Online retailing in China

Online retailing in China
July 2012
Li & Fung Research Centre
1
In this issue:
I. Overview of China’s online retail market
II. Competitive landscape
III. Trends and developments
IV. Challenges
V. Government initiatives
2
Overview of China’s
online retail market
3
Online retailing registers stunning growth
Transaction value of online retailing market, 2006-2015e
129%
3,000
113%
2,500
2,551
105%
2,012
2,000
75%
68%
1,500
774
1,000
500
53%
1,184
26
56
128
263
2006
2007
2008
2009
1,569
33%
28%
27%
2013e
2014e
2015e
461
0
2010
2011
Transaction value (billion yuan)
2012e
140%
120%
100%
80%
60%
40%
20%
0%
Yoy growth (%)
Source: iResearch
•
The transaction value of China’s online retail market* reached 773.56 billion yuan in 2011
(up by 67.8% yoy).
•
The market size of the online retail market in China is expected to exceed Japan in 2012, and
overtake the US to become the largest online retail market in the world by 2013 according to
iResearch.
* According to iResearch, scale of online retailing market refers to the total transaction value of consumer-to-consumer (C2C) and business-to-consumer (B2C) online
businesses. Scale of C2C online retailing market is calculated by the total value of purchases, excluding that on the B2C arm of C2C platforms. Scale of B2C online retailing
market has excluded payments of travel expense, air tickets and online bill payment services.
4
Share of online transaction in total retail sales still lags behind other
developed countries; yet, Chinese consumers shop more often than their
counterparts in developed economies
Share of online retailing among total retail sales in selected countries, 2011
0%
2%
4%
6%
8%
10%
12%
14%
United Kingdom
United States
Germany
Switzerland
Norway
Denmark
France
Sweden
China
Spain
Poland
Italy
Source: China Chain Stores and Franchise Association (CCFA), iResearch
•
In China, online retail sales accounted for 4.3% of the total retail sales in 2011, and are set to reach 6.3%
by 2015. The share of online transaction in total retail sales still lags behind that of other developed
countries. For instance online retail sales accounted for 12% of total retail sales in the UK, 9% in the US
and 9% in Germany.
•
Having said that, according to a PwC report*, Chinese consumers are more likely to shop online compared
to their counterparts in Europe and the US. Around 70% of the survey respondents in mainland China
shop online at least once a week, compared with around 40% in the US and UK, and around 20% in the
Netherlands, France and Switzerland.
* PwC, “Customers take control: How the multi-channel shopper is changing the global retail landscape”, Dec 2011
5
Faster development of e-commerce in first tier cities (1)
Ranking of e-commerce development indexes* among prefecture or above cities in 2011
Rank
1
2
3
4
5
6
7
8
9
10
City
Rank
Guangzhou
11
Shanghai
12
Beijing
13
Hangzhou
14
Shenzhen
15
Suzhou
16
Nanjing
17
Jinhua
18
Dongguan
19
Wuhan
20
City
Chengdu
Ningbo
Wenzhou
Tianjin
Zhengzhou
Quanzhou
Chongqing
Qingdao
Fuzhou
Foshan
Rank
21
22
23
24
25
26
27
28
29
30
City
Xiamen
Taizhou
Jinan
Changsha
Jiaxing
Wuxi
Shenyang
Shijiazhuang
Xi'an
Putian
Source: Ali Research, Haitong Securities
* The e-commerce development index includes: (1) development scale index (no. of e-commerce companies and trading volume); (2) penetration index (per capita ecommerce companies and per capita trading volume); (3) business performance index (credit, activities, satisfaction of buyers and quality of e-commerce products); (4)
ecological index (coordination of e-commerce companies, logistic support, e-payment support and economic & technical levels and (5) growth trend index (e-commerce
companies and trading growth rate).
•
According to Ali Research, the top three cities in terms of e-commerce development are
Guangzhou, Shanghai and Beijing respectively, indicting that first-tier cities lead the way in
developing e-commerce activities.
•
It is believed that regional imbalance in online retailing is correlated with the development of
logistic infrastructure. In general, comparing with the lower-tier cities, first-tier cities have
better logistics infrastructure to support the robust development of online retail market. Still,
the huge number of orders generated by online retailing may pose significant challenges to
many logistics players, particularly the express delivery companies.
6
Expanding Internet population has been a key driver of the rapid
growth of online retail market
Million
Number of Internet users* and penetration in selected countries, 2009 and 2011
600
500
400
300
200
100
0
2009
2011
China
Penetration
(%) (2011)
38
India
Brazil
Russia
10
47
51
Indonesia United
States
13
80
Japan
70
Source: Boston Consulting Group
•
China has the largest online population in the world. China ’s Internet population reached
538 million as of June 2012; according to China Internet Network Information Center
(CNNIC). The Internet penetration rate of 39.9%. The growth has moderated after years of
rapid increase.
