China The Emerging Global E-Commerce Powerhouse EN

Transcription

CHINA
THE EMERGING
GLOBAL
E-COMMERCE
POWERHOUSE
From the editors of Internet Retailer magazine
Sponsored by
Dear Retail,
TOGETHER,
LET’S BUILD
A THRIVING
BUSINESS IN
CHINA.
Love, hybris
CLICK H
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E-COM RE TO GET OUR
MERCE
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CONTENTS
PART I
PART II
PART III
Sponsored by
contents
INTRODUCTION
China becomes a global online powerhouse . . . . . . . . . . . . . . . . . . . . . . 4
The right technology eases entry to e-commerce in China . . . . . . . . . . . . . . 8
PART I: E-COMMERCE IN CHINA
Growing pains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China’s e-commerce leader expands into web-based TV shopping .
Chinese e-commerce firm turns to Austria for warehouse technology
China’s No. 2 web retailer aims to build a bigger e-mall . . . . . . . .
A Chinese retail chain steps up its e-commerce game . . . . . . . . . .
Bain predicts China will overtake the U.S. in e-commerce this year .
A web-only phone maker outsells Apple in China . . . . . . . . . . . . .
E-commerce in China grows 35% in the first nine months of 2013 .
Behind Alibaba’s $5 billion e-commerce day . . . . . . . . . . . . . . . .
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PART II: WESTERN BRANDS
SELL ONLINE IN CHINA
UK fashion retailer Asos plans to launch a China e-commerce site . . . . . . . 38
There may be e-commerce gold in China, but it’s hard to mine . . . . . . . . . 40
Wal-Mart’s Chinese e-commerce partner starts selling fresh food . . . . . . . . 43
Xiu.com helps eBay sellers expand into China . . . . . . . . . . . . . . . . . . . . 45
Cherries to China from the U.S., via Tmall.com . . . . . . . . . . . . . . . . . . . . 47
The National Football League looks for an e-commerce touchdown in China . 49
An umbrella brand prepares for a torrent of traffic in China . . . . . . . . . . . 51
China’s cross-border e-commerce tops $375 billion in 2012 . . . . . . . . . . 54
PART III: CHINESE E-RETAILERS
LOOK ABROAD
Direct from China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China’s big online marketplaces will sell to overseas Chinese . . . . .
China’s answer to PayPal expands into the U.S. . . . . . . . . . . . . . .
Alibaba leads $200 million funding round in U.S. shipping service
E-retailer LightInTheBox adds three languages to its e-commerce site
Alibaba creates a U.S. e-commerce investment group . . . . . . . . . .
3 • CHINA: THE EMERGING GLOBAL E-COMMERCE POWERHOUSE
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CONTENTS
PART I
PART II
PART III
Sponsored by
introduction
China becomes
a global online
powerhouse
by Don Davis
O
nline purchases by Chinese consumers in 2013 will exceed those
of U.S. consumers, predicts Bain Capital. That will make China
the world’s biggest e-commerce market. But that’s not the most
important part of the story for Western brands, retailers and
e-commerce technology providers.
The big story is this: China’s explosive e-commerce growth is spawning big
Chinese companies that are not content to stay in China. They’re targeting the
world, even as the world’s brands are seeking to establish an online position in
China from which to sell to the rapidly growing and very web-savvy Chinese
middle class.
In this special report, Internet Retailer looks at three aspects of the industry-altering e-commerce growth in China. Part I examines the growth of
the Chinese e-commerce market and its biggest players. Part II looks at how
Western brands and retailers are entering China, the obstacles they’re encountering and how they’re responding. And Part III describes the steps Chinese
e-commerce companies are taking to expand internationally.
In each of these areas there are developments that will impact the business
of Western brands and retailers.
Consider Alibaba Group, whose two big online marketplaces, Taobao and
the more brand-oriented Tmall, account for well over half of all e-commerce
in China. In fact, Alibaba executives claim that their marketplaces account
for more sales than Amazon and eBay combined. They will soon be providing more details of their business as Alibaba moves toward a long-awaited
CONTENTS
PART I
PART II
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PART III
introduction
initial public offering, an IPO likely to value the
company at around $100 billion.
Alibaba says its primary focus remains China,
but the huge company is starting to make inroads
overseas. Its PayPal-like payment service Alipay
is promoting itself to U.S. retailers, primarily as a
way to help them sell to Chinese online shoppers,
who increasingly look abroad for quality goods.
And in the fall of 2013 Alibaba led a funding
round in ShopRunner, a U.S. company that helps
retail chains deliver online goods from bricks-andmortar stores. It’s also invested in U.S. e-retailer
Fanatics and Silicon Valley-based Quixey, which
provides a search engine for mobile apps. There is
little doubt that Alibaba will use the infusion of
cash coming from its IPO for further expansion.
And Alibaba is far from the only Chinese
company growing rapidly. Its nearest competitor,
Jingdong Century Trading Co. more than doubled
its online sales in 2013 to more than $16 billion.
And it’s attracted some $2 billion in capital, which
it’s using to build out its technology platform and
nationwide distribution network.
Meanwhile, Western brands are moving
aggressively to sell online in China. Companies
like Amazon.com Inc. and Wal-Mart Stores Inc.
have invested heavily. Amazon is building its own
e-commerce site and marketplace, using as a base
Chinese online book seller Joyo, which it acquired
in 2004. Wal-Mart in 2012 expanded to 51% its
stake in Yihaodian, already a Top 50 Chinese
e-retailer and moving up fast. Such big Western
brands as Nike, Gap and Coach are entering China,
sometimes by selling on marketplaces—mostly
Tmall—and sometimes on their own sites, and in
some cases pursuing both strategies.
As the stories in this report document, they are
encountering obstacles they don’t face in the West,
such as the fact that Chinese consumers are so used
to start their shopping searches on Taobao and
CONTENTS
PART I
PART II
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PART III
introduction
Tmall that they don’t often search for products
on China’s leading search engine, Baidu. That
makes search engine marketing costly and often
ineffective. At the same time they’re learning how
to leverage immensely popular social networks
like Weibo to introduce themselves, and their
e-commerce sites, to Chinese shoppers.
Part III of this special report delves into the
least-understood aspect of China’s e-commerce
growth: the early moves into international expansion by Chinese e-retail companies. Already in certain categories, such as prom and wedding dresses,
Chinese e-retailers are disrupting the U.S. market
with drastically reduced prices, as you’ll read in the
story “Direct from China.” That story also touches
on how eBay is quietly helping Chinese companies sell globally on eBay’s marketplaces around
the world.
Beijing-based online retailer LightInTheBox
is building its business exclusively on selling
abroad, primarily in Europe and North America.
The retailer went public on the New York Stock
Exchange in June 2013, raising $79 million.
Xiaomi is another Chinese company few
Westerners know about now, but will hear from
soon. Founded in 2010, the company makes smartphones that aim to match the features of devices
from Apple and Samsung, at half the price. The
company sells exclusively online, solicits suggestions
from customers and updates its operating system
every Friday, and expects to sell 15 million handsets
in 2013. In a sign of its global ambitions, Xiaomi in
late summer 2013 hired away from Google Inc. its
head of Android development, Hugo Barra.
Companies like Xiaomi, LightInTheBox and
Alibaba clearly have wind in their sales—and
every intention of making big waves in global
e-commerce.
Don Davis is the editor in chief of Internet Retailer
magazine and InternetRetailer.com.
Dear Retail,
GUESS WHICH
HYBRIS CUSTOMER
SAID THAT CHINA
IS “ONE OF OUR
CORNERSTONES
FOR GROWTH IN THE
COMING YEARS?”
Love,
hybris
ORY.
T
S
IR
E
H
T
D
TO REA
CLICK HERE
CONTENTS
PART I
PART II
PART III
Sponsored by
executive interview
The right technology
eases entry to
e-commerce in China
C
hinese consumers have become the world’s most active online
shoppers. Sixty-two percent of Chinese consumers make an online
purchase once a week, by far the most of any country, according
to consulting firm PricewaterhouseCoopers. In the United States,
which China is about to surpass as the world’s largest e-commerce market, just
22% of consumers make an online purchase each week.
Much of the China’s e-commerce growth coming from consumers in smaller
cities and rural areas where there are fewer retail stores compared to the country’s major cities. In addition, the explosion of mobile devices is enabling many
Chinese consumers to access the Internet for the first time, making it possible for
them to purchase goods not available locally, and to do so anytime and anywhere.
Tapping the growth opportunities China’s vast population of online shoppers
represents requires technology that integrates e-commerce, m-commerce, digital
marketing and payment platforms. Like most online shoppers, Chinese consumers expect retailers to deliver a unified brand experience regardless of the device
they use to shop, according to Burghardt Groeber, vice president of Asia Pacific
for hybris software, an SAP company and e-commerce platform provider.
“A successful e-commerce strategy in China includes mobile, access to social
networks, gaming and payment services to create a seamless user experience
across all channels,” he says.
For example, it is not uncommon for a Chinese consumer to view an item
in a store and leave, use her smartphone throughout the day to learn what her
peers have said about the product on social networks, and purchase the item
later that night on a personal computer or tablet using her Alipay account.
Alipay is China’s leading third-party online payment platform.
CONTENTS
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executive interview
Retailers must be prepared to engage that shopper effectively throughout that shopping journey.
“Omnichannel is key for success in China, because
online and offline shopping behavior is strongly
influenced by social networks, the mobile channel
and online Chinese marketplaces,” says Groeber.
“E-retailers need a web store to provide a starting
point for seeding information in the market.”
SOCIAL STRATEGIES
As Western web retailers are discovering as they
enter China, e-commerce is dominated by two
players: Alibaba Group, China’s undisputed king
of e-commerce and operator of the country’s two
dominant web marketplaces, Taobao and Tmall;
and JD.com, Alibaba’s fiercest rival. Both companies
have invested heavily in social networking platforms,
which Groeber cites as an example of the rapid convergence of e-commerce and social media in China.
Earlier this year, JD.com aligned itself with
Tencent Holdings Ltd, a provider of Internet
and mobile messaging and advertising services in
Burghardt
Groeber, vice
president of
Asia Pacific for
hybris software
China that will promote JD.com though its digital
messaging platforms. Alibaba is a stakeholder in
Weibo, a popular Chinese social media platform
combining elements of Facebook and Twitter.
Chinese consumers rely heavily on social networks to gather information about products they
are interested in purchasing, as they tend to favor
recommendations from peers and family members,
many of whom share their opinions via social networks, over advertisements and news reports.
One way retailers can use social networks to
their advantage is by establishing relationships with
influential bloggers who comment about their personal experience with a product. These can include
celebrities, industry experts and grassroots bloggers
with a large audience. Using analytics, retailers can
track how much a blogger’s posts drive traffic to a
retail web site and the value a brand derives from
its ties to each commentator.
Groeber also recommends retailers develop promotions for, and offer coupons on, social networks
to drive sales and heighten brand awareness.
CONTENTS
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executive interview
“Social sharing, product comparison, marketing campaigns and the involvement of key opinion influencers are the building blocks of a social
media strategy in China,” he says. “Social media
has a greater influence on purchasing decisions in
China than anywhere else in the world, according
to McKinsey & Co.”
TECHNOLOGY MADE FOR CHINA
The good news for Western retailers looking to
stake out a high-profile position on China’s social
networks is they can do so without having to invest
in one. hybris’ B2C Commerce Accelerator for
China provides plug-ins for China’s biggest social
networking sites, Weibo and QQ. Once connected,
retailers can upload consumers’ comments and
product recommendations from their web sites to
those social networks.
As the integration between social networks and
e-commerce tightens in China, retailers will need
more sophisticated social media strategies, such
as providing consumers the option of making a
purchase directly from a social network. “Microblogging platform Sina Weibo already allows direct
purchases on Alibaba’s Taobao and Tmall platforms,” Groeber says.
Many e-retailers entering China opt to open
a web store on Tmall, which gives a brand greater
control over its image than the more free-wheeling
Taobao. While that provides them retailers and
brands with an easy way to sell to China’s massive
community of online shoppers, they run the risk of
commoditizing their brand and pricing because of
the heavy discounting on Tmall. Chinese consumers, who are price-sensitive to begin with, flock to
Tmall in search of the lowest price. In addition, the
limited space retailers have on Tmall for conveying
their brand value undermines their ability to charge
higher prices than competing retailers on Tmall.
A more sensible approach to e-retailing in
China is establishing a dedicated e-commerce site,
which provides retailers direct control over their
brand marketing and customer communications, in
addition to opening a Tmall store.
CONTENTS
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PART II
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PART III
executive interview
“Having a web store and a Tmall store should
be the approach of choice, as a dedicated web store
guarantees appropriate brand marketing and communication through that site, while a Tmall store
establishes a fast, cost-effective presence on China’s
largest e-commerce platform,” says Groeber.
The hybris B2C Commerce Accelerator for
China provides retailers with ready-made components needed to launch an omnichannel strategy in
China. Those components include storefront and
page templates that can accommodate large product
images to deliver the visual user experience Chinese
consumers expect, and that support Simplified
Chinese characters for creating text-based content.
