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HK-PRI002-130225-P1
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E-commerce in China
Milan, 8 April 2013
HK-PRI002-130225-P2
Within the 1.3 Billion population in China, 40% are internet users and
20% are e-commerce users, which grows at >20% per year
600
500
400
23%
300
200
564
513
457
161
194
242
100
0
2010
2011
The e-commerce
transaction amount
was 968 billion
Euros in 2012
2012
Number of internet and e-commerce users in China (mn)
E-commerce
users
CAGR, ecommerce users
Internet users
The average time
that a Chinese
internet user
spends online
was 20.5 hours
per week in 2012
Source: CNNIC
2
HK-PRI002-130225-P3
China is the second largest e-commerce market in the
region
E-commerce sales
in Asia Pacific, 2012
E-commerce sales worldwide,
2012
284
North America
259
Asia Pacific
228
Western Europe
99
Japan
86
China
Australia
28
Eastern Europe
32
Korea
16
Latin America
29
India
9
Middle East &Africa 16
Others
Euro, billions
20
Euro, billions
Note: e-commerce sales is B2C figure but includes ‘Business” occurred over C2C platforms
Source: emarketer
3
HK-PRI002-130225-P4
Alibaba is a dominant player in China e-commerce market
E-commerce retail market, 2012
15%
12%
40%
Taobao
Tmall
360 Buy
Others
33%
Total market transaction value = 86 billion euros
Tmall and Taobao, the two major
players in B2C and C2C markets, both
belong to Alibaba Group
Source: CNNIC, CECRC
4
HK-PRI002-130225-P5
The consumer e-commerce market is expected to grow at 40% per
year and exceed 300 bn Euros by 2016 largely driven by B2C
E-commerce B2C and C2C sales, Euro bn
CAGR,
2012-2016
400.0
350.0
C2C
B2C
41%
342
300.0
279
250.0
214
141
150.0
86
100.0
0.0
30%
49%
61%
54%
200.0
50.0
51%
59%
65%
44
75%
25%
70%
30%
35%
2011
2012
2013E
41%
2014E
46%
2015E
2016E
Source: iResearch, emarketer
5
HK-PRI002-130225-P6
Key categories that the Chinese buy online are clothes,
shoes and 3C
Market share, 2011
Clothes &
shoes
3C
% of e-commerce buyers
Clothes and
shoes
47.20%
26.70%
18.20%
Cosmetics
Books
3.10%
3C
68.1%
38.6%
books
32.6%
cosmetics
30.0%
4.90%
Others
Food
20.8%
Note: 3Cs include Computer, Communication and Consumer Electronics
Source: iResearch
6
HK-PRI002-130225-P7
Annual spending per Chinese e-commerce user is still lower
than counterparts in other areas
14% of
2,790
22% of
1,784
390
36% of
1,074
29% of
1,356
Note: e-commerce spending is B2C figure but includes “Business” occurred over C2C platforms
Source: emarketer
7
HK-PRI002-130225-P8
Consumers can be driven in mass to buy online with the
right promotional effort
11.11 is
• Named to be the “Singles’ Day” (Guang Gun Jie) by the
Chinese youth as these four numbers mimic four single men
• However Tmall and Taobao has made successful marketing
campaign and made the Singles’ Day into “Shoppers’ Day”
Transaction amount on Tmall after sales started on
2012/11/11, 00:00
Total
transaction
value of Alipay
Out which Tmall:
Out which
Taobao:
10 minutes
31 million
euros
8 hours
617 million
euros
End of day
1,628 million
euros
Source: Tmall official blog, Value Partners Analysis
8
HK-PRI002-130225-P9
Platform, payment and logistics are indispensable elements
in e-commerce business
Platform
Information flow
• Launch of
independent platform
can maintain the
flexibility of marketing
strategy
• Replying on thirdparty platform can
save initial cost
Payment
Capital flow
• Third-party payment
gateway is widely
used in C2C and
B2C in China
• Yet due to the
relatively slow growth
of online payment,
cash upon delivery is
prevalent too
Logistics
Goods flow
• Apart from the stateowned Chin Postal,
logistics in China has
been fragmented
• Some large logistics
companies have
started their own ecommerce business
Source: Value Partners Analysis
9
HK-PRI002-130225-P10
After harvesting the early investment into vertical
integration into payment system, Alibaba is eyeing logistics
Platform
-96% market share
in C2C market
-52% market share
in B2C market
“Will not enter
logistics!”