•
In 2011, the Internet penetration rate in China lagged behind the US, Japan, Russia and
Brazil; however, the number of Internet users topped among these countries.
* Internet users are defined as individuals aged 6 and older who went online in the past six months.
7
Expanding Internet population has been a key driver of the rapid
growth of online retail market (cont’d)
Number of online shoppers, transaction value of online retail market, and average online spending
per person in China, 2008-2015e
Year
Number of online
shoppers (million)
Scale
yoy growth
Transaction value
(billion)
Average online
spending per person
(yuan)
Number of online
shoppers
Transaction value
Average online
spending per person
2008
2009
2010
2011e
2012e
2013e
2014e
2015e
80.0
109.0
148.0
187.0
227.7
269.0
314.0
363.0
128.18
263.00
461.00
773.56
1,184.05
1,568.89
2,012.49
2,551.00
1,602
2,413
3,115
4,137
5,200
5,832
6,409
7,028
45.5%
36.3%
35.8%
26.4%
21.8%
18.1%
16.7%
15.6%
128.8%
105.2%
75.3%
67.8%
53.1%
32.5%
28.3%
26.8%
57.3%
50.6%
29.1%
32.8%
25.7%
12.2%
9.9%
9.6%
Source: iResearch
•
According to the CNNIC, the number of online shoppers reached 210 million (up by 26.4%
yoy) as of June 2012, accounting for 39% of China’s Internet population.
•
The volume of online purchase also increased significantly in 2011. The average online
spending per person in 2011 was around 4,137 yuan, up by 32.8% yoy. This was largely
attributed to the fact that consumers have been more familiar with purchasing online and
are confident in buying higher-priced products online.
8
Reasons for the fast growing e-commerce market
Attractive online
pricing
New product
categories sold online
(e.g. pharmacy, luxury,
real estate, etc.)
Growing popularity of
wireless devices
facilitate online
retailing
Expanding Internet
population
Increasing confidence
in online retailing
Traditional retailers set
up online stores
Advancement in IT
Better logistics
infrastructure
Social media platforms
provide enormous
opportunities
9
Profile of China’s online shoppers (1) – Gender and age
Gender distribution of online shoppers in
China, 2010-2011
Female,
48.30%
Male,
51.70%
Age distribution of online shoppers in China, 2010-2011
Male
Female
40%
35%
30%
25%
20%
15%
10%
5%
0%
2010
2011
Below
18
Source: iResearch
18-24
25-30
31-35
36-40 above 40
Source: iResearch
*Note: share calculated by the transaction value of orders placed
by different age groups of online shoppers
Gender
• Proportion of male and female online shoppers are similar.
• 51.7% of the online shoppers were male.
Age
• Over 60% of the China’s online shoppers aged 18-30 in 2011.
• In 2011, 33.6% of online shoppers aged 25-30; the share increased from 25.1% in 2010.
• More middle-aged users have started shopping online; they have strong consumption ability and
are more willing to pay for high-priced goods.
10
Profile of China’s online shoppers (2) – Income level
Income level distribution of online shoppers in China, 2010-2011
above 5,000 yuan
9.70%
13.70%
18.50%
17.30%
3,000-5,000 yuan
25.90%
23.20%
2,000-3,000 yuan
24.30%
27.30%
1,000-2,000 yuan
6.50%
below 1,000 yuan
2010
10.50%
12.00%
12.00%
none
Source: iResearch
2011
0%
5%
10%
15%
20%
25%
30%
Income level
• Over 50% of the online shoppers have income between 1,000-3,000 yuan in 2011.
• More people in the high-income group participated in online shopping in 2011. The share
increased from 9.7% in 2010 to 13.7% in 2011.
11
Apparel, footwear and bags is the most popular category consumer
purchased online in 2011
The most popular categories consumer purchased online, 2011
Cosmetics and
personal care
4.9%
Books/music/
movies and
videos 3.0%
Electronic
appliances
24.2%
Apparel,
footwear and
bags 26.5%
Others 41.4%
1
• Apparel, footwear and
bags
2
• Electronic appliances
3
• Cosmetics and personal
care products
Source: iResearch
12
Payment method
Online payment market breakdown, 2011
Yeepay, 3.00%
IPS, 2.70%
Others, 1.70%
Huifutianxia,
7.40%
99bill, 7.50%
Alipay, 49.00%
China
Unionpay,
8.40%
Tenpay, 20.40%
Source: iResearch
•
•
•
Cash on delivery (COD) is still the most common payment method.