The platform also supports infinite scrolling, a
navigation-friendly feature that does away with
clumsy page-to-page navigation, making it possible
for the shopper to quickly find what he is looking
for. Groeber says Chinese consumers have come to
expect that kind of design on e-retail sites.
The hybris platform’s store locator feature is
integrated with Baidu Maps, an online mapping
application for China, to visually show shoppers directions to a retailer’s nearest store from the shopper’s
current location. Integration with Alipay allows Alipay
accountholders to complete payment by entering their
user name and password, which authenticates them
as accountholders, eliminating the need for entering
account information and streamlining checkout.
Plans are also in the works to support integration to Tmall so that as retailers add new products
to their primary web site those items will be automatically added to their Tmall store. Inventory for
both stores will be tracked in real time.
“Foreign retailers that build out a localized
strategy leveraging a seamless omnichannel user
experience can shape their business to appeal to
the needs and expectations of Chinese consumers
to compete with Chinese e-retailers,” says Groeber.
“With the omnicommerce paradigm widely
adopted in Europe and North America the hybris
B2C Commerce Accelerator is ideal for e-retailers wanting to break into China, and for Chinese
retailers that want to expand globally.”
PART I:
E-COMMERCE
IN CHINA
Growing pains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China’s e-commerce leader expands into web-based TV shopping .
Chinese e-commerce firm turns to Austria for warehouse technology
China’s No. 2 web retailer aims to build a bigger e-mall . . . . . . . .
A Chinese retail chain steps up its e-commerce game . . . . . . . . . .
Bain predicts China will overtake the U.S. in e-commerce . . . . . . .
A web-only phone maker outsells Apple in China . . . . . . . . . . . . .
E-commerce in China grows 35% in the first nine months of 2013 .
Behind Alibaba’s $5 billion e-commerce day . . . . . . . . . . . . . . . .
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Part II: Western brands sell online in China
Part III: Chinese e-retailers look abroad
13
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CONTENTS
PART I
PART II
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PART III
PART I
e-commerce in china
Growing
pains
E-commerce growth in China is
explosive, but profits are woeful.
And everything’s changing.
by Don Davis
I
n no market will consumers buy more online than in China by 2014, if trends
hold, and in no market will so many major online retailers lose money filling
those orders.
It’s the China paradox: Growth is so explosive that investors are pouring money into Chinese e-commerce, fueling profit-killing price competition.
Chinese e-retailer Dangdang, which went public in December 2010, has since
seen many rival web merchants, backed by venture capital, trade profits for
business-to-consumer e-commerce market share, the retailer’s executive chairwoman told analysts in late 2012.
“Before and after Dangdang’s IPO there was a huge inflow of billions of
U.S. dollars into the b2c segment in China,” Peggy Yu Yu said. “Selling at
or below cost became an easy way for some companies to pump up sales.”
Dangdang is No. 10 among Chinese online retailers in the newly published
Internet Retailer Asia 500 guide.
That ferocious price competition hasn’t stopped global brands and retailers
from joining China’s e-commerce fray since China’s entry into the World Trade
Organization opened the country to foreign retailers in 2004. Tmall, a major
online marketplace operated by Chinese e-commerce behemoth Alibaba Group
Holdings Ltd., now offers products from 2,000 non-Chinese brands. And such
major companies as Toys ‘R’ Us Inc., The Estee Lauder Cos. Inc. and Coach Inc.
have launched their own e-commerce sites to sell directly to Chinese consumers.
CONTENTS
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PART I
e-commerce in china
CHINA OVERTAKES THE U.S. IN E-COMMERCE SALES
$350
$331.7
U.S.
$300
CHINA
$261.6
$250
$225.5
$168.3
$142.5
$144.6
$100
$50
$258.2
$193.8
$200
$150
$303.4
$194.6
$125.9
$73.9
$42.1
$20.5
$0
2008
2009
2010
2011
2012
2013
2014
Source: China: Macquarie Group Ltd.; U.S.: U.S. Commerce Department, 2008-11, Internet Retailer 2012-14 projections
There are big opportunities to sell online
in China, says Andrew Stockwell, vice president
of Asia/Pacific for research and consulting firm
Forrester Research Inc. But global brands need
to take into account the challenges in making
delivery and accepting payment, the huge scale of
e-commerce and, especially, how fast online retailing is changing in China. “The strategy you develop
for the next six months can’t be your strategy for
the next 18 months,” he says.
They also need to understand the mindset of
China’s newly emerging middle class, who will
spend their growing disposable income on status
symbols, but not on premium-priced everyday products, Stockwell says. “Nobody is going to spend a lot
on toothpaste because nobody will see that,” he says.
“But a handbag, clothing or a mobile phone, they
will save three months for that because it’s a symbol
of wealth and affluence, which is more important in
China than in the rest of the world.”
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e-commerce in china
And those buying high-end goods value global
brands. In a 2011 Forrester survey of Chinese luxury shoppers, 42% said they prefer foreign brands
because they offer better-quality goods.
However, Chinese consumers are buying all kinds
of goods online, mostly from Chinese e-retailers.
The web accounts for 8.1% of total retail sales in
China, according to the Internet Retailer Asia 500
guide, compared to 5.2% in the United States.
What’s more, with e-commerce in China growing so fast—53.7% in 2011—China’s e-retail sales
soon could outpace those of the United States.
Alibaba: China’s e-commerce goliath
While Amazon.com Inc. accounts for roughly
30% of U.S. online retail sales, Alibaba Group
Holdings Ltd. commands about 80% of China’s
e-commerce market.
Jack Ma, a former English teacher, founded
Alibaba with 17 associates in 1999, aiming to
use the Internet to assist Chinese entrepreneurs.
In 2003, they launched the online marketplace
Taobao, which attracted millions of sellers by
charging them no listing or commission fees.
Today, Alibaba says 6.6 million merchants
sell on Taobao and there are 500 million
registered shoppers.
Aiming to attract bigger brands to a less bazaarlike site, Alibaba in 2008 launched Taobao
Mall, later renamed Tmall, which today hosts
50,000 storefronts representing 70,000 brands.
Unlike on Taobao, brands pay Tmall an annual
fee of $5,000 to $10,000 and a commission
of 1% to 5%.
Alibaba created several other web-related
businesses. Among them is Alipay, a PayPallike service that claims 800 million registered
accounts and some $350 billion in 2012 transactions, including payments of utility bills and
peer-to-peer transfers. Another is Alibaba.com,
a web portal that some 29.4 million users,
including many Western web retailers, use to
source goods from 2.5 million suppliers, many of
them Chinese factories.
Alibaba has had its missteps. In early 2011 the
company disclosed that 100 of its employees had
helped 2,300 Alibaba.com suppliers commit fraud.
Alibaba fired the employees and by February
2011 had paid out nearly $2 million to defrauded
buyers from its Fair Play Fund, created in December
2009 to compensate buyers in case of fraud. Also
in 2011, the U.S. government added Alibaba to
a list of “notorious markets” where pirated and
counterfeit goods are freely sold. Alibaba, which
says it took 63 million dodgy items off its marketplaces in 2011 and employs 200 people to prevent
trademark violations, was removed from the list in
December 2012.
Alibaba also made news in 2012 when it raised
$7.6 billion to buy back about half of the 40%
interest in Alibaba held by Yahoo Inc., in a deal that
valued Alibaba at roughly $40 billion. Alibaba is
widely expected to go public in 2014.
Meanwhile, Ma, now said to be worth $3.4 billion
and China’s 11th-richest billionaire according to
Forbes magazine, announced in January plans to
resign as CEO. “At 48 I am no longer young for
the Internet business,” Ma wrote in an e-mail to the
company’s 24,000 employees. He will remain as
executive chairman.
CONTENTS
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PART I
e-commerce in china
CHINA'S E-COMMERCE LEADERS
RANK
RETAILER
WEB SITE
2012 WEB SALES
2011 WEB SALES
GROWTH
1
Alibaba Group
TaoBao.com
$170,000,000,000
$101,548,761,300
67.40%
2
360Buy.com Jingdong Mall
360Buy.com
$8,100,000,000
$4,174,000,000
94.06%
3
Suning Commerce Co. Ltd.
Suning.com
$4,760,000,000
$945,067,900
403.67%
4
Jia.com
Jia.com
$3,208,000,000
$1,761,991,000
82.07%
5
51Buy.com
51Buy.com
$1,605,691,000
$379,628,970
322.96%
6
HappiGo Ltd.
Happigo.com
$1,605,000,000
$800,000,000
100.63%
7
Vancl.com
Vancl.com
$1,400,000,000
$560,633,500
149.72%
8
Amazon.com Inc.
Amazon.cn
$1,000,000,000
$800,000,000
20.00%
9
360Mart.com
360Mart.com
$964,260,000
$642,840,000
50.00%
10
Dangdang
Dangdang.com
$878,000,000
$575,000,000
52.70%
Source: Internet Retailer Asia 500
China’s Ministry of Commerce reported in 2012
that online retail sales in 2011 totaled 782.56 billion yuan ($125.9 billion). By contrast, U.S. online
retail sales grew 15.8% in 2012 to $225.5 billion,
according to the U.S. Commerce Department.
E-retail sales will reach $331.7 billion in China in 2014, predicts Macquarie
Group Ltd., part of Australia-based financial services firm Macquarie Group Ltd. If U.S. e-commerce grows at 16% for both 2013 and 2014 it
would total $303.4 billion in 2014, putting China
first in e-commerce in 2014.
BEHIND THE E-COMMERCE EXPLOSION
is a two-decade-long economic boom. From 1993 to
2011 China’s economy grew by more than 16 times, an
annual growth rate of nearly 17%, according to World
Bank statistics. By 2011, China was the world’s second-largest economy, trailing only the United States.
Much of the new wealth has gone to an emerging middle and upper class, who mostly live in
China’s biggest cities. Boston Consulting Group
says the 120 million most affluent Chinese command $590 billion in annual buying power, and
that the affluent will grow to 20% of China’s population, or 280 million consumers, by 2020.
Along with this robust income growth has come
greater use of the Internet, and not just among the
urban elite. There are 570 million Internet users,
42% of the population of 1.354 billion, and 220
million online shoppers in China, according to
eMarketer Inc., a U.S. market research firm.
Online retail is growing rapidly in part because
China’s retail industry was so weak. Many Chinese
department stores for years leased space to suppliers,
gaining none of the expertise in gauging trends and
consumer marketing that Western chains acquired.
(Notable exceptions are two national chains of
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e-commerce in china
consumer electronics stores, Suning Commerce
Group Co. Ltd. and Gome Electrical Appliances
Holding Ltd., both of which compete aggressively
online. Suning is No. 4 among Chinese e-retailers
in the Asia 500 and Gome No. 16.)
As a result, Chinese retail remains highly fragmented, with the top 100 merchants representing
only 11% of retail sales, says consulting firm Grant
Thornton LLP, roughly the same percentage that
Wal-Mart Stores Inc. alone commands of U.S.
retail sales.
THAT LEFT A VACUUM THAT Alibaba Group
Holdings Ltd. filled. The company launched
Taobao as an eBay-type marketplace for small
sellers in 2003—and drove eBay Inc. out of China
by charging sellers no fees, instead earning revenue mostly through advertising. As Taobao
became an increasingly large online flea
market—where big brands mixed with startup
retailers—Alibaba in 2008 created a second online
marketplace, Tmall, for larger retailers willing to
pay sales commissions.
Alibaba’s two marketplaces account for more
than 80% of e-commerce sales in China. Alibaba
reported in December 2012 that it has surpassed
1 trillion yuan ($160 billion) in sales on its two
marketplaces in the first 11 months of 2012. Tmall
says its sales for 2012 totaled 200 billion yuan
($32 billion), double its 2011 sales. The Asia 500
Guide estimates Taobao’s 2012 sales at $138 billion.
Analysts typically put Taobao’s sales into
the category of consumer-to-consumer, or c2c
e-commerce, even though most of its sellers are
entrepreneurs who buy goods from Chinese
manufacturers or wholesalers to sell on Taobao.
They characterize as business-to-consumer, or b2c,
the sales that take place on more regulated marketplaces like Tmall and through the e-commerce sites
of major retailers. And that portion of e-commerce
is now taking off. While Macquarie estimated that
c2c sales in 2013 would be more than double b2c
sales, it projects 55% growth in b2c through 2015,
versus 35% in all of e-commerce.
Taobao’s early dominance of e-commerce has
trained Chinese consumers to turn first to online
Jack Ma, Alibaba
founder and CEO
marketplaces for a vast array of merchandise and low
prices. To compete, major competitors have created
their own web shopping malls in hopes of offering
comparable selection. These include companies
that have raised large sums from venture capitalists
and public share offerings, such as 360buy.com,
No. 2 among Chinese e-commerce companies,
which has raised more than $2.2 billion, and No.
10 Dangdang, which pocketed $272 million in its
2010 IPO.
For a company like Le Saunda, a Chinese manufacturer of high-end shoes that’s been selling
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online for two years, the prospect of trying to
draw enough online shoppers to its own e-commerce site is still too daunting. To promote “selfbuilt web site sales, you need a lot of promotion in
order to have enough customers,” says Ken Yang,
e-commerce director. Instead of building its own
site, Le Saunda operates storefronts on marketplaces like Tmall, 360buy, Amazon.com.cn (No.
