Exploring eCommerce opportunities in China
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Exploring eCommerce opportunities in China
- 1. Exploring eCommerce opportunities in China Emerging trends and channels China Digital Conference 2 June 2016 Ben Franzi General Manager eCommerce Platforms & Digital
- 2. Page 2 Worldwide B2C eCommerce $57.7bn Latin America $482.6bn North America $347.4bn Western Europe $58.0bn Central & Eastern Europe $33.8bn Middle East & Africa $525.2bn Asia Pacific This year, worldwide B2C eCommerce sales are set to total $2 trillion USD
- 3. Page 3 Populations in Asia to stimulate growth and trade As well as a growing middle-class, large and dynamic populations with high internet usage and reliable supply chains are likely to experience rapid eCommerce growth. China: 1.4 billion India: 1.3 billion Indonesia: 255 million Australia: 24 million Philippines: 100 million Japan: 123 million Singapore: 5.4 million Source: InternetLiveStats, InternetWorldStats, Government data (Singapore); all Q1 2015. Wikipedia for population data. 86% 89% Average global internet average Japan 28% 81% 19% 42% 47% China India 44% Philippines Singapore Australia Indonesia Asia Pacific online spend: $525.2bn National internet usage figures% Populations
- 4. Page 4 Tourism Government incentives & Customs involvement eCommerce leadership Much of China’s eCommerce growth is driven by increased consumer purchasing power and government policy change China’s booming eCommerce market Growing middle-class RMB (¥) appreciation
- 5. Page 5 By 2030, China’s middle class is projected to equate to 93% of the urban population Projected China urban households (millions) by income groups Source: ANZ Research, Business Insider Australia Chart depicts expected changes to composition of Chinese household wealth from 2015 through to 2030 China’s growing middle class is a key driver of Asian eCommerce
- 6. Page 6 Food and wine Clothes & accessories Home Health & skincare Baby food & products Dairy Top imports from Australia – Quality, provenance and iconic Chinese eCommerce preferences play to Australian advantages
- 7. Page 7 Despite this growth, there are still many barriers to market entry that need to be recognised so that your business can succeed • Accessing customers • Legislation • Language & culture • Logistics Barriers Overcoming barriers to growth
- 8. Page 8Page 8 Key policy changes: • Types of taxes • Commodities list • Value limits • Tax rates • Clarified tax paying subject Changes to China’s import tax laws From 8 April 2016, goods purchased through online marketplaces will be treated as imported goods – carrying tariffs, import VAT and consumption tax (in some cases).
- 9. Page 9 Sending overseas, simply Introducing our new international products What’s new? • Easy options • Enhanced security • Flexible extras • Less paperwork • Competitive pricing to popular export destinations – including China (Zone 2) Find out more at: auspost.com.au/sendoverseas
- 10. Page 10 • Postal and commercial solutions • Marketplaces • Sai Cheng China JV • Hong Kong & Asia supply chain (incl. distribution & warehousing) • Payment solutions International - Powered by Australia Post Our cross-border solutions can open doors to new opportunities in China Choosing distribution channels to suit you
- 11. Page 11 Third-party marketplaces can be an easier way to sell your products Marketplaces • One-stop shop – wide product variety • Generates strong consumer confidence and trust • Broad reach and increased revenue opportunities (for merchants) Why marketplaces?
- 12. Page 12 How we help businesses sell into China Tmall (B2C) auspost.tmall.hk 1688 (B2B) auspost.1688.com JD.COM (B2C) auspost.jd.hk
- 13. Page 13 A snapshot of brands selling into China via our Australian flagship store on Alibaba’s Tmall marketplace - auspost.tmall.hk Brands already trading on Tmall
- 14. Page 14 Alibaba’s 2015 Singles’ Day sales grew 60% YOY to net USD $14.3 billion (AUD $20 billion) 2015 Alibaba Singles’ Day – in numbers: China Singles’ Day – Biggest annual online day (5x Black Friday)
- 15. Page 15 • Exciting time for Australian businesses • Huge opportunities • We have the solutions to help you succeed in China Summary
- 16. Thank you. Questions? For more information: Ben Franzi ben.franzi@auspost.com.au
Editor's Notes
- Good morning It’s a pleasure to be here at the China Digital Conference today. And I thank you for taking time out of your schedules to join us today. My name is Matt Godfrey and I head up Australia Post and StarTrack’s Parcels Strategy team. Acknowledge traditional owners: I'd firstly like to acknowledge the Wurundjeri (Woo-run-jerry) people, the Traditional Custodians of the land on which we are gathered, and pay my respects to their Elders – both past and present. Today I want to talk about some key trends in our industry and to focus on the Asian opportunity for Australian businesses
- This year worldwide B2C eCommerce sales are set to total $2 trillion USD signalling the irreversible extent to which eCommerce is changing the way we shop and consume. Global eCommerce spending – by region: $525.2bn Asia Pacific $482.6bn North America $347.4bn Western Europe $58.0bn Central & Eastern Europe $57.7bn Latin America $33.8bn Middle East & Africa In the Asia Pacific region alone, eCommerce sales have reached $525.2 billion, highlighted by rapid growth in the Chinese market. Of course, these is the area I want to focus on over the next few slides…..