According to CNNIC, as of June 2012, 187 million online shoppers used online payment
systems to purchase items online.
Among various online payment systems, Alipay is the preferred one and is frequently the first
option offered by leading online retailers.
–
According to iResearch, Alipay dominated the online payment industry with a market share of 49% in 2011.
13
Competitive landscape
14
C2C segment represents a dominant share;
yet, B2C businesses are gaining attention
Share of online retailing in terms of transaction value, 2009-2015e
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
7.80% 13.70% 23.20% 29.80% 33.80% 37.80% 40.70%
92.20% 86.30%
2009
Source: iResearch
•
•
•
2010
76.80% 70.20%
66.20% 62.20% 59.30%
2011
C2C
2012e
2013e
2014e
2015e
B2C
In 2011, C2C transactions amounted to 594.45 billion yuan, accounting for 76.8% of the total
transaction value of the online retail market.
The transaction value of B2C segment totaled 179.11 billion yuan in 2011, accounting for
23.2% of the total value.
It is expected that the share of B2C transaction will continue to increase steadily in the
future.
15
Some popular C2C and B2C websites in China
C2C websites
B2C websites
16
C2C market (1) – Market share
Market share of C2C market, 2011
Paipai
(拍拍網),
4.30%
Eachnet
(易趣網),
0.60%
Taobao
(淘寶網),
95.10%
Source: iResearch
•
C2C market in China is very stable.
–
–
Taobao (淘寶網) is the dominant player which accounted for 95.1% market share in 2011.
Although the growth of the C2C market has been slowing down, Taobao’s growth was still faster
than that of the industry, according to Credit Suisse.
Paipai and Eachnet shared the remaining market.
17
C2C market (2) – Statistics
Taobao.com
Eachnet.com
Paipai.com
•
•
Taobao is leading the market in terms of
number of daily unique visitors.
Paipai and Eachnet both lag quite far
behind in terms of daily visitors; for
Eachnet, the number of daily visitors has
been on a decreasing trend in the last
couple of months.
18
Source: Google ad planner, as of July 2012
B2C market (1) – Market share
Market share of B2C market, 2011
COO8 (庫巴網),
1.20%
51Buy (易迅網),
1.30%
Newegg (新蛋網),
0.80%
Others, 13.60%
360Buy (京東商城)
Amazon China (亞馬遜)
Yihaodian (1號店),
1.50%
Vancl (凡客誠品),
1.90%
Suning (蘇寧易購)
QQ Shop (QQ商城)
Dangdang (當當網),
2.00%
QQ Shop (QQ商城),
2.90%
Tmall (天貓), 51.00%
Source: iResearch
•
•
Dangdang (當當網)
Vancl (凡客誠品)
Yihaodian (1號店)
51Buy (易迅網)
Suning (蘇寧易購),
3.30%
Amazon China (亞馬
遜), 3.30%
Tmall (天貓)
COO8 (庫巴網)
360Buy (京東商城),
17.10%
Newegg (新蛋網)
B2C is the fastest growing but highly fragmented segment in China’s e-commerce market.
Retailers in the B2C segment can generally be classified into three groups:
–
–
–
Pure-click retailers such as Vancl (凡客誠品), a prominent online apparel player in China;
Multi-channel B2C retailers such as Suning (蘇寧易購), which has a large offline store network
of Suning Appliances (蘇寧電器); and
B2C online platform operators such as Tmall (天貓), the distinct leader in China’s B2C online
retailing market.
19
B2C market (2) – Top 10 B2C players in China in 2011
Top B2C players in China, 2011
Online retail
Rank
player
1
Tmall
2
360Buy
3
Amazon China
4
Suning
5
QQ Shop
6
Dangdang
7
Vancl
8
Yihaodian
9
51Buy
10 COO8
Category
天貓
京東商城
亞馬遜
蘇寧易購
QQ商城
當當網
凡客誠品
1號店
易迅網
庫巴網
Online superstore
Online superstore
Online superstore
Online superstore
Online superstore
Online superstore
Apparel
Online superstore
Home electronics
Home electronics
Transaction value in 2011 % yoy
(billion yuan)
growth
92.0
206.7%
30.9
202.9%
6.0
100.0%
5.9
490.0%
5.3
165.0%
3.6
57.1%
3.5
89.2%
2.7
235.8%
2.4
196.3%
2.1
320.0%
Source: iResearch
•
•
•
In 2011, the two largest B2C players were Tmall and 360Buy, followed by Amazon China and
Suning.
Suning is the only non-pure click B2C players among the Top 10 players in China 2011.
Most of the top players are integrated online platforms selling a large variety of goods; only a
few selling specialized products.