8 among Chinese e-commerce sites), Yintai.com
(No. 28) and Dangdang.
THESE MARKETPLACE OPERATORS compete fiercely for the loyalties of Chinese consumers,
and of the retailers that sell on their sites. For example, 360buy launched a round of well-publicized
price cuts in 2012 that were quickly matched by
competitors Suning and Gome. The prices were so
low the government warned retailers not to violate
laws against selling goods below cost.
To woo sellers, such major players as Alibaba,
360buy and Suning offer loans to online retailers.
That’s important because small companies have
trouble getting loans from China’s banks that
prefer to lend to the country’s giant state-owned
companies, says Julia Q. Zhu, who previously
worked at Alibaba before founding consulting firm
Observer Solutions in Washington, D.C. Alibaba’s
AliFinance arm has made more than 200,000 loans
since starting its program in 2010, handing out
$2.2 billion in the first half of 2012. The average
loan is $10,200, Alibaba says, and is often used to
buy merchandise.
Big marketplace operators are also competing in
fulfillment, building extensive delivery networks in
a country without a national delivery service like
UPS or FedEx. 360buy announced in November
2012 it would let other retailers use its service that
provides same-day delivery in 23 cities and nextday delivery in more than 150 cities. The 360buy
service includes collecting cash on delivery, a payment method used in as many as 80% of Chinese
e-commerce transactions, Macquarie says, in a
country where credit cards are not commonplace.
Alibaba announced in January 2013 it would work
with financial institutions, logistics companies and
retailers on a $16 billion project to create a nationwide delivery network.
These investments and price wars take their toll
on profits. While Alibaba is profitable—the privately held company reported to part-owner Yahoo
Inc. net income of $782 million on $2.9 billion
in revenue for the nine months ended June 30,
2012—many of its competitors are not.
VIPShop, No. 13, proudly reported a
$6.3 million profit in the fourth quarter of 2012
and a full-year loss of only $9.5 million compared
with a $156.5 million loss in 2011; Dangdang
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increased revenue 44% in 2012 but its operating
loss increased 94% to $71.2 million. Jingdong Mall,
operator of 360buy.com, projects finally becoming
profitable in the fourth quarter of 2013.
The losses may be cooling investor excitement.
One indication: Chinese group-buying site Lashou,
which raised $155 million in three investment
rounds, put off an IPO planned for 2012.
IN THE FACE OF THIS TOUGH COMPETITION, Western retailers have had mixed
results selling online in China. Amazon,
the dominant e-retailer in North America
and Europe and No. 8 in China, acquired
Chinese online bookseller Joyo in 2004, rebranded
it Amazon.com.cn and expanded into general
merchandise and as a platform for other sellers.
Amazon executives emphasized in January 2013
plans to step up investment in China, where it
operates 13 distribution centers, according to
MWPVL International Inc., a logistics consulting
firm. Wal-Mart, which does not operate its own
e-commerce site in China, in 2012 raised its stake
in Shanghai-based Yihaodian, No. 24, to 51%.
However, U.S. home improvement retailer
Home Depot Inc. closed its seven bricksand-mortar stores in China last year, and Metro
Markt, the consumer electronics retailer subsidiary
of Metro AG of Germany, announced in January
2013 it was closing its stores and e-commerce site.
Meanwhile, U.S.-based Toys ‘R’ Us and luxury
goods retailer Neiman Marcus announced plans
late in 2012 to begin selling online in China.
Another U.S. brand that launched its own
e-commerce site last year is handbag manufacturer
Coach Inc., which went live in November 2012 at
Coach.com.cn. Coach, which operates 70 stores in
China, projects selling $300 million there this year,
but did not break out an online projection.
Most Coach stores are in China’s largest cities,
and the new e-commerce site is attracting new customers—it has shipped to customers in more than
110 cities, many where there are no Coach stores,
says David Duplantis, executive vice president of
global digital media and customer engagement. At
David Duplantis, executive vice president of global digital
media, Coach: A new e-commerce site is attracting firsttime shoppers to the brand.
least 40% of purchases on Coach.com.cn are by
new customers.
There are challenges, including the many unauthorized web sellers of Coach products in China.
The Coach site emphasizes that it is the only
authorized online seller of Coach goods in China.
“China is the only market where we have to do
that,” Duplantis says.
That’s just one of many peculiarities of China
that Western retailers will have to understand if
they are to be successful in what will soon be the
world’s largest e-commerce market.
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China’s e-commerce
leader expands
into web-based
TV shopping Alibaba says set-top boxes
by Frank Tong
L
with its new TV operating
system will go on sale soon.
ike major Internet companies in the West, China’s leading e-commerce
player is positioning itself for a central role in what may be the next big
trend in online retail: consumers shopping via web-connected TV sets.
Alibaba Group announced in July 2013 that it had developed an operating system for web-connected TVs and a deal with Wasu Media Holding
Co. to jointly develop a set-top box, the Wasu Rainbow, that will incorporate
the new software and go on sale later in the year. Wasu holds a license to provide Internet-based TV services in China, and says 8 million households use
its service to access movies and TV shows on demand and play online games.
With the new Alibaba operating system, developed by Alibaba subsidiary
AliCloud, consumers will be able to use their mobile phones as a TV remote
control, stream video from their phones, and pay utility bills and shop from
Juhuasuan, a Groupon-like group-buying site operated by Alibaba, making
payments with Alipay, Alibaba’s online payment system that is similar to
eBay Inc.’s PayPal. Shopping on Alibaba’s two big e-commerce marketplaces,
Taobao and Tmall, will not be part of the initial release. Alibaba is No. 1 in the
Internet Retailer Asia 500.
Chinese TV manufacturers Skyworth, Haier and Changhong plans to release
TVs that incorporate the new operating system soon, Alibaba says. What’s
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more, Alibaba has formed an alliance with major
technology companies to develop features and standards for Internet-enabled TVs. They include Wasu
Media, U.S. computer networking gear manufacturer Cisco Systems Inc., and Chinese electronics
companies Hisilicon, Skyworth, Haier, Changhong,
Konka, Mstar, Amlogic and Allwinner Technology.
“The launch of this operating system allows
Alibaba to enter the vast China TV market earlier
than other Chinese internet companies,” Zhijiang
Dou, deputy research director of TNS China, a
consulting company, tells Internet Retailer. “Alibaba
already has an OS platform for smart phone, and
the OS for Smart TV will be the next battlefield.”
Chinese manufacturers shipped 43 million TV
sets in 2012, including 26 million “smart TV”
units that can connect to the Internet, according
to China Market Monitor, a market research firm.
Smart TV shipments doubled in 2012 from 2011,
the report says.
In moving into TV shopping, Alibaba is moving on a parallel path with several major U.S.
technology companies. eBay Inc., for instance, has
offered consumers using iPads the ability to buy
web products related to TV shows, including the
Olympics. While eBay and its PayPal payments
units have tried to position themselves as leaders in
this area, such heavyweights as Amazon.com Inc.
and Google Inc. also have shown signs of wanting
to do more with TV and e-commerce.
For Alibaba, this is not the first time it has
butted heads with Western technology companies. The Chinese e-commerce giant developed
an operating system for mobile phones in 2011,
and reached a deal with Acer, a big electronics
manufacturer in Taiwan to produce phones with
the Aliyun software. However, Acer subsequently
backed off under pressure from Google, provider of
the Android software that Acer uses in many of the
tablets and smartphones it ships.
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Chinese e-commerce
firm turns to Austria
for warehouse
A subsidiary of women’s
technology
by Frank Tong
C
apparel maker Aero signs
a contract with TGW.
hina’s retailers are seeking more advanced warehouse equipment to
handle their rapidly growing volume of orders. That’s led a company
that both makes women’s apparel and provides logistics services to
e-retailers to turn to Austria for automated warehouse technology.
CNSS China Co. Ltd. has signed a contract worth 80 million yuan
($13 million) to obtain equipment for a new e-commerce warehouse from
TGW Logistics Group of Austria. CNSS was founded in 2011 by apparel
manufacturer Aero Technology (China) Co. Ltd. to fulfill orders for Aero and
for other Chinese companies that sell online to consumers.
CNSS planned to build in 2013 a 51,800-square-meter (557,575-squarefoot) central warehouse in Danyang, a city 125 miles from Shanghai, and in
the next several years to construct seven regional warehouses and 15 provincial
distribution facilities.
In outdated warehouses, one worker picking orders may need to walk up to 40
kilometers each day, CNSS says, a system that becomes increasingly unwieldy as
the volume of orders increases.To accelerate the processing time and reduce errors,
CNSS decided to adopt a system from TGW that picks products automatically.
“CNSS bought automated picking stations, conveyor equipment and two
Natrix sorters from TGW,” Julie Sun, managing director of TGW China,
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tells Internet Retailer. Natrix is a TGW brand
of equipment that can directs packages of varying
sizes to the proper conveyor belt for shipping. Sun
says warehouse workers will use mobile terminals
to get order information and follow lights to the
items they need. Products will travel over seven
kilometers of conveyors to 70 packing stations that
will be staffed by 140 workers, Sun says.
CNSS aims for its center warehouse to process
more than 20 million parcels daily and generate
200 million yuan ($32.7 million) in annual revenue
for CNSS in 2014.
TGW, whose clients include such Western
apparel brands as U.S.-based Gap Inc. and Spain’s
Zara generated revenue of more than 455 million euros ($609 million) for its fiscal year that
ended June 30, 2013, up 25% from the prior
year. According to Sun, a year after entering the
China market TGW China has signed more than
100 million yuan ($16.3 million) in contracts
with five clients and projects top 500 million yuan
($81 million) in annual sales by 2017.
“The Chinese logistics market is expected to
grow by at least 30% per year in the future,” Sun
says. “To better serve the Chinese market, TGW
has decided to build a manufacturing plant in
the Shanghai area, which is its fourth plant
in the world.”
Big Chinese e-commerce companies are also
investing in developing logistics facilities. E-retailer
Jingdong has announced plans to invest 5 billion
yuan ($817 million) in five new warehouses this
year. Alibaba Group, meanwhile, joined forces in
2013 with several other e-retailers and delivery services to found Cainiao Internet Technology Ltd.,
which aims to provide logistics services for the
e-commerce industry. Jingdong is No.3 in Internet
Retailer’s Asia 500 rankings and Alibaba is No.1.
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China’s No. 2
web retailer
aims to build a
bigger e-mall Jingdong will compete
by Frank Tong
U
more directly with top
e-commerce player Alibaba.
nlike in the West, the vast majority of retail purchases in China take
place on online marketplaces where many merchants compete, particularly the Taobao and Tmall shopping portals operated by Alibaba
Group Ltd. Alibaba’s biggest competitor, Jingdong Century Trading
Co., has made clear it aims to dramatically increase its share of sales on China’s
web marketplaces.
While its POP marketplace accounts for 20% of the sales today on JD.com,
Jingdong’s e-commerce site, the company aims to increase that to 50% by 2016,
Jingdong founder and CEO Qiangdong Liu said in July 2013 at the company’s initial gathering for retailers and technology providers to merchants that
sell on JD.com, formerly known as 360Buy.com. Jingdong, No. 3 in the 2013
Internet Retailer Asia 500 rankings and No. 2 among Chinese companies on
that list, opened the POP marketplace as a platform where other merchants
can sell in 2010. POP stands for “plan of open platform.”
Jingdong, which launched in 2004 as a web retailer of consumer electronics
products, claims that over 60 million consumers have registered with its site
and that nearly 10,000 merchants now sell on JD.com in 12 product categories, including books, furniture, food and cosmetics. Jingdong says it average
500,000 orders and more than 100 million page views per day. The company
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has been particularly aggressive in building out
its delivery infrastructure, and says it now directly
fulfills orders to consumers in 400 Chinese cities.
While Jingdong’s online sales nearly doubled
last year to $9.63 billion, according to the Internet
Retailer Asia 500 Guide, the company is far behind
Alibaba, which accounts for 90% of online marketplace sales in China, according to e-commerce
analyst Chengdong Li.
Jingdong’s Liu addressed Alibaba’s dominance
in his remarks, without mentioning his competitor
by name. “It is not a good sign when a platform
occupies more than 50% market share,” Liu said.
“Jingdong sees the POP business as a key business
driver in the future, and Jingdong hopes to provide
more options to merchants and customers.”
Analyst Li says the various Chinese e-marketplaces are strong in different categories. For
example, he says, Tencent, No. 8 in the Asia 500,
VIPShop (No. 4) and Dandang (No. 16) are strong
in clothing. Yihaodian (No. 42) is strong in food
sales. Wal-Mart Stores Inc. bought a controlling
interest in Yihaodian last year.
Following in the footsteps of Alibaba’s Tmall,
Jingdong has created flagship stores that give
large companies their own branded storefronts on
JD.com. They must pay a $970 fee plus commissions
of 5-30% and hold trademarks on the brands they
sell. Alibaba created Tmall in 2008 as a platform
for large brands that sought a way to sell online
away from the free-for-all of Taobao where some
7 million merchants offer their goods and where
price competition tends to be intense.