--2001
Payment
-67% of online
payment market
-Alibaba started
investment in this
third-party payment
tool in 2004, before
e-commerce took
off in China
Logistics
-Invested in two
logistics companies
in 2010
-RMB100billion was
spared in 2011 to
develop logistics
system
“Taobao ‘Big
Logistics’ plan
launched!”
--2010
Source: CECRC, Alibaba official website
10
HK-PRI002-130225-P11
Typical operating models of e-commerce for foreign
retailers in China
1
Launch flagship stores on large
e-commerce platforms
Uniqlo’s flag ship
store on Tmall
2
Run an independent online retail
store
Zara’s stand-alone
web store in China
3
Establish presence through their
retail partners
Dsquared2 creates
existence via their
partner Yoox
Source: Tmall, Zara, Yoox, Value Partners Analysis
11
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For a foreign player, the challenges mainly lie within the
choice of platform and logistics
•
Building your own platform?
 High control
 Consumer confidence
 Require dedicated resource
•
Using third party platform?
 Quick to market
 Risk of look-a-likes
 Low level of customization
Platform
Payment
•
Logistics
•
•
Getting a third-party payment license is extremely
complicated for foreign players
 E.g. PayPal is still waiting to get its license
approved
Building your own logistics?
 High control on service level
 Expensive and time consuming
Using of third party logistics?
 Easy to set up
 Uncertainty of service level
62% of users list
“long delivery time” as
most unsatisfying part
of online purchase
Source: CECRC, Value Partners Analysis
12
HK-PRI002-130225-P13
Foreign brands take different approaches in opening their
online stores building on their physical retail network
Time of online shop opening
April 2009
September 2012
Online platform
Flagship store on
Tmall and standalone online shop
with interconnected
backend
Stand-alone online store
Payment
Accepts all
common
payments
including cash
deposit at China
Post branches
Fewer methods of
payment accepted:
Alipay, mainland
online banking and
international credit
cards
Logistics
Centralised
logistics centre
Source: Tmall, Uniqlo and Zara websites
Delivered by
partner logistics
company regional
offices
13
HK-PRI002-130225-P14
Interactivity formats such as social media are increasingly important
and converging
Selected core platforms
30% of the
internet users
Forum/ BBS
62 % of the
internet users
36 % of the
internet users
Online
shopping
80 % of the
internet users
Blog/
personal
space
Online
Video
Micro-blog
Tekst
(eg Twitter)
Social
networking
sites
Search
engine/
Portal
Instant
messaging
66% of the
internet users
40% of the
internet users
47 % of the
internet users
79 % of the
internet users
Interaction touch points
Source: CNNIC
Receiving touch points
14
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The new e-cosystem is moving from a controlled ‘push’ system to an
uncontrolled interactive system made up of a myriad of influencers
Controlled brand ecosystem
New interactive e-cosystem
Press
In store
activities
TV
Shopping
engines
/ comparison
sites
Online
forum
Brand web
presenter
Interactive
promotions
Social media
Brand
internet site
Celebrity
endorsement
Events
 Highly controlled / controllable brand environment
 Mostly push communication
Key
opinion
forums
Friends
Opinion
websites
 Greater range of influencers
 Interactive environment
 Low ability to control
15
HK-PRI002-130225-P16
The mental model of shopping has changed fundamentally
and forever
Comparison of traditional vs. new mental model
The traditional 3-step mental model
Stimulus
A new mental model
Stimulus
Zero Moment
of Truth
1st Moment of
Truth (Shelf)
2nd Moment of
Truth
(Experience)
1st Moment of
Truth
(Shelf & online)
2nd Moment of
Truth
(Experience)
16
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Convergence of social media with e-commerce is emerging – e.g. Mogujie
allowing users to share photos and provides links to online stores
Account tool bar
Channels by topic: clothes, shoes,
bags, etc.
Social shopping example
Live feed from
users
Smart phone apps
Link to account of
cover page model
Link to online
store
Different types of
products
Other users like
the products
Comments and
reviews
Source: Mogujie website, Value Partners Analysis
17
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Key success factors for retail brands to establish ecommerce in China
1
Build or partner with the right platform
2
Make payment methods as diverse (and locally adapt) as possible
3
Work with reliable logistics partner(s)
4
Build physical retail presence first and create multi-channel experience
5
Have exclusive to online platform items or promotions
6
Build social media presence in Chinese platforms
18