20
B2C market (3) – Statistics
Tmall.com
360Buy.com
Amazon.cn
Suning.com
Source: Google ad planner, as of July 2012
•
•
Tmall is the most popular B2C platform in terms of daily unique visitors.
The number of visitors of 360Buy has increased significantly recently, largely attributed to the
launch of its promotion campaign during its anniversary celebration in June 2012.
21
B2C market (4)
• China’s B2C market is very fragmented. According to the China Chain Store
and Franchise Association (CCFA), most of the B2C platform players are
still losing money.
– For instance, 360Buy was reportedly incurred a net loss in 2011 (a negative profit margin
of 5%); Coo8 also incurred a net loss of around 400 million yuan in 2011; and Dangdang
encountered a net loss of 284 million yuan in 2011.
• Having said that, it is believed that the B2C market has a much brighter
development prospects than the C2C market due to the following reasons:
– Consumers generally demand better product/service quality in B2C platforms than in
C2C platforms.
– B2C players usually provide better service than C2C.
– An increasing number of C2C individuals and SMEs begin to migrate their businesses to
B2C platforms.
22
B2C market (5) – Comparison between selected B2C players
Tmall
360Buy
Amazon China
Suning
√
√
√
√
- online payment systems
√
√
√
√
- online banking
√
√
√
√
- credit card
√
√
√
√
Self-owned delivery system
x
√
√
√
Third-party delivery services
√
√
√
√
Invoice
√
√
√
√
7 days
7/15 days
30 days
7/15 days
√
√
x
√
Cash on delivery
Payment method
Free return/ exchange policy
Mobile client
Source: Li & Fung Research Centre, company websites
23
Trends and developments
24
1. Traditional retailers increase investment in online operations
Number of retailers among the Top 100s with
their own online stores, 2009-2012
70
60
50
40
30
20
10
0
59
52
31
14
2009
June 2010
June 2011
As of date
Source: CCFA
•
Retail format
Department store
Supermarket / hypermarket
Electronics specialty store
Others
Total
Number of retailers
with own online
stores
26
22
5
6
59
Source: CCFA
59 of the top 100 chain retailers (the Top 100s) have launched their own online stores as of June 2012 (see
Appendix). The number has increased significantly since 2009. However, the majority of the top online
retail players in China are still pure-click players.
–
–
–
•
June 2012
Number of retailers among the Top 100s with
their own online stores by retail format, 2011
32 of them provide national delivery; while 27 only provide regional delivery services.
34 of them support cash on delivery (COD) payment method.
Among all, only two partner with other B2C platforms; while the rest set up their own online stores.
Integration of online and offline business operation is getting popular. On the one hand, traditional
retailers are going online to extend consumer reach; on the other hand, online retailers are launching
offline stores to enhance consumer shopping experience.
25
1. Traditional retailers increase investment in online operations
(cont’d)
Some advantages of launching online
platforms…
Yet, not many are successful at the
current stage…
Examples:
Why?
•
•
Many traditional retailers are not familiar
with selling online, posing challenges for
their online businesses to breakeven.
•
Not many players can develop a successful
online platform, many of them just act as
“online showroom”.
•
Many traditional retailers have no
competitive edge going online in terms of
product and price.
•
Target customers of online and offline
shops are different. Going online can
extend the customer base and capture
more customers.
Online technology can enhance shopper
experience
–
e.g. Use mobile apps to check inventory
26
1. Traditional retailers increase investment in online operations
(cont’d)
• There is an increasing trend for foreign retail players to enter the China
online retailing market by acquiring stakes in big local players.
– Wal-Mart acquired a minority stake in Chinese online grocery store Yihaodian (1 號店) in
May 2011; in February 2012, Wal-Mart announced a further increase in stake in
Yihaodian to approximately 51%.
– Macy’s, a leading US large department store operator, has acquired a USD 15 million
stake in Chinese online retailer VIPStore. The deal will allow Macy’s to sell merchandise
through a dedicated section on Omei.com, a luxury website operated by VIPStore.
27
2. B2C retailers expand product categories
• Most B2C operators in China have low profit margins. To reap more
profits, some vertical B2C operators have expanded their product
categories, hoping to draw more traffic, improve margin and increase
economies of scale.