Despite the growing competition among online
marketplaces in China, Alibaba continues to post
robust growth in revenue and profit, as disclosed in
July 2013 in the quarterly earnings report of Yahoo
Inc., which retains a 24% stake in Alibaba even after
selling part of its Alibaba holdings last year.
Yahoo reported the following financial results
for Alibaba Group for the first three months of
2013 versus the same period in 2012:
h Revenue increased 71.5% to $1.382 billion
from $806 million;
h Gross profit grew 91.7% to $1.018 billion
from $531 million;
h Net income increased 189.4%to $680 million
from $235 million.
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A Chinese retail
chain steps up its
e-commerce game
by Frank Tong
S
Suning’s plans include opening a tech center
in Silicon Valley this year.
uning Commerce Group Co Ltd., a leading retailer of consumer
electronics in China, has unveiled plans to expand its online sales
and more closely connect its store and web operations. That includes
allowing a limited number of major brands to sell on Suning.com,
creating a marketplace that may feature less of the price competition that’s
common on competing shopping portals in China.
Suning, No.5 in the Internet Retailer Asia 500 guide, launched in September
2013 its “Suning Cloud” marketplace, with more than 300 merchants now selling on Suning.com. That includes such international brands as apparel maker
H&M, PC manufacturer Lenovo and consumer electronics company Samsung.
Aiming to limit competition among merchants on its marketplace, Suning
says it will recruit only a limited number of premium brands to sell in each category. Suning said it would keep the total number of third-party sellers on its
site to under 10,000 in 2013 and to no more than 50,000 by 2015. After 2015,
the recruiting will focus on overseas brands that don’t already sell in China.
“Limiting the merchants in the same category provides a healthy competition opportunity for brands and helps us maintain premium service quality to
consumers,” Li Bin, vice president of Suning.com, says. Keeping competition in
check could address complaints by many brands that they’re forced to discount
heavily because of stiff pricing competition on major Chinese e-commerce
marketplaces like Tmall and Jingdong. Tmall is a unit of Alibaba Group, No.
1 in the Asia 500; Jingdong is No. 3. There are 50,000 storefronts on Tmall
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representing 70,000 brands, Alibaba says.
Brands selling on Suning.com will pay fees of
2% to 5% of the value of the merchandise sold,
although Suning says it will refund the transaction
fee to merchants in some categories. The fees are
in line with what Tmall charges. However, Suning
says it will not charge any up-front fees. A merchant that opens a store on Tmall must put up a
security deposit of 50,000 yuan ($8170) to 150,000
yuan ($24,510) and pay an annual fee of 30,000
yuan ($4902) or 60,000 yuan ($9804).
Starting as a Best Buy-like electronics retailer
in 1990, Suning launched its e-commerce site in
2009 and has taken several steps since to enhance
online business. The Nanjing-based company
acquired e-retailer Redbaby.com in 2012 to expand
into beauty and children’s categories. Suning also
reorganized its management to give more emphasis
to e-commerce and and integrated its 1,614 stores
with Suning.com. Now the two channels have common systems for managing pricing and inventory.
“Suning is not only a store chain or an e-retailer,
but also an e-retailing service providers. In the
future, our major profits will come from financial
services, logistics services and data analysis to
merchants, not from the price difference between
wholesale and consumer,” says Sun Weimin,
vice-president of Suning Commerce Group.
The retailer also unveiled an investment plan
designed to help it reach its e-commerce goals.
Much as U.S. office supplies chain Staples Inc.
is doing in two pilot stores, Suning planned to
redesign 100 of its stores in 2013 to better show off
merchandise available on Suning.com. Merchants
that sell on Suning’s e-commerce site will be able
to display their merchandise in these “Suning Expo”
stores, either in physical form or through videos or
QR codes that consumers can scan to access online
information. The retailer will provide computers and
tablets to enable consumers to compare store and
online prices, and promises to match prices of major
online rivals. Those stores also will serve as pickup
points where consumers can collect online orders.
Suning, which had 15 regional fulfillment centers
and three storage warehouses as of June 2013, says it
delivers orders in most cities in less than two days. By
2015, the company says it plans to offer express delivery in 5,000 Chinese cites through a network that
will boast 60 fulfillment centers, 12 storage warehouses, 10,000 vehicles and 50,000 delivery workers.
The company also plans to expand its I.T. development staff from 4,000 to 10,000 by 2015. Suning
has two research centers and planned to open three
new centers by the end of 2013, including one in
Silicon Valley for researching data mining, cloud
computing and web search technology.
Suning’s online sales reached $1.73 billion in
the first half 2013 and the company has set a goal
of reaching 300 billion yuan ($49 billion) in annual
sales by 2020. According to iResearch, a Beijingbased research firm, in Q2 2013 Suning had a 5%
share of the business-to-consumer e-retail market
market in China, behind Tmall (50.8%), Jingdong
(17.1%) and Tencent Holdings (5.6%.) That B2C
market calculation excludes the largest online marketplace in China, Taobao, which is operated by
Alibaba and offers products from some 7 million
individuals and small businesses. China e-commerce analysts typically categorize Taobao’s sales as
consumer-to-consumer, or C2C.
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Bain predicts China
will overtake the
U.S. in e-commerce
by Frank Tong
I
E-retail in China will
grow 32% a year
through 2015.
t was only a matter of time before Chinese consumers’ enthusiastic embrace
of online shopping would make China the No. 1 e-commerce market in the
world, surpassing the United States. That time has come, says U.S.-based
consulting firm Bain & Company.
Chinese consumers spent 1.3 trillion yuan ($210 billion) online in 2012 and
that will reach 3.3 trillion yuan ($540 billion) by 2015, Bain says. The report
says China’s e-commerce market grew at a compound annual growth rate of
71% from 2009-2012 and projects annual growth of 32% from 2013-2015.
By contrast, Bain estimates U.S. e-retail growth at 13% for the entire period
2009-2015.
While the Bain report does not project 2013 e-commerce sales in the two
countries in dollar terms, 32% growth in China’s e-commerce sales from 2012
would amount to $277 million in online sales in 2013. 13% growth from 2012
U.S. online retail sales of $225 billion, according to the U.S. Department of
Commerce, would put U.S. e-retail sales in 2013 at about $254 billion.
The Bain report explicitly predicted that China would overtake the U.S. in
e-commerce. “The year 2013 will be remembered as the one in which China
surpassed the U.S. as the world’s largest digital retail market,” write analysts
Serge Hoffman and Bruno Lannes in the report, “China’s e-commerce prize.”
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China’s digital market: No. 1 and growing
Indexed market size of online shopping (including USD depreciation)
12
9
China
U.S.
6
3
0
2009
2012
2015 (Fall)
Sources: iResearch, China stastics bureau, US Department of Commerce, Euromonitor, Bain analysis
“Digital retailing has furiously transformed
shopping and purchasing habits, opening up vast
opportunities for retailers and brands that pay
attention to the nuances of massively changing
consumer behavior.”
Drawing on a survey of 1,300 Chinese online
shoppers, Bain says Chinese shoppers spend more
time online comparing prices than shoppers in
other countries. The Bain survey finds more than
70% of respondents say they frequently go online
to compare prices among web retailers and with
bricks-and-mortar stores.
The report also makes these observations about
Chinese online shoppers:
h They have little brand loyalty. They not only
choose from multiple brands, but also purchase
from different stores.
h Price is the No. 1 reason they shop online.
h They embrace technology, especially mobile
phones. 60% of shoppers surveyed use smartphones
to browse or buy products. By 2012, 66% of Chinese
mobile users owned smartphones, compared with
53% in U.S.
h They often favor foreign products due to
health concerns. Chinese customers purchased
10% of all infant formula and 7% of cosmetics from
e-commerce sites outside of mainland China, such
as in Hong Kong and Australia.
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A web-only mobile
phone maker
outsells Apple
Web-only Xiaomi updates
in China
by Frank Tong
W
its mobile operating system
based on suggestions from fans.
hile Apple Inc. fans line up around its stores to get the latest
iPhone, Chinese phone maker Xiaomi, which sells exclusively online, draws a crowd to its web site every time it
releases a new handset. When it introduced its first phone,
Mi-I in 2011, consumers placed 300,000 orders in two days and a later release
drew 200,000 orders in just 45 seconds, the company says.
Xiaomi, founded in 2010, sold 7 million handsets in 2012 and generated
revenue of $2 billion. In the first half of 2013 the Beijing-based company sold
7 million handsets and projected 2013 sales would hit 15 million phones and
$4.1 billion in revenue.
Its Internet-centric marketing philosophy has turned the 3-year-old company into a major competitor in China’s hot smartphone market with much
larger global competitors. According to Canalys International, a research company, in the second quarter of 2013, Xiaomi had a 5% share of China’s smartphone market, compared to 17.6% for top brand Samsung and 4.8% for Apple.
But founder and CEO Jun Lei does not compare Xiaomi to device makers like
Samsung and Apple. “We are an Internet company, not a phone maker,” he says.
Indeed, the Internet is at the center of Xiaomi’s business. It sells its Mi
phones exclusively on Xiaomi.com, typically selling 200,000 handsets a
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week. The company arranges production based
on the orders received, which means it’s never left
with unsold inventory. The phones are produced
by Foxconn, a major electronics contract manufacturer, which also produce iPhones for Apple.
Customers may have to wait up to a month to
receive the latest version of a Xiaomi phone, but
they get a phone that analysts say has many of the
features of a Samsung or Apple device for a much
lower price. For example, Apple sells the iPhone 5
on its China web site starting at 5,288 yuan ($864),
while Xiaomi’s new Mi-3 handset costs 1,999 yuan
($327). The company name means “small rice” in
Mandarin and its logo “MI” is an abbreviation for
“mobile Internet.”
And Xiaomi uses the web to do more than
take orders. The company has built a web site for
its “Mi fans” where 4 million registered users can
find updated applications and learn about technical
innovations from other users. Some 200 fans clubs
in major Chinese cities organize online and offline
Xiaomi’s
mobile phone
and its mascot
activities. Xiaomi invites fans to submit feedbacks
and suggestions. Based on that feedback, Xiaomi
updates the MIUI operating systems of the Mi
phone every Friday, encouraging more suggestions
as consumers see they can contribute directly to
designing the next-generation product.
Fans’ enthusiasm shows up on China’s online
social networks. After Xiaomi released it Mi-3
phone in this month over 1 million fans clicked
“Like” on Xiaomi.com and posted 470,000 comments in just several days. On the popular Chinese
social network Weibo, 1.6 million fans follow
Xiaomi’s official account. In contrast, Apple does
not have an official account on Weibo.
Xiaomi is moving to build on its early success. The
company announced in August 2013 the hiring of
Hugo Barra, Google Inc.’s former head of Android
product management, to lead global expansion. At
the same time, the company unveiled its newest
Mi-3 phone at 1999 yuan ($327) and a 47-inch
Smart 3D TV, called Mi-TV, for less than $500.
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E-commerce in China
grows 35% in first
nine months
Total retail growth
of 2013
by Frank Tong
O
is 8.9%, reports the
Ministry of Commerce.
nline retail sales in China grew 35% in the first nine months of
2013 over the same period a year earlier, equaling the 1.3 trillion
yuan ($212.4 billion) of online sales for all of 2012, according to
China’s Ministry of Commerce.
China’s total retail sales grew 8.9% in the first three quarters, the ministry
reported last week.
“While sales from department stores, supermarkets and brand stores
increased by 11.1%, 8.4% and 6.9% from January to September, e-retailing
sales increased 34.7% to 1.3 trillion yuan and become a bright spot in the
first nine months,” Shen Danyang, director the Bureau of International Trade
Negotiations at the Ministry of Commerce, told reporters in Beijing.
If China’s e-retail sales continue to grow at a 35% in the fourth quarter
they would reach $282 billion for all of 2013, and likely eclipse the U.S. as the
world’s leading online retail market for the first time. U.S. e-retail sales totaled
$225.5 billion in 2012 and grew by nearly 17% in the first two quarters of 2013,
according to the U.S. Department of Commerce. 17% full-year growth would
put U.S. e-retail sales at $264 billion for all of 2013.
U.S.-based consulting firm Bain & Company projected in August 2013
that China’s online retail sales would exceed those in the United States in
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e-commerce in china
2013, basing that projection on estimates from
Chinese research firms.
Apparel and consumer electronics are the largest categories of online retail sales, the Ministry
of Commerce said in its report. The ministry also
disclosed that it had begun in 2013 conducting a
survey of 3,000 online retailers in China to produce its estimates of business-to-consumer online
sales. It previously had relied on data from Chinese
research companies.
Some 200,000 Chinese companies now
engage in cross-border e-commerce, the ministry said, including business-to-business and
business-to-consumer online trade. The total volume of cross-border e-commerce trade amounted
to 2 trillion yuan ($US327 billion) in 2012, the
ministry says, including both B2B and B2C sales.
The Chinese government intends to take additional
steps to make cross-border Internet trading easier
and to lower costs, the ministry says.
