Prestudy China eCommerce Growth, 27.10.2015

1. China’s ecommerce
boom opens up for
new opportunities
INNOVATION BUSINESS ACCELERATOR
ERIC CHENG, ERICC@INNOVBA.COM
OCTOBER 22, 2015

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. 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. 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. 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. Connected Consumers –Product
Categories

7. Connected Consumers – Information
Channels

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. Cross-Border vs Ordinary Trade

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. 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. 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. 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. 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.