• Some examples include:
–
–
–
–
Suning launched its online book channel in October 2011
Dangdang set up its electronic book platform in December 2011
360Buy started its hotel reservation services in February 2012
Tmall re-launched its pharmaceutical channel in February 2012
28
2. B2C retailers expand product categories (cont’d)
Categories offered in selected B2C websites (as of July 2012)
Menswear
Womenswear
Children's wear
Maturity and Baby
products
Sportswear
Underwear
Footwear
Cosmetics
Home electronics
Homeware
Food
Book
E-book
Online travel
Airline ticket
Movie
Real estate
Pharmacy
Healthcare
Tmall
√
√
√
360Buy
√
√
√
Amazon China
√
√
√
Suning
√
√
√
QQ Shop
√
√
√
Dangdang
√
√
√
Vancl
√
√
√
Yihaodian COO8
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Source: Li & Fung Research Centre, company websites
29
3. Migration to open platform
•
Major vertical B2C companies are transforming into B2C e-commerce platforms. They allow
third parties to sell their goods on their platforms; the platforms will provide logistics,
warehouse and even after-sale services for the third parties.
•
The platforms charge credit deposit, entry fee, annual fee, technology service fee, advertising
and charging transaction fees, etc.
•
Major advantage: companies can easily expand product categories without increasing capital
requirements.
•
Tmall, QQshop, 360Buy, Dangdang and Amazon China, Suning are some of the platforms that
open to third parties.
30
3. Migration to open platform (cont’d)
Example of Tmall
•
In September 2011, Tmall signed an agreement with 38 e-commerce companies, including Yaodian100,
Coo8, Okbuy, Letao and Tiantian. These e-commerce companies have established their own online flagship
stores on the Tmall platform.
–
e.g. Redbaby on Tmall: http://redbaby.tmall.com; Coo8 on Tmall: http://coo8.tmall.com/
38 vertical websites signed agreement with Tmall
3C
Cosmetics
Apparel
Food
Coo8
newegg
51Buy
Lusen
Jumei.com
lafaso.com
Tiantian.com
Yihaodian.com
homew.com
vcotton.com
VJIA.com
La Miu
crucoo.com
Nop
menglu.com
m18.com
uya100.com
quwan.com
jiuxian.com
Footwear
Maternity
Luxury goods
Okbuy
letao.com
s.cn
xijie.com
Redbaby
Leyou
Mamabkoo.com
yintai.com
VIPshop.com
xiu.com
ihaveU.com
shopin.net
vipstore.com
d1.com
xdsc.com
vipku.com
luxstore.com
Source: Credit Suisse, company website
31
4. Players explore the potential of private labels and proprietary
brands
•
•
Most B2C operators in China have low profit margins.
Some players are exploring the potential of private label products and
proprietary brands to improve their margins.
–
Dangdang has launched its private label (當當優品) in May 2012. The company hopes
that its private label can achieve 100 million yuan sales revenue at the end of 2012,
accounting for 20% of the total revenue of Dangdang. Its product categories covered
apparel, homeware, bedding and cushions, etc.
32
5. Mobile commerce is fast emerging
Market size of mobile retailing, 2009-2015e*
350
304.95
300
Billion yuan
250
188.55
200
150
114.28
100
55.78
50
0.53
2.22
11.46
2009
2010
2011
0
2012e
2013e
2014e
2015e
Source: iResearch
* Figures for 2012-2015 are estimated by iResearch
•
With the growing popularity of wireless devices and mobile phones, m-commerce has
expanded rapidly in China.
–
•
Online transaction through mobile purchase was estimated to reach 11.46 billion yuan in 2011, five
times more than the transaction value in 2010.
Many retailers develop application program on wireless devices to
facilitate transaction on those devices.
33
6. Some players increase investment in e-logistics infrastructure
Build own distribution centers and/ or logistics facilities
• Delayed shipment of goods still bothers many online retailers in China. To solve
the problem, some online retailers have opted for building their own distribution
centers to enhance logistics efficiency. Some examples include 360Buy,
Dangdang and Amazon China.
Comparison on number of warehouses of
major B2C platforms
•
Some online retailers have established other
logistics facilities.
–
–
–
•
Vancl, a pure-click apparel retailers, has established
its own express delivery company, Rufengda
to provide last-mile delivery services to its customers.
360Buy, Dangdang and Amazon China also have their
own logistics teams and warehousing facilities.
Suning is reportedly going to establish 12 regional
automatic warehouses within two years.
B2C platform Number of warehouses
360Buy
13
Dangdang
10
Amazon China
11
Source: Credit Suisse, China Wuliu.com, 21st Century,
company data
Many online retailers see the provision of logistics services as a key
differentiator. However, some industry watchers are concerned about the lack of
know-how of China’s online retailers in warehousing, sorting, pick and pack, and
distribution. Shortfall of e-logistics professionals is another problem.
34
6. Some players increase investment in e-logistics infrastructure
(cont’d)
Set up self-pick points to facilitate last mile logistics
• An increasing number of online retailers have set up self-pick points in recent years due to
high door to door delivery cost.
–
–
•
Some examples include:
–
–
•
Dispersed delivery locations may involve high transportation and storage costs.