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e-commerce in china
Behind Alibaba’s
$5 billion
e-commerce
Deals with retail chains and sales
day
by Frank Tong
C
of travel and financial products
contributed to a record sales day.
hina often produces eye-popping economic statistics, and that
includes the report in November 2013 from Alibaba Group
Holding Ltd. that its two big online marketplaces booked
$5.75 billion in sales during the annual one-day Singles Day sale.
While merchants on Tmall and Taobao sold plenty of conventional merchandise, the sales Alibaba reports also include substantial revenue from selling
financial and travel products, and deals with store-based merchants.
Alibaba, China’s dominant e-commerce company and No. 1 in the Internet
Retailer Asia 500, bolstered its Singles Day sales—which were almost double
last year’s $3.0 billion—with several new features.
A big one was the introduction of financial products such as insurance policies
and bond funds. Alibaba obtained government approval shortly before the Nov. 11
Singles Day sale to offer financial services, and the Taobao Licai (Licai means
“wealth management”) section of the Taobao marketplace generated $149 million
in revenue on Singles Day, Alibaba says. (Singles Day comes from the 11.11 notation for Nov. 11, and Alibaba began promoting it as a big day for online sales in
2009, with many other merchants coming on board in recent years.)
Another new features was an “O2O”—offline to online—partnership with
such major store-based retailers as Gap Inc., Toys ‘R’ Us Inc. and Japanese
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e-commerce in china
fast-fashion retailer Uniqlo Co. Ltd. to promote
Singles Day sales through 30,000 stores in 1,000
Chinese cities. The stores offered deals in advance
of Singles Day that consumers could select, completing the purchase online on Nov. 11. For example, shoppers could scan a QR code on posters at
Gap stores to get $3 off purchases on Gap’s Tmall
storefront on Nov. 11.
The promotion was designed to drive consumers into participating stores in advance of Nov. 11
as well as to stimulate buying on Singles Day. Gap
did not respond to a request for comment on its
Singles Day results.
Alibaba also stimulated demand by sending out
$50 million worth of digital coupons in advance
of the sale. Some of the coupons were specifically
designed to drive purchases through mobile devices
or on social networks.
Travel products also boosted sales on the Alibaba
sites. Bargain hunters snapped up 60,000 travel packages in the first 12 hours of the Singles Day event,
generating $25.8 million in revenue, Alibaba says.
The company has not disclosed full-day travel sales.
Alibaba says it shipped 60 million parcels on
Monday, the same day orders were placed, out of
the 152 million it expected to ship to fulfill all
Singles Day orders. Contributing to the fast delivery were the services of a new logistics company
called Cainiao Network Technology Co., created
in 2013 by Alibaba and six major Chinese delivery firms. During the Singles Day period Cainiao
advised merchants on inventory planning and
helped delivery companies plan to handle the spike
in demand, Alibaba says.
While the Singles Day online sale is most associated with Alibaba, which introduced the sale in
2009 to promote its Tmall marketplace aimed at
larger brands launched the previous year, many other
Chinese merchants also promoted online sales on
Nov. 11. In some cases, they extend the sale beyond
just the one day in order to better compete with
Alibaba’s dominant marketplaces. Here are some
Singles Day results from other web merchants:
h Alibaba’s nearest competitor, Jingdong
Century Trading Co., racked up $1.6 billion in sales
in a two-day event that spanned Nov. 11-12. In 2012
Jingdong, No. 3 in the Asia 500, sold $410 million
in a three-day event. Customers placed 6.8 million
orders in the first day of this year’s sales, the retailer
says. Orders from mobile devices increased five times.
h From Nov. 8 to 11, Suning.com, the e-commerce site of consumer electronics and appliance
retailer Suning Commerce Group Co. Ltd. generated 6 million orders. Sales from mobile devices
increased 900% from last year, says Suning, No. 5
in the Asia 500.
h Jiuxian.com, a top Chinese online wine
retailer and No. 33 in the Asia 500, increased its
Singles Day sales 267% to $36.3 million, from
$9.9 million a year earlier. Besides its own site,
Jiuxian sell wines through its store on Tmall.com.
h On Nov. 11, Yixun.com, a retailer of consumer electronics and general merchandise, booked
600,000 orders worth $82 million.
Dear Retail,
IS YOUR
COMMERCE
PLATFORM
READY TO GO
GLOBAL?
Love, hybris
CLIC
K
LET’S HERE AN
D
FIND
OUT.
PART II:
WESTERN BRANDS
SELL ONLINE
IN CHINA
UK fashion retailer Asos plans to launch a China e-commerce site . . . . . . . 38
There may be e-commerce gold in China, but it’s hard to mine . . . . . . . . . 40
Wal-Mart’s Chinese e-commerce partner starts selling fresh food . . . . . . . . 43
Xiu.com helps eBay sellers expand into China . . . . . . . . . . . . . . . . . . . . 45
Cherries to China from the U.S., via Tmall.com . . . . . . . . . . . . . . . . . . . . 47
The National Football League looks for an e-commerce touchdown in China . 49
An umbrella brand prepares for a torrent of traffic in China . . . . . . . . . . . 51
China’s cross-border e-commerce tops $375 billion in 2012 . . . . . . . . . . 54
Part I: E-Commerce in China
Part III: Chinese e-retailers look abroad
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western brands sell online in china
UK fashion retailer
Asos plans to
launch a China
e-commerce site Asos previously
by Thad Rueter
A
opened an office
in the United States.
sos Plc Holdings, a U.K.-based fashion retailer, will launch an
e-commerce site in China using technology from hybris AG.
Asos is No. 32 in the recently published Internet Retailer Europe
500. According to that guide, its sales increased nearly 41% year
over year in 2012.
The move into China represents the latest international push by Asos, which
a year ago opened an office in New York, and which says the United States is
its No. 2 market after the United Kingdom. The company has said it aims to
become the top global fashion destination for twenty-something shoppers.
“Within the [Asia-Pacific] region, China is recognized as being the primary driver of growth and, as such, it’s a market in which we want to be a major
player,” says Pete Marsden, chief information officer at Asos.
The Asos China site, scheduled to launch in October, 2013 will use the
hybris Commerce Suite e-commerce software. Asos will also offer Chinese
consumers a mobile-optimized site.
The retailer has established a team in China that will manage the business
there as an autonomous unit, says Paramjot Jassal, head of business transformation-international, for Asos. "We realize that to be competitive in the Chinese
market we need to be both close to the customer by operating from within
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China but have the team respond to the wants
and needs of the customer from China," he says.
China will also be the first country outside the
U.K. where Asos will operate a distribution facility.
"The Chinese customer is one of the most demanding customers in the world," Jassal says. "In tier 1
cities same-day and next-day deliveries are the
norm. To compete we knew we would have to have
our product in country close to the customer." The
term "tier 1" refers to China's largest cities, such as
Beijing, Shanghai and Guangzhou.
‘The Chinese customer
is one of the most demanding
customers in the world.’
Asos says it has 6 million active customers, sells
some 60,000 products and ships to 214 countries. It
also operates e-commerce sites in France, Germany,
Spain, Italy, Australia and Russia.
In June 2013, Germany-based business software company SAP AG said it would buy hybris,
which will operate as an independent unit. Hybris
is ranked eighth among vendors of e-commerce
platforms in Internet Retailer’s Leading Vendors
to the Top 1000 E-Retailers guide.
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There may be
e-commerce gold
in China, but it’s
hard to mine Western brands find
by Don Davis
W
Chinese consumers
expect big discounts.
hile athletic shoe brand Puma SE sells online in 31 countries, its No. 1 online sales day came in a country where it
didn’t even have its own e-commerce site and wasn’t selling
its latest styles. The country was China and the date was
Nov. 11, 2012, a date that’s called Singles Day (because of the 11/11 notation)
that’s become China’s equivalent of U.S. online shopping spree days Cyber
Monday (the Monday after Thanksgiving) and Black Friday (the day after
Thanksgiving).
“When I saw those numbers beat Cyber Monday and Black Friday, that
opened my eyes,” says Tom Davis, Puma’s global head of e-commerce.
There was no comparable eureka moment that put China on the map for
Valerie Hoecke, senior vice president of digital for high-end beauty brand
Benefit Cosmetics. But she’s seen studies predicting that China will soon pass
Japan as the world’s leading market for luxury goods. China, she says, “is one of
our cornerstones for growth in the coming years.”
What Davis and Hoecke have in common is that both their brands have
launched freestanding e-commerce sites in China. That’s a big step in China
where many consumers start their online shopping trips at Taobao and Tmall,
two marketplaces operated by Alibaba Group, No. 1 in the Internet Retailer
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Asia 500 rankings, and similar shopping portals
operated by such Alibaba rivals as Jingdong and
the China unit of Amazon.com Inc. Jingdong is
No. 3 in the Asia 500 and Amazon No. 4.
Price competition is fierce on the Chinese online
marketplaces, as both Benefit Cosmetics and Puma
have learned from their experiences selling on
Tmall, the Alibaba marketplace more oriented to
big brands than the larger Taobao, where millions
of mostly small Chinese companies sell in a bazaarlike setting.
The prevalence of heavy discounting is why
Benefit Cosmetics no longer sells on Tmall, Hoecke
says. “We found it extremely promotional, and that
level of promotional focus is out of keeping with
how we present our brand as a prestige brand. We
try not to be all about ‘discount, discount, sale,
sale,’ and that’s very much what selling on Tmall
is all about.”
Puma has been selling on Tmall since August 2011
and early in 2013 started selling on Jingdong.com.
“We’re trying to curb the discount out of the gate
with Jingdong, as we may not have done with Tmall
two years ago,” Davis says. “At Tmall we started
out accepting it’s going to be a 50% discount. Now
we’re trying to pull it back to 30%, and starting on
Jingdong with a similar discount as Tmall.”
Puma's
Tom Davis
Both Benefit Cosmetics and Puma have
launched their own e-commerce sites in China,
and begun the arduous task of persuading Chinese
shoppers to navigate to those brand sites, rather
than going to a marketplace like Tmall and searching for a product or brand.
Benefit Cosmetics has been at it longer, having
launched BenefitCosmetics.com.cn in 2011. The
company has found that some of the basic tools
brands use to market themselves in North America
and Europe don’t work very well in China,
Hoecke says.
Paid search ads deliver poor returns because
relatively few Chinese shoppers go to China’s
main search engine, Baidu, to begin a shopping
trip, instead going to shopping portals like those of
Alibaba and Jingdong. Nonetheless, she says, many
brands advertise there, trying to get in on the boom
in Chinese e-commerce, and that raises pay-perclick costs. “The market hasn’t stabilized yet,” she
says. “Everyone is willing to spend money to get in
front of consumers.”
Nor is e-mail very effective for Benefit
Cosmetics. Hoecke says the young women her
company targets are reluctant to opt in to receive
e-mail, and rarely open the marketing e-mails they
do receive.
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Chinese consumers, she says, are more likely
to communicate with friends via WeChat, a mobile
social network that parent company Tencent says
had 236 million active monthly users in the second
quarter of 2013. Benefit Cosmetics has just started
promoting itself on WeChat and is working on
a mobile version of its Chinese e-commerce site.
“Mobile is super-important,” Hoecke says.
Hoecke would not disclose online sales or traffic
from BenefitCosmetics.com.cn, but says, “We’ve
seen nice growth, 50% over last year.” The sales
alone would not justify operating an e-commerce
site, she says, but the revenue does help support
the Benefit Cosmetic’s four-person digital team in
Shanghai that promotes the brand through social
media and other means.
Benefit Cosmetics built its Chinese e-commerce
site on technology from hybris, which was acquired
in 2013 by Germany-based business software
company SAP AG. Benefit Cosmetics is part of
global luxury brand marketer LVMH, which also
owns Sephora, No. 144 in the Internet Retailer
2013 Top 500.
Puma, part of France-based retail conglomerate
PPR SA, No. 33 in the Internet Retailer Europe
500, prepared for the launch of its e-commerce site
in summer 2013 by putting up a “coming soon”
screen at Cn.Puma.com for several months before
the site’s launch and collecting e-mail addresses.
The company also planned to do some paid search
advertising, put flyers with information about the
web site into shopping bags at the company’s couple of dozen Puma-owned stores in China, and
seek to attract traffic through outdoor and other
traditional forms of advertising, Davis says. He
would not provide details on Puma’s e-commerce
sales in China.
The site will feature a growing catalog of products and “a full-price representation of the brand,”
Davis says, as opposed to the heavy discounts on
the marketplaces like Tmall. Puma built its Chinese
site on the e-commerce platform of U.S.-based
software company Demandware Inc., which is
also supplying the technology for 23 online stores
Puma has launched around the world in the last
two years, Davis says.
Davis says it will take time to educate
Chinese consumers to shop at a brand site like
Cn.Puma.com, but the results from the 11/11
online shopping holiday in 2012 convinced him
it’s time to invest in a brand site in China. “This is
going to be something,” he says. “If we can figure
out how this is going to work from the consumer
perspective this is going to be massive.”