- With large and dynamic Asian populations likely to propel further consumption and stimulate trade in the region, this will continue to present significant growth opportunities for Australia’s online retail industry. While online retail in Australia continues to grow, the rate of growth has slowed dramatically according to recent NAB research. By contrast, online retail in China continues to experience rapid growth, exceeding RMB 2.8 trillion in gross value, a 48.7 percent jump on the prior year. This number is expected to grow even higher given the number of Chinese people expected to come online in the next year. The China Internet Network Information centre estimated that more than 300 million Chinese were shopping online in 2014.The Chinese government target is to connect 1.2bn people (85% of the population) to 3G or 4G mobile Internet by 2020. Australia is perfectly positioned to be a part of this market opportunity.
- China is poised to become the world’s top import market for online goods in 2018 There are a number of key drivers of the growth in China’s online markets: Growing middle-class: McKinsey estimate that 14 percent of China’s households can be defined as mainstream (incomes of US$16k to $34k). This is expected to reach 54% of households by 2022 WHICH I WILL GO INTO IN MORE DETAIL ON THE NEXT SLIDE. Chinese overseas trips: Drives first hand experience of quality products from overseas Higher value of the Yuan Making it cheaper to buy from overseas Government incentives and active involvement by Chinese Customs Free Trade Agreement Customs improving the processes for the import of goods Strength of eCommerce businesses Particularly Alibaba Group and JD.COM
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- The shortcomings of traditional retail are another factor driving ecommerce Limited range in inland provinces and smaller towns and cities Congestion in tier 1 cities makes online shopping more convenient And well-publicised concerns over unsafe and counterfeit products have undermined trust in many locally-produced product Pushing consumers towards goods with a strong reputation in overseas markets and reputable sales channels A typical online Chinese buyer is female, under 30, earning AUD $25,800+ p.a. Coupled with the growing Chinese consumer demand for quality Australian products, there are a wealth of opportunities for local businesses looking to grow their presence in China. Chinese buyers are price-conscious, online-savvy shoppers. They most discerning shopppers will take their time to hunt for a good deal and purchase authentic goods with high quality control. These preferences play to particular Australian product strengths e.g. Health and Nutraceutical's (e.g. Swisse and Blackmores) Skincare and cosmetics products Milk powder and dairy formula (e.g. Bellamys) Food and wine (e.g. Arnott’s biscuits and China’s Weet-bix kids) Clothing and homeware (especially woollen products like Ugg boots) OF COURSE A SECURE SUPPLY CHAIN TO ENSURE AUTHENTICITY AND PURITY IS CRITICAL
- There are many challenges faced by Small and Medium businesses when exporting to China. These include: Accessing the market and customers – Which can boil down to difficulties creating local networks and understanding the local market. The markets in China are many and varied Legislation and compliance issues and costs – Everything from red tape to the role of government in business can be difficult to decipher. Language & culture - which can make business negotiations and building new partnerships difficult. Logistical barriers – Getting your products into China, through quarantine and health checks, meeting labelling requirements and finding the right distributors and freight handlers to work with. HOW TO OVERCOME THESE BARRIERS: Have an adaptive strategy Adaptability is crucial in China – develop products that meet the needs of the market and continue to evolve them Consumer attitudes in China continue to shift on a regular basis Regularly update your business strategies to match competitor, customer, economic and regulatory changes Maintain a relationship with the government Local regulations and local enforcement of central regulations can differ across regions Maintaining positive and sustainable relations with government departments will help you stay on top of new regulatory changes Flexibility and persistence There is no single business model that is key to unlocking the China market The different markets, geographies and industries within China are diverse Properly localising your products and services for the China market takes considerable resources and research.
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- Our business can help you and your clients and customers successfully take their products to China Importantly we can offer secure channels to market which are so critical to Chinese consumers Our solutions leverage Our postal and commercial capabilities Our marketplace partnerships Alibaba, Tmall and JD.com Our joint venture with China Post, Sai Cheng Our payment and other capabilities Our strategy is focused on developing compelling outbound solutions to position our business as Australia’s preferred eCommerce delivery partner to the world – and Asia in particular – for consumers and businesses.
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- Since signing the joint agreement just over a year ago: Australia Post now provides 40 Australian merchants with a virtual storefront at auspost.tmall.hk reaching more than 300 million Chinese consumers. They have an average transaction growth of 36% over the past 12 months. So while our service is still in its infancy, by connecting local businesses with Chinese consumers… We’re forging a new pathway for Australian businesses to sell into China… …Through one of the country’s most reputable and commercially-successful channels… Potentially reaching many more millions of consumers. Tmall - China’s largest online B2C marketplace dedicated to domestic and international merchandise. - more than 255 million registered users - 70,000 shopfronts. Tmall Global allows foreign merchants to establish an official shopfront without needing a Chinese business license. They ensure consumer confidence in merchandise authenticity, by only allowing shopfronts on Tmall to be operated by brand owners or their licensed agents. 1688 1688.com is a business-to-business (B2B) online marketplace, operating wholly in Chinese. It was established in 2010 by Alibaba to help foreign businesses sell their goods in China at wholesale prices. JD.COM Our JD site also went live earlier this month, with a number of customers now trading online.
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