Couriers have to make multiple visits if receiver is not at the delivery address.
Dangdang announced in July 2012 that it would set up 120 self-pick points in 9 major cities, including
Beijing, Shanghai and Guangzhou, to facilitate the “last mile” logistics.
360Buy also set up self-pick points in metro stations in Beijing in early 2012. It also has many selfpick points* in major cities such as Beijing, Shanghai, Guangzhou, etc.
Apart from building their own self-pick points, some online retailers may ride on the widespread network of existing partners. Convenience stores or metro stations, for instance, can
serve as convenient self-pick locations. As such, online retailers can save the costs for
developing their own networks.
* List of self-pick up points of 360Buy: http://help.360buy.com/help/question-64.html
35
7. Some logistics companies enter the online retail market
• While a number of leading online retailers have started to provide
logistics service to customers, some logistics companies have ventured
into online retail operation.
– SD Express, one of the largest courier companies in China, launched a new ecommerce website, ShunFengYouXuan (順豐優選) (http://www.sfbest.cn/) in June
2012. The website focuses mainly on high-end food category.
36
8. Shut down of many non-profitable e-commerce websites
•
In 2011, many e-commerce websites were shut down due to difficulties in raising finance.
Many of them had long been competing on price and kept losing money.
–
–
–
According to Lingtuan.com (領團網), 33.5% of the group buying website have been shut down by end-2011;
Luxury B2C platforms such as http://l.163.com (網易尚品) and http://huha.com (呼哈網) were shut down in
December 2011;
Integrated B2C platform http://pinju.com (品聚網) was closed in January 2012;
•
According to China Venture, investments from venture capitalists in e-commerce websites
have decreased tremendously since 2H11. In 1Q12, VC/PE investments in e-commerce
websites in China amounted to 725 million USD, down by 57.1% yoy.
•
Some big players in the market also cannot survive as a result of adopting the wrong strategy
in China. For instance, many people attributed the failure of “Tao Japan” (淘日本) and
“Rakuten China” (樂酷天) to the minimal localization efforts these companies had made.
•
It is expected that weak players would continue be forced out of the market and the market
will further consolidate in coming years.
37
9. Price wars are still commonplace; yet, some online players start to
differentiate by offering other value-added services
•
Price-cutting promotions are very common among B2C players.
–
–
•
For example, Amazon China launched a two-week heavy price cutting promotion in May 2012. Over 100,000
products, varying from 3C goods, home appliances to furniture, were offered at an average discount of more than
30%.
360Buy launched a promotion campaign on June 18 to mark the company's anniversary, triggering a fierce price war
with its rivals such as Tmall, Dangdang and Coo8. 360Buy offered discounts equal to 1 billion yuan to customers, in
addition to coupons worth of 618 million yuan. Tmall then joined the price war by distributing coupons worth of 50
million yuan to consumers.
Indeed, many online retailers realize that low-price is no longer the only key factor that
impacts customer’s choice. Some of them have sought to enhance customers’ online
shopping experience by providing more value-added services or expanding product
categories.
38
Challenges
39
1. Product quality remains one of the major concerns
Reasons for not purchasing online, 2011
0%
10%
20%
30%
40%
50%
60%
70%
Worry about product quality
Worry about reputation of online stores
Inefficient deliveries
Insufficient enquiry support
High product price
No online banking account
Complicated shopping process
Can't find the product online
Source: iResearch
•
Quality of products sold online is less assured and it remains the largest concern for many
consumers.
–
–
•
65.9% of the online shoppers worried about product quality;
42.6% of them worried about reputation of online stores.
Counterfeit goods are prevalent in the online retail market space. Consumers may not realize
until the product is delivered to them.
–
In June 2012, Dangdang was reportedly being accused of selling counterfeit watches. Dangdang stated that their
watches are genuine, but Casio said it had never authorized the selling rights to Dangdang.
40
2. Conflicts between online and offline stores
•
Multi-channel retailers may face possible conflicts between their online and offline stores in
terms of product variety and price.
•
There is a possibility that online channels may cannibalize sales of their offline stores and
lead to potential conflict of interests with existing distributors and franchisees; retailers
should pay extra attention to pricing strategies and product offerings.
41
3. Logistics bottleneck
•
The robust growth of online retailing has generated significant revenue for the logistics
industry, particularly the express delivery industry. However, the huge number of orders
generated by online retail has overloaded many express delivery companies.
•
According to survey conducted by the State Post Bureau on the performance of China’s
express delivery services, on-time delivery remained dissatisfactory for over half of the
respondents.
–
•
52% of the complaints were related to delay of delivery
The logistics crunches have constrained the development of online retailing and increased
the logistics costs of many online retailers.