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Wal-Mart’s Chinese
e-commerce partner
starts selling
The Chinese e-retailer
fresh food
by Frank Tong
C
Yihaodian is selling fresh fruit
in Beijing and Shanghai.
hinese online retailer Yihaodian is expanding its sale of fresh food
with the help of its majority shareholder, Wal-Mart Stores Inc.
Yihaodian announced in August 2013 that it had started
selling fresh fruit to consumers in Beijing, five months after first
offering fresh produce from its e-commerce site to shoppers in Shanghai, the
e-retailer’s home city. Yihaodian officials say they now receive 1,200 orders per
day for fresh fruit, and that they aim to add fresh meat and vegetables at a later
date. The e-retailer says it hopes to expand fresh food delivery to other large
cities, including Guangzhou and Shenzhen.
“Since Yihaodian can get the support of the logistics networks of WalMart China, we could enter the fresh food section faster and easier than
others,” says Guo Dongdong, vice president of Yihaodian. Wal-Mart, which
raised its stake in Yihaodian to 51% in 2012 operates some 390 stores in 150
cities in China.
Wal-Mart’s assistance takes several forms. Wal-Mart warehouses store the
fresh fruit that Yihoadian sells, though Yihaodian contracts with delivery services that can handle perishable items to deliver orders to consumers. Another
important aid is that Wal-Mart, which sells fresh food in its bricks-and-mortar
stores in China, hold import licenses for fresh food. Many Chinese prefer
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imported food items as there have been many press
reports about contaminated Chinese food products.
Guo notes that fresh food makes up about 20%
of sales in physical supermarkets, and that offering items like meat, vegetables and fruit could
give Yihaodian a big boost. “It is an attractive
category that could enhance repeat purchasing for
e-retailers,” he says.
China’s farmers are also seeing the opportunity to sell food online directly to residents of
major cities. According to a 2012 report on sales
of agricultural products from Alibaba Group, the
dominant e-commerce platform in China, 260,000
merchants in 2012 sold nearly 20 billion yuan
($3.3 billion) worth of agriculture and food products on Alibaba’s sites, Tmall and Taobao. Alibaba
predicted 1 million merchants would sell 50 billion
yuan ($8.2 billion) worth of food or agriculture
products on its platform in 2013. Alibaba is No.1
in the Internet Retailer Asia 500.
There is still, however, plenty of room for
growth in selling fresh food online in China. Only
1% of food is now purchased on the web in China,
according to Alibaba. By comparison, the online
penetration rate for beauty and cosmetics was
16.3% by the end of 2011, for electronics 15.6%
and apparel 14.3%.
Yihaodian, founded in 2008, says the knowledge it has gained about its customers will help
it gauge demand for fresh products. The company
has grown rapidly in the past five years, founder
and CEO Yu Gang said at a press conference in
August 2013 announcing the fresh fruit delivery
program in Beijing.
“Our traffic has increased 1000 times from five
years ago, and listed products have grown from
only 3,000 to 2 million,” Yu said. Yihaodian says
its web site traffic exceeds 10 million visits per day.
Wal-Mart does not disclose Yihaodian’s sales, but
says they are growing at a double-digit percentage
rate and that Yihaodian has doubled the number of
active customers from a year ago. Internet Retailer
estimates Yihaodian’s 2012 sales at nearly $224, and
ranked the e-retailer No. 42 in the Asia 500.
“We have six fulfillment centers with 260,000
square meters of storage space,” Yu told reporters.
“Since the market develops so fast, the orders of
Yihaodian exceeded the maximum capability of
warehouses by six times in five years. Now we are
building hundreds of thousands of square meters of
warehouse space in Shanghai and Dongguan.” He
noted that Yihaodian provides same-day delivery in
major metropolitan cities and that its own fulfillment network delivers 70% of orders. “Our customers’ satisfaction ratio for delivery is 90%,“ he added.
The e-retailer says it is also making progress in
attracting mobile shoppers. Yihaodian says it has
more than 10 million mobile registered users and
that mobile sales increased 10 times over 2012 in
the first half of 2013.
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Xiu.com helps
eBay sellers
expand into
China
by Frank Tong
U
Xiu.com provides
web site and
fulfillment services.
.S. merchants selling on eBay Inc.’s marketplace are getting an assist
from Chinese e-commerce services provider Xiu.com to start selling products to online shoppers in China. Since November, 2012
Xiu.com has been helping U.S. eBay merchants to set up shops on
Chinese e-marketplaces such as 360Buy.com, Jingdong Mall and Tmall.com,
a unit of Alibaba Group, and handling their international fulfillment needs.
Alibaba Group is No. 1 in Internet Retailer’s 2013 Asia 500. Jingdong Mall
is No. 3
Xiu.com created a sub-site, eBay.xiu.com, to sell items from those sellers,
which the site refers to as “eBay style.” On that site, the vendor translates U.S.
merchants’ product listings into Chinese and localizes the product descriptions
for Chinese shoppers, eBay says. For instance, Chinese customers typically
request more detailed photos of a product before they place an online order
and Chinese clothing sizes differ from U.S. sizes—details Xiu.com handles for
American sellers.
When a Chinese buyer orders a product from a U.S. merchant, Xiu.com
buys product on her behalf and ships it to its fulfillment center in Texas. Since
Xiu.com can aggregate multiple orders from many buyers and ship them all
together, it helps merchants reduce the costs of cross-border shipping by
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as much as 40%, it says. Xiu.com says it plans to
open a second fulfillment center in Los Angeles
this year.
Xiu.com also employs 10 professional appraisers who inspect the products to make sure buyers
receive authentic goods; they also give feedback to
U.S sellers after the transaction. Chinese customers
need to wait at least 10 days for products bought in
the United States to reach them, the vendor says.
“The Chinese retailing industry is so fragmented that new brands can hardly find a national
department store chain to cooperate with, and so
the speed for expanding there would be very slow
otherwise,” Wenhong Ji, founder and CEO of Xiu.
com, tells Internet Retailer.
Besides eBay, Xiu.com works with other overseas
online marketplaces or retailers, like South Korean
‘The Chinese retailing industry is so
fragmented that new brands can
hardly find a national department
store chain to cooperate with.’
online market platform Gmarket.com, U.S apparel
retailer Karmaloop.com and U.S online jewelry
retailer Blue Nile Inc. More than 300 brands use
Xiu.com to sell products in China, including Gucci,
American Apparel Inc. and The Children’s Place
Retail Stores Inc., the company says.
The average ticket price for a Xiu.com client is
$90 and its sites have 300,000 to 400,000 unique
visitors per day. The vendor takes a service fee of
about 20% on all clients’ sales, it says. Xiu.com’s
sales were $150 million in 2012 and it expected to
grow by 20% in 2013 it says.
Gmarket is a unit of eBay Inc., No. 7 in the
2013 Asia 500.
Karmaloop is No. 118 in the 2013 Top 500
Guide; Blue Nile, No. 74; American Apparel,
No. 284 and The Children’s Place, No. 112.
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Cherries to
China from
the U.S., via
Tmall.com
by Frank Tong
T
Chinese consumers
can pre-order U.S. cherries
on Tmall.com.
hrough the magic of e-commerce, consumers in such big Chinese
cities as Beijing, Shanghai and Guangzhou are receiving cherries
just two days after they are picked by producers in the U.S. states of
Washington, Oregon, Idaho, Montana and Utah.
The Chinese shoppers place orders on a special section of Tmall.com, along
with Taobao.com, one of the two big online marketplaces operated by Alibaba
Group, China’s dominant e-commerce company and No. 1 in the Internet
Retailer Asia 500. That area of the site, Yushou.Tmall.com, is set aside for
consumers to place deposits on items for later delivery.
A consumer pays a deposit of 10 yuan ($1.60) to reserve a box of cherries.
Once the cherries are picked, they are placed in 2-kilogram (4.4-pound) boxes
along with four bags of ice to keep them cool, and shipped by air to China. The
price of a 2-kilogram box is 179 yuan ($29.21), or $6.64 per pound, 22% less
than the $8.50 per pound price of comparable cherries in Wal-Mart Stores
Inc.’s bricks-and-mortar stores in China, according to China media reports.
Wal-Mart is No. 4 in the Internet Retailer Top 500, which ranks North
America’s leading online retailers, and No. 244 in the Asia 500.
Tmall first offered the option to pre-order U.S. cherries from June 27
to July 8, 2013. That led to over 50,000 orders, says Keith Hu, overseas
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marketing director for the Northwest Cherries
Association, which promotes sales of cherries
from Washington, Oregon, Idaho, Montana and
Utah. There were two other cherry promotions on
Tmall in July 2013. Hu expected total shipments
that month would exceed 200,000 kilograms, or
roughly 450,000 pounds.
The U.S. Department of Agriculture’s office
in Shanghai collaborated with the Northwest
Cherries Association in working with Tmall on the
cherries promotion.
“The power and potential of e-commerce in
China is unparalleled compared to any other
country or region around the world; it has already
become a new way of life in China, especially
for younger consumers,” says U.S. ambassador to
China Gary Locke, who attended several events
promoting U.S. cherries. “E-commerce is bringing
about new opportunities for U.S. and facilitating
enhanced U.S.-China trade, and we are proud to
be serving as a bridge for our businesses into the
burgeoning Chinese consumer market.”
Tmall has offered the cherries only to consumers in 35 of China’s biggest cities because China
has limited facilities for preserving products at
low temperatures as they move through the supply
chain from producer to consumer. “After China
‘After China builds more sophisticated
cold-chain networks, we hope
Chinese customers will consume
more U.S foods in the future.’
builds more sophisticated cold-chain networks, we
hope Chinese customers will consume more U.S
foods in the future,” Locke says.
In fact, Chinese consumers have been demanding
more imported food—and looking for it online—
recently as a result of widespread warnings about
the safety of certain Chinese food products. Sales
of imported food on Tmall have increased 500% in
the first half of 2013 over the prior year, says Daniel
Zhang, president of Tmall.com.
U.S. agricultural exports to China in 2012 were
$26 billion, up 38% from 2011, according to the
U.S. Department of Agriculture. The Northwest
cherry started selling heavily to Japan and Taiwan
several years ago, Hu says, but in recent years the
biggest growth has been in sales to China. He says
producers in the five northwestern states he represents sold 2 million 9-kilogram boxes of cherries
in 2012, up from 200,000 boxes in 2005.
Tmall touts the pre-order model as ideal for
agricultural products, because it allows the producer
to ship exactly what customers have ordered. The
Alibaba unit says pre-ordered products typically
reach Chinese consumers within two to three days
of their being shipped directly to the end customer,
versus seven days if they are shipped to a warehouse
and then sold through a store.
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The National Football
League looks for
an e-commerce
touchdown
It now sells apparel,
in China
equipment and accessories
via Tmall.com.
by Amy Dusto
T
he National Football League announced plans to kick off a new
e-commerce site in China in September 2013. The online store will
sell apparel, equipment and accessories on Chinese online marketplace
Tmall, a unit of Alibaba Group Holdings Ltd., according to the NFL.
Alibaba is China’s dominant e-commerce player and the No. 1 e-retail company in the Internet Retailer 2013 Asia 500.
More than 5 million Chinese consumers are highly interested in the
National Football League, and another 15 million have at least some interest
in it, according to NFL China, the league’s fifth international office, which
opened in Beijing in 2007. That fan base has been growing 35% year over year
in the country, it says.
In order to sell in China, the NFL will use technology and services from
Export Now, which helps U.S.-based retailers to sell in the country through
Chinese-language stores on the Tmall and Taobao e-marketplaces. The company provides market research and selling advice; distribution services; help
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‘NFL products are
becoming increasingly
popular around the world.’
with regulatory compliance, such as import tariffs, trademark registrations and taxes; e-commerce
store creation; online marketing and advertising
services; fulfillment and customer support; and
transaction, inventory and information technology
management. Export Now says 110 clients worldwide use its services.
“Export Now offers the NFL the ability to
accelerate our international development and
expand our access to the Chinese consumer market,” says Richard Young, managing director of
NFL China. “NFL products are becoming increasingly popular around the world. We are excited at
the opportunity to increase the availability of our
teams’ apparel, equipment and accessories and serve
our fans in China.”
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An umbrella brand
prepares for a
torrent of traffic
Totes-Isotoner
in China
by Don Davis
S
could benefit from competition
between Alibaba’s Tmall and Amazon China.
tarting early in 2012, U.S.-based Totes-Isotoner Corp. has been introducing Asian consumers to its umbrellas, shoes, bags, hats and other
weather-related accessories. The effort could take a big step forward in
coming months as the brand steps up its online marketing in China
and takes advantage of developing competition between two e-retail giants:
Alibaba Group, China’s dominant e-commerce player, and the China unit of
Amazon.com Inc.
Totes-Isotoner in spring 2013 launched its storefront on Alibaba’s Tmall
marketplace, which is designed for larger brands, at Totes.Tmall.com. That
reflected its strategy of promoting the Totes brand in Asia. Traffic is starting
to increase as the U.S. company begins to market it more aggressively, and vice
president of marketing Nancy Koglmeier says she’s excited about the prospects
for selling online in China. “It’s clear to me that the way to put Totes on the
map is through the Internet,” she says.
