley.com/ideas/china-e-commerce-revolution/,accessed30Mar2015.
“eCommerce:China’sConsumptionGrowthEngine,”Barron’swebsite,http://online.barrons.com/articles/ecommerce-chinasconsumption-growth-engine-1415323378,accessed25March2015.