42
4. Lack of professionals for online operation
•
China is experiencing an online retail boom, however, the supply of qualified employees in
the field is insufficient and could not meet the increasing demand in the market. The
turnover rate is also very high in the industry.
•
The operating models of online and offline channel are totally different. Take the distribution
system as an example. The supply chains for online stores are usually more complicated than
that of offline stores; retailers may need to cooperate more closely with suppliers or redesign the logistics flows such as backward logistics, etc. This may require additional
investment in human resources.
•
Management should view online retailing as a different retailing channel. It should be
managed by a professional team with in-depth market knowledge, rather than solely by IT
team.
43
5. Online retailing is less popular in lower-tier cities
• Development of online retailing in inland and western regions lags behind
the coastal cities.
– Most logistics facilities are located in first-tier cities and provincial capitals, complicating
the delivery of products to lower-tier cities or rural areas.
– Internet penetration is lower in lower-tier cities .
– Consumers in lower-tier cities are not yet familiar with shopping online.
44
Government initiatives
45
Recent government policies/ initiatives related to online retailing and ecommerce (1)
Rules and regulations
Effective date Highlights
The Circular on Issues Concerning the Promotion
Feb-12
Establish an expert consulting committee
of Sound and Fast E-Commerce Development
for building pilot cities for e-commerce,
(關於促進電子商務健康快速發展有關工作的通
regulating online payment, promoting
知)
application of IC cards, promoting ecommerce standardization, etc.
Guiding Opinions on Promoting the Development
Jan-12
Encourage and support large retail
of Retail Trade During the 12th Five-Year Plan
enterprises to set up online stores; support
Period
the
establishment
of
third-party
(商務部關於“十二五”時期促進零售業發展的
transaction platforms for SMEs.
指導意見)
Guiding Opinions for the Development of EOct-11
Establish regulations for online retailing;
commerce in the 12th Five-Year Plan Period
online retail sales is forecast to account for
(商務部“十二五”電子商務發展指導意見)
9% of the total retail sales of consumer
goods by the end of 2015.
List of e-Commerce Demo Enterprise
(關於“電子商務示範企業名單”的公告)
Jul-11
83 enterprises were selected as the “eCommerce Demo Enterprises”.
46
Recent government policies/ initiatives related to online retailing and ecommerce (2)
Rules and regulations
Effective date Highlights
Notice for Combating Intellectual Property
Infringement and Counterfeits in Online
Shopping
( 關於進一步推進網路購物領域打擊侵犯知識
產權和制售假冒偽劣商品行動的通知)
Apr-11
Online shopping platform operators
should take responsibility to monitor if
the goods sold online infringe
intellectual property rights and they
should ensure that the goods are
genuine products.
Circular on Regulating Online Shopping
Promotional Activities
(關於規範網絡購物促銷行爲的通知)
Jan-11
Online retailers must offer sufficient
information on promotional items
Interim Measures for the Trading of Commodities
and Services through the Internet
(網絡商品交易及有關服務行爲管理暫行辦法)
Jul-10
Real-name registration is required in
online bulletins.
Establishment and Basic Code of Conduct for
Third-party Transaction Platforms
(第三方電子商務交易平台服務規範)
Apr-10
Consumers are allowed to cancel orders
within a certain period of time.