Totes-Isotoner began ramping up its search marketing program in June
2013, and traffic to the Totes storefront on Tmall grew from a few hundred visitors a day to nearly 10,000 per day, says Joseph Ranieri, CEO of 101Elements
Private Ltd., a Singapore-based company that is working with Totes-Isotoner to
introduce its products to Asia. That could increase to hundreds of thousands
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per day once Totes-Isotoner launches a full-scale
online marketing campaign, Ranieri says. He says
the company is holding off doing that for about a
month while it stocks up on inventory in preparation for higher sales.
Even as traffic has increased, the conversion rate
also has gone up, from 1.8% to 2.5%, and the goal
is to reach 3-3.5%, Ranieri says. Sales are still modest, but the aim is to sell $2-2.5 million this year on
Tmall, Ranieri says.
Tmall offers brands like Totes-Isotoner attractive
home pages with room for large fashion shots, which
fits with the Totes-Isotoner strategy of positioning
itself to Asian consumers as a high-end, fashionable line of weather-related apparel and accessories, Ranieri says. Alibaba launched Tmall in 2008
to give brands a more appealing alternative to the
bigger Taobao bazaar where 6.6 million merchants
compete for the attention of some 500 million registered shoppers. There are some 70,000 storefronts
on Tmall operated by about 50,000 merchants.
Between Taobao and Tmall, Alibaba accounts
for well over half of Chinese online retail sales by
most accounts, and Alibaba is No. 1 in Internet
Retailer’s Asia 500, which ranks e-commerce companies by their online sales in the region. Alibaba’s
estimated $170 billion in 2012 online sales in
China dwarfs all competitors, including Amazon,
which booked $1 billion in online sales in China in
2012, by Internet Retailer’s estimates. But Amazon
is launching a new initiative that Ranieri says will
challenge Tmall and give Totes-Isotoner another
opportunity to reach Chinese web shoppers.
According to Ranieri, Totes-Isotoner will be one
of the first companies in what Amazon is calling
its “concept store,” which will offer participating
retailers broad freedom to design brand-friendly
storefronts—much as Tmall does in the premium
brand section of its site. “Amazon and Tmall will
be fighting it out for brand attention through these
premium brand platforms,” Ranieri says.
Amazon did not respond to a request for
comment.
While Amazon doesn’t sell nearly as much as
Alibaba’s marketplaces, it attracts a lot of Chinese
visitors: about 105 million monthly unique visitors
in 2012 compared to 200 million for Alibaba’s sites,
according to traffic data from comScore Inc. reported
in Internet Retailer’s Asia 500 guide. Many Chinese
consumers distrust Chinese companies and go to
Amazon to check prices and to buy, Ranieri says.
Amazon already sells Totes products on its site,
taking 25-40% of the purchase price. When Totes
sets up its own store on Amazon, the marketplace
will take about 20-25%, Ranieri says. Tmall’s commission is 5% of the sale price, plus another half a
percent for stores in the premium mall section, for
a total of 5.5%.
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In exchange, Tmall works hard to market
brands like Totes to the 250 million consumers who
shop on Tmall, Ranieri says. Tmall puts new brands
on its home page to give them visibility and has
invited Totes to participate in a monthly promotion
in which Tmall features about 20 brands. In addition, Tmall will work with Totes to target its paid
search spending, for example showing ads for Totes
umbrellas to shoppers in southern China during the
wet winter months and to those in northern China
when the rainy season hits that region. “It’s hugely
effective marketing spend,” says Ranieri, who previously worked with U.S. footwear manufacturer
Crocs Inc. to introduce its brand in Asia.
But Ranieri notes Western brands like TotesIsotoner and Crocs entering China must understand that the Chinese online shopper asks a lot of
questions via telephone, e-mail, text message and
live chat. “They really delve into what the product
is,” he says. “How big is the opening of the arm, how
long from neck to the end of the tail of the coat?
Every measurement and material is asked about
before or as they make this purchase decision.”
There are also logistics and payment challenges
that may take U.S. companies by surprise. Sameday delivery is expected in major cities, and many
consumers pay in cash on delivery. It’s not uncommon, Ranieri says, for a consumer to order three
pairs of shoes in different sizes, try them on while
the courier waits, and send back two, paying in cash
or with a credit card for the one pair she keeps.
To help handle such issues as customer service,
web site design and delivery, Ranieri and TotesIsotoner have engaged Export Now, a company that
specializes in helping Western brands sell online in
China, particularly on Tmall. Export Now created
the Totes site on Tmall in 45 days, Ranieri says. “We
were leveraging off an existing team that knew what
they needed to do, that helped us prepare FAQs and
put together a really robust site with lots of information to provide to the consumer,” he says. He
says intermediaries like Export Now typically take
a cut of 15-30% of online sales they help facilitate.
The Totes stores on Tmall and Amazon are just
part of Totes-Isotoner’s strategy for entering Asia.
It also sells on Japan’s leading e-commerce marketplace, Rakuten Ichiba, No. 2 in the Asia 500, and has
placed its products in some 750 bricks-and-mortar
stores. Those stores are mostly in Japan, but also
include key department stores and specialty shops
in major Chinese cities like Beijing and Shanghai.
The company has also entered South Korea, mostly
via the web, as well as Australia, New Zealand and
Singapore. The company planned to bring its products to the Philippines, Malaysia and Hong Kong
in 2013, and to Taiwan in 2014, Ranieri said.
Also part of the Asia strategy has been the
creation of a regional e-commerce site, Totes.
Asia, where visitors can find background on the
company and its brands and locate stores selling
Totes-Isotoner products, but not buy, at least for
now. The site is currently in English and Japanese,
with plans to add simplified Chinese for mainland
China, Korean and traditional Chinese (the written language used in Taiwan and Hong Kong.)
“While we don’t expect the kind of volume we will
get from local partners like Rakuten and Tmall,”
Ranieri says, “we think it will be important to give
consumers confidence in the brand and to tell our
brand story cleanly and clearly.”
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China’s cross-border
e-commerce tops
$375 billion
Mostly it’s foreign
in 2012
by Frank Tong
E
businesses buying from
Chinese firms, iResearch says.
-commerce transactions between China and other countries increased
32% to 2.3 trillion yuan ($375.8 billion) in 2012 and accounted for
9.6% of China's total international trade, according to the “2012 China
Cross Border e-commerce report” from iResearch, a research firm
based in Beijing that specializes in online commerce. Business-to-business
transactions—mostly overseas companies ordering online from Chinese
firms—accounted for 95% of that cross-border trade, with Chinese consumers
buying from foreign web sites most of the rest.
“The market continues to develop at high speed and will reach 6.5 trillion yuan ($1.1 trillion) by 2016, representing 19% of China’s total import
and export volume of China,” Xie Chun, the iResearch analyst who wrote the
report, tells Internet Retailer.
Xie adds, “The 2.3 trillion yuan transactions include B2B and B2C. B2C
e-retailing is approximately 5% of total cross border e-commerce volume in
2012, which is 115 billion yuan ($18.8 billion).”
More than 90% of cross-border e-commerce transactions in 2012 were
exports to other countries from China. The U.S. purchased the most goods
from China, 17.2% of the total, including both purchases by businesses and
consumers. Europe was next at 16.3%, followed by Hong Kong (15.8%),
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South Asia (10%), Japan (7.4%), Korea (4.3%)
and India (2.3%), according to the iResearch report.
Popular categories for cross-border e-commerce
trade include electronics, apparel and sporting
goods, the report says.
In terms of business-to-consumer cross-border
e-commerce, much of it comes from Chinese customers ordering from overseas sites. According to
iResearch, many of these shoppers are young adults
living in cities with relatively high income. Their
purchasing frequency is low, but their spending per
purchase is high, the report says. Chinese consumers often purchase beauty, baby, electronics and luxury products from overseas online retailers. As more
Chinese customers become accustomed to purchasing directly from overseas, iResearch predicts
cross-border online imports will grow gradually.
IResearch declined to make public its estimate
of sales by Chinese retailers to online shoppers
overseas. But some Chinese companies are starting to sell online to shoppers in other countries,
including on sites operated by U.S.-based eBay Inc.
In a November 2012 report eBay said more than
7,500 eBay sellers and PayPal merchants in China,
Hong Kong and Taiwan were selling more than
$100,000 a year to online shoppers in other countries, with 598 selling more than $1 million a year.
Another example is Beijing-based LightInTheBox,
which specializes in selling online to overseas consumers. The retailer reported selling $200 million
online in 2012.
The Chinese government has adopted new policies to motivate cross-border e-commerce in recent
years. That includes building industrial parks that
specialize in cross-boarder e-retailing in five cities
on a trial basis. The government has also made
it easier for Chinese e-retailers to receive money
from consumers in other countries.
PART III:
CHINESE E-RETAILERS
LOOK ABROAD
Direct from China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China’s big online marketplaces will sell to overseas Chinese . . . . .
China’s answer to PayPal expands into the U.S. . . . . . . . . . . . . . .
Alibaba leads $200 million funding round in U.S. shipping service
E-retailer LightInTheBox adds three languages to its e-commerce site
Alibaba creates a U.S. e-commerce investment group . . . . . . . . . .
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Part I: E-Commerce in China
Part II: Western brands sell online in China
58
63
65
68
70
71
Dear Retail,
WILL YOUR
PLATFORM SUPPORT
ONGOING BUSINESS
GROWTH?
INNOVATION IS
PART OF OUR DNA.
Love,
hybris
ITH
W
E
R
U
T
UR FU
O
Y
D
L
I
UITE
BU
S
E
C
R
E
M
OUR COM
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chinese retailers look abroad
Direct
from China
Chinese companies are selling online in the
United States, undercutting prices in some
categories and forcing domestic sellers to respond.
by Don Davis
O
nline sales represent half the business for Peaches Boutique, up
from about 2% a half-dozen years ago, says Jeff Surdej, the prom
and party dress retailer’s director of operations. But there’s been
a recent blip in that web growth.
In fact, online sales fell 20% in 2012 for the retailer, which operates a single
bricks-and-mortar store in Chicago along with PeachesBoutique.com. The
reason for the decline? Stiff price competition that’s emerged in recent years
from Chinese companies selling directly to U.S. consumers via such web sites
as FabPartyDress.com, JJsHouse.com and FabulousPromDress.com.
“It’s not just $10 off our price, it’s half off,” Surdej says. Many of the Chinese
sites sell dresses for $100 to $250, while North American retailers like Peaches
Boutique sell dresses from major brands typically for $400 to $600.
The online competition from China emerged in the last four years, says
Dusty Hill, president of Sherri Hill, a well-known prom dress brand. Early
on, many of the Chinese sites flagrantly violated registered trademarks, falsely
claiming to be selling dresses from brands like Sherri Hill and Jovani, and
stealing photographs of their dresses from the web sites of the manufacturers
or authorized retailers. Sites like that keep popping up, and Hill and others are
having some success fighting them—Hill says he took down 10,000 web
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pages last year by complaining to web-hosting
firms, for example. Retailers in other categories
can learn valuable lessons about fighting trademark
infringement from those initiatives.
However, some Chinese web retailers have
moved on, Hill says, and now simply sell cheap
dresses without violating trademarks. “I see
that as fair competition,” Hill says. He cites
LightInTheBox Holding Co. Ltd., a Beijingbased company that, Hill says, used to improperly
claim to be selling Sherri Hill dresses, but no longer does. LightInTheBox and the other Chinese
prom dress retailers did not respond to requests
for comment.
The bigger question ahead may be how North
American retailers and brands compete with
e-commerce sites selling low-cost goods directly
from China, whose prolific factories produce a
United Nations-estimated $2 trillion worth of
goods each year. The growing number of international shipping and payment options is making it
easier for Chinese companies to directly market
and deliver to North American and European consumers, and they’re starting to do just that.
A prime example is LightInTheBox, which in
June 2013 raised $79 million in a U.S. stock offering.
The retailer, which sells wedding and prom dresses
598
Number of eBay merchants
from China, Hong Kong and Taiwan
selling more than $1 million per year
online outside their home markets.
Source: eBay Inc.
$9.0 billion
Chinese retailers’ projected online sales
to consumers in other countries
by 2015.
Source: iResearch Consulting Group
as well as home and electronics items, reported
2012 sales of $200 million from the e-commerce
sites it operates in 17 languages. Of those sales, just
over half were to European consumers and 24%, or
$48.0 million, were to North American shoppers.
LightInTheBox said in its IPO filing that
Chinese companies have strong prospects for selling online to consumers around the world. “They
enjoy access to a large, low-cost export-oriented
manufacturing base, global payment and logistics
solutions and globally scalable online marketing,”
the filing says. It also quotes a projection by Chinese
market research firm iResearch Consulting Group
that online direct-to-consumer sales of Chinese
goods to consumers in other countries will grow
from $1.7 billion in 2012 to $9.0 billion in 2015, a
compound annual growth rate of 75.8%.