47
Appendix
48
List of enterprises among the top 100s that have launched their own
online purchasing platform, as of June 2012
Enterprise
Website
Suning Appliance 蘇寧電器
http://www.suning.com
Gome Electrical Appliances 國美電器
http://www.gome.com.cn/
http://www.coo8.com/
Intime Department Store 銀泰百貨
http://www.yintai.com/
Yum! Brands 百勝餐飲集團
http://www.4008823823.com.cn/kfc/index.htm
http://www.4008123123.com
McDonald's China 麥當勞
https://www.4008-517-517.cn
Carrefour China 家樂福
http://www.carrefour.com.cn/DefaultNew.aspx
Bailian Group 百聯集團
http://www.blemall.com/
http://www.jaja123.com
Rainbow Department Store 天虹商場
http://www.myrainbow.cn/
Renrenle 人人樂
http://www.rrlgou.com/
New World Department Store 新世界百貨
http://www.xinbaigo.com/
Hisap High Technoloty 宏圖三胞
http://huimai100.com/
PARKnSHOP China 百佳超市（中國內地）
http://www1.parknshop.com/WebShop/LoginPage.do
Shandong Inzone 銀座商城
http://www.yinzuo100.com
Walmart China 沃爾瑪
http://www.samsclub.cn/sams/homepage.jsp
http://www.yihaodian.com/
Liqun 利群集團
http://www.liqunshop.com/
http://www.lqyaopin.com
Beijing Wangfujing Department Store
王府井集團
Nepstar 海王星辰
http://www.goonow.com
Dalian Dashang 大商集團
http://www.66buy.cn/
Metro China 錦江麥德龍
http://www.metromall.com.cn/
Huiyin Household Appliances 匯銀家電
http://www.pinyi108.com
Haihang Business 海航商業
http://www.yoye.cn
http://www.star365.com/
http://www.msegou.com/
Golden Eagle 金鷹國際商貿集團
http://www.goodee.cn/eshop/
PCD stores 中國春天百貨集團
http://www.saite.com/
RT-Mart 康成投資（大潤發）
https://www.rt-drive.com.tw/
Auchan China 歐尚（中國）
http://www.auchan.com.cn/
Chongqing Peace Chain Drugstore
重慶和平藥房
Guangzhou Grandbuy 廣百股份
http://www.hp1997.com/
Handan Sunshing Department Store 邯鄲市
陽光百貨
http://ygttg.com/
http://www.igrandbuy.com/
http://www.365sunshop.com/
http://hdyg.taobao.com/
Nonggongshang Supermarket 農工商
http://www.chblt.com/
http://emall.chblt.com/ngs/
D.Phone 迪信通
http://www.dixintong.com/default.asp
49
Enterprise
Website
Wuhan Zhongbai 中百集團
http://www.zon100.com/
C.P. Lotus 卜蜂蓮花
http://www.ourlotus.com/
Chengdu Hongqi 成都紅旗
http://www.hqls.com.cn/netshop/webindex.asp
Anhui Huishang 徽商集團
http://www.hzsmall.com/
Beijing Capital Retailing Group
北京首商集團
Nanning Department Store 南寧百貨大樓
http://www.igo5.com/
Qingdao Weekly Group 青島維客
http://www.weeklydd.com
Hefei Department Store 合肥百貨大樓
http://www.bdemall.com/
Ito Yokado 伊藤洋華堂
http://shop.iy-cd.com/
Sanjiang Shopping Club 三江購物俱樂部
http://www.sanjiang.com
Shandong Weifang Department Store
山東濰坊百貨
Changchun Eurasia 長春歐亞集團
http://zbbl.zhong100.com/
Zhongshan One Plus One Supermarket
中山市壹加壹
ShijiaZhuang Beiguo Renbai Group
石家莊北國人百
Liaoning Xinglong Happy Family
遼寧興隆大家庭
Oriente Home 東方家園
http://www.zsyijiayi.com/
New Century Department Store
重慶商社新世紀百貨
Chongqing Department Store 重慶百貨大樓
http://www.sjgo365.com/
China Resources Vanguard 華潤萬家
http://www.crvmore.com
Jiangsu Wenfeng Great World 文峰大世界
http://www.wfdsj.com.cn/shop
A-Best Supermarket 新一佳
http://www.xyj-shop.com/
http://www.nnbh.cn/
http://www.oysd.cn/
http://www.ruyigou.cn/
http://www.xlgoo.net
http://www.ohome.cn/
http://www.cbmall.cn
http://meitianhui.taobao.com/view_page-244647683.htm
Hunan Friendship & Apollo 友誼阿波羅
http://9448.net/newjrdshop/
C & U Group 浙江人本超市
http://www.rbcs.cn/
Wuhan Wushang Group 武漢武商集團
http://www.wssmgc.com
Shandong Quanfuyuan Commercial Group
全福元商業集團
Shandong Newstar Group 山東新星集團
http://www.sgbhdl.com:8080/ehdshop/webshop/index/index.j
sp
http://www.xinxing100.net/index.php
Zhongnan Commercial 中商集團
http://www.aizsw.com/zs/default.html
Guangzhou Watson's 廣州屈臣氏
Nanjing Central Emporium 中央商場
http://watsons.tmall.com/shop/view_shop.htm?prt=13371540
81657&prc=1
http://njzysc.tmall.com
Guangzhou Friendship 廣州友誼集團
http://121.8.125.2:6080/
50
For More Information
Li & Fung Research Centre
10/F, LiFung Tower,
888 Cheung Sha Wan Road,
Kowloon, Hong Kong
Tel: 2300 2470
Fax: 2635 1598
Email: lfdc@lf1937.com
http://www.lifunggroup.com/
© Copyright 2012 Li & Fung Research Centre. All rights reserved.
Though Li & Fung Research Centre endeavours to have information presented in this document as accurate and updated as
possible, it accepts no responsibility for any error, omission or misrepresentation. Li & Fung Research Centre and/or its
associates accept no responsibility for any direct, indirect or consequential loss that may arise from the use of information
contained in this document.
51