FURTHER EVIDENCE OF THE EMERGENCE
of Chinese e-retail competition comes from eBay
Inc., which since 2007 has been helping Chinese
companies sell on eBay’s marketplaces around the
world and encouraging them to use its PayPal service to accept payments. In a November 2012 report
eBay said more than 7,500 of these large eBay sellers and PayPal merchants in China, Hong Kong
and Taiwan were selling more than $100,000 a
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year to online shoppers in other countries, with
598 selling more than $1 million a year.
Of those sales 77% were on eBay sites, which
means 23% were off eBay, including on the
Chinese companies’ own e-commerce sites. One
example of a large seller that’s launched its own site
is Gofavor.com, which sells inexpensive jewelry.
While the company would not reveal its sales in
dollars, co-founder Wu Hongbo says the company
ships 60,000 to 70,000 parcels per year, mostly to
Europe and North America, and is growing annually by 30%.
Besides giving credit to PayPal for making it
easy to accept international payments, Wu notes
the expansion of shipping options for Chinese
retailers. “International shipping has developed a
lot in recent five years. Today we have many choices,
and we can choose different logistics solutions for
different markets,” he says in an e-mail response
that eBay staffers translated into English.
Among the services Gofavor.com and other
eBay sellers use is ePacket, the product of a 2011
agreement between the U.S. Postal Service and
Hongkong Post to facilitate shipments from Hong
Kong merchants to U.S. consumers. The service
includes order tracking. Fees vary by parcel weight.
$5
Typical price to ship a half-pound
parcel from Hong Kong to the United
States using ePacket, a service of the
U.S. Postal Service and Hongkong Post.
Source: eBay Inc.
A package of just over half a pound costs about $5
to ship to the United States, eBay says. Delivery to
the United States takes seven to 10 days.
STARTUPS ARE TAKING ADVANTAGE of
these shipping and payment services to get into
the business of selling online to consumers in the
United States and elsewhere. One recent entrant is
Bundshop LLC, whose e-commerce site sells furniture and home goods from Chinese designers, with
an average selling price of $130, says co-founder
Stephany Zoo. Zoo and her business partner, Diana
Tsai, are U.S.-born Chinese-Americans fluent in
Chinese who recently graduated from U.S. universities and moved to Shanghai, where their families
are from, to launch Bundshop.com.
It cost $64,000 to launch the business, Zoo says,
including $14,000 to build the web site, which
formally began selling in March following a few
months of testing. Zoo says she uses nine delivery
services, depending on destination and weight, and
that the retailer’s packages arrive in the United
States in seven to 10 days and cost $8 to $10 to ship.
“For us to ship to the U.S. is about the same cost as
shipping from California to New York,” she says.
While it may be easier than ever for Chinese
e-retailers to reach online consumers in North
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America, their success is likely to be limited to
certain categories, says Ken Calhoon, who worked
in international operations in his seven years at
eBay and consults on global e-commerce as managing partner of Calhoon Global Management
Consulting LLC. For inexpensive, unbranded
items consumers aren’t going to wait for delivery or
pay much for shipping, and at the high end there
aren’t many Chinese brands yet that U.S. consumers covet, he says.
But when it comes to higher-priced, custom-made goods, like prom and wedding dresses,
the Chinese may be able to compete, he says. “It’s
in the segments where they can offer good value
for the money, along with customization, that the
Chinese can be most disruptive,” Calhoon says.
Even here, he says, Chinese companies will only
make a dent if they can get U.S. sizing and styling
right, and deliver quality goods, he says.
U.S. PROM DRESS MAKERS and retailers say
many of the Chinese sites violate trademarks, and it’s
these sites that they have targeted with an aggressive
legal action and consumer education campaign.
They say the rogue sites promise brand-name
goods, then ship whatever they have on hand.
‘They used to sell to people
like me. Now they realize
they can sell direct to
the consumer.’
SCOTT WEINER, CEO, DBA CASES
The Gioconda Law Group PLLC, a law firm that
represents Sherri Hill and such luxury brands as
Burberry Group plc and Tiffany & Co., regularly
makes test purchases to see what the Chinese
sites actually ship. “They’re usually out of stock for
anything that isn’t very basic, then they will try to
talk you into something else or ship you something
completely different from what you ordered,” says
Joseph Gioconda, a partner in the firm.
When Sherri Hill spots an unauthorized
retailer advertising Sherri Hill dresses it seeks to
take down the site, taking advantage of the Digital
Millennium Copyright Act of 1998. The law
enables the holder of a registered trademark like
Sherri Hill to petition a web-hosting firm to close
a site that’s violating its trademark. If the hosting
firm does not comply, it becomes liable for legal
damages, Hill says.
Most web-hosting companies, even outside of
the United States, act quickly to take down sites in
response to such requests, Hill says. But then the
trademark violators often launch another site. “One
site down, one site up is what we’re dealing with,”
Hill says.
Rogue sites will copy images, even if the
retailer has put its own name on the photo,
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says Meytal Sutton, president of MissesDressy,
a prom dress retailer that sells online and through
a store in the New York area. To stop that abuse,
the retailer blocks Internet users in China from
viewing MissesDressy.com. Another U.S. prom
dress retailer, DressGoddess.com posted a video on
YouTube in spring 2013 showing the differences
between a genuine and counterfeit gown from
Tony Bowls, another major prom dress brand.
Sherri Hill has taken several other steps to let
consumers know which retailers are authorized to
sell its dresses. One of the eight navigation tabs
on SherriHill.com is Authenticity; clicking on it
opens a page where a consumer can enter a domain
name to see if it’s an authorized seller. The dress
manufacturer added that feature to its site three
years ago, Hill says. A year later, it created a seal that
retailers can add to their own web sites. Clicking
on the seal opens a window that says the retailer is
an authorized Sherri Hill seller.
Hill, who went to law school in Beijing, traveled
to China in spring 2013 seeking a way to enforce
China’s strict laws—at least on paper—against
violating trademarks. He’s engaged a Hong Kong
law firm to draft a copyright violation letter in
Chinese that cites Chinese statues that he can send
to hosting companies in China, asking that they
shut down violators’ sites. “The Chinese are averse
to legal threats and I expect good success as far as
getting web sites down,” Hill says. “That doesn’t
mean they won’t put another one up.”
Hill says PayPal has responded quickly to complaints about trademark violators using PayPal to
accept payments, and that Google Inc. typically
will remove violators from natural search results.
He also won a $5 million judgment in a trademark violation lawsuit last year and appeared on
TV’s “Today” show in spring 2013 to warn young
women shopping for a prom dress against web sites
that falsely claim to offer brand-name goods.
WHILE MAKING PROGRESS AGAINST
TRADEMARK VIOLATORS, prom dress retailers still face the problem of how to compete with web
sites offering gowns at low prices that aren’t violating
trademarks. The retailers have responded in various
ways. Peaches Boutique, for example, will match the
online prices of U.S. retailers in its store, but not the
prices of Chinese sites. DressGoddess.com, which
is based in Pennsylvania, posts at the top of its site
that it is a “100% authorized prom dress retailer
located in the United States.”
Some retailers simply cede the low end of the
market to Chinese competitors. Scott Weiner used
to source inexpensive mobile phone cases from
China to sell on Amazon and eBay until he grew
tired of competing with Chinese sellers offering cases for as little as $2. Eventually he began
designing more upscale cases and selling them on
his own site, dbaCases.com. “The Chinese have
gotten smart about it,” says Weiner, CEO of DBA
Cases Inc. “They used to sell to people like me or
mall kiosks. Now they realize they can sell directly
to the consumer.”
Indeed they can, with the Internet making it
possible for them to market to consumers everywhere, and globalization making international
shipping and payment easier every year. There is no
reason to think there will be less direct competition
from Chinese e-retailers in the years ahead.
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China’s big online
marketplaces will
ship to overseas
Alibaba, China’s dominant
Chinese
by Frank Tong
A
e-commerce company,
will ship to South Asia.
libaba Group says more than 500 million Chinese consumers have
registered to shop on its two online marketplaces, Taobao and
Tmall, which together account for three-quarters or more of online
retail sales in China. Recognizing that Chinese living abroad also
will want to shop on those marketplaces, Alibaba in July 2013 launched a new
service that will help merchants ship to consumers in South Asia.
Alibaba, No. 1 in the Internet Retailer Asia 500, says eight Chinese logistics
companies are participating in the program. It will allow overseas customers to
ship multiple orders on Taobao and Tmall to a location in China for consolidation and shipment to their overseas addresses.
Alibaba says the service could save up to 50% shipping cost for international
customers. Shipping a 1-kilogram (2.2-pound) parcel to Hong Kong will cost
around 20 yuan ($3.30) and to Malaysia only 32 yuan ($5.2).The shipping time
is from four days to six days.
Merchants won’t need to make any changes to their systems, as they will be
shipping parcels to addresses in China. Shoppers will be able to track orders
through their accounts on Taobao or Tmall. (Taobao is Alibaba’s main marketplace where more than 6 million mostly Chinese merchants sell; Tmall is
geared to larger brands.)
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Taobao and Tmall are both Chinese-language
sites, so this service mainly targets Chinese-speaking
people outside of China. According to Panli, a company that helps overseas customers purchase from
Chinese web sites, there are around 50 million
Chinese-speaking people living outside China.
The new service initially will ship only to consumers in South Asia, including Hong Kong,
Taiwan, Singapore and Malaysia. Alibaba plans
to expand the service, especially to other Asian
countries, but has no current plans to offer a similar service for shipping to the U.S or Europe, an
Alibaba spokeswoman says. “Alibaba will continue
to evaluate the demand for this type of service by
consumers in other markets and does not rule out
rolling this feature out to other markets in the
future," the spokeswoman told Internet Retailer.
China’s Ministry of Commerce estimated that
online retail sales in China grew 67.5% in 2012
to more than 1.3 trillion yuan ($209.7 billion).
Alibaba says sales on Taobao and Tmall surpassed
1 trillion yuan, or 77% of the 2012 total for China,
in just the first 11 months of 2012. Alibaba has not
reported a full-year sales figure for 2012.
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China’s answer
to PayPal
expands into
More Chinese shoppers
the U.S.
by Don Davis
T
buy at iHerb.com now
that it accepts Alipay.
hree hundred million Chinese consumers shop online, and most
of them have accounts with Alipay, the PayPal-like online payment
service owned by Alibaba Group Ltd., operator of China’s top online
marketplaces. In a move that could make it easier for Chinese shoppers
to buy on U.S. e-commerce sites, Alipay is now promoting itself as a payment
option for U.S. e-retailers.
Among the U.S. online retailers that began accepting Alipay in 2013 is
iHerb Inc., No. 204 in the Internet Retailer Top 500. In the first six months
of accepting the Chinese payment method, iHerb’s sales on the cn.iHerb.com
subdomain of its web site aimed at Chinese consumers increased 244.52%
compared with the prior six-month period and 684.15% compared with the
same period a year earlier, says John McCarthy, director of marketing at iHerb.
“We’ve just been thrilled with the results, to the point that we’re looking at
implementing other payment options, not just within China, but also in other
countries,” McCarthy says. While not disclosing dollar sales, he says China,
which previously was not one of its top 10 markets, now is in the top 10 “and
moving up quickly.”
Leading Alipay’s international expansion is Jingming Li, whose title is chief
architect and acting president of the newly formed Alibaba International
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Financial Service Unit. Based at Alibaba’s U.S.
headquarters in Santa Clara, CA, Li sees a big
opportunity in enabling Chinese shoppers to pay
with a method that they use widely in China, not
only to shop online but also to pay utility and other
bills offline in China.
Li notes that China’s increasingly affluent
middle- and upper-class consumers made 83 million trips abroad last year and spent $100 billion
while traveling. In addition, he says, they spent 20
billion yuan ($3.3 billion) buying directly from
e-commerce sites outside of China. They’re especially interested in buying baby products, apparel
and luxury goods.
They would buy more, Alibaba reasons, if they
could pay with the Alipay accounts they use in
China. “That’s where our international focus will
be, helping our members continue to use their
Alipay accounts outside of China,” he says.
In all, there are more than 550 million registered users of Alipay, which Chinese consumers use
inside China for such offline transactions as paying
utility bills as well as for buying at e-commerce
sites, Alibaba says. Alibaba, operator of the Taobao
‘If a merchant is willing to use
Alipay as a form of payment it
gives a lot more trust and
confidence to the consumer.’
and Tmall marketplaces that account for well over
half of online retail sales in China, is No. 1 in the
Internet Retailer Asia 500 guide.
Without disclosing the total number of U.S.
sites accepting Alipay, Li says there are about 10
web sites in the U.S. that already are generating
more than 100 Alipay transactions per day. They
include the e-commerce sites of retailers Gap Inc.
Direct, No. 19 in the 2013 Top 500, and Forever 21,
No. 353; travel site Travelzoo; web domain registrar
GoDaddy and peerTransfer, which handles tuition
payments for international students.
International web sites can boost sales by
accepting Alipay because many Chinese consumers
don’t have credit cards from Western brands like
Visa and MasterCard, Li says. Plus, he says, “They
are in the habit of using Alipay. If a merchant is
willing to use Alipay as a form of payment it gives a
lot more trust and confidence to the consumer who
may be purchasing an airline ticket from a foreign
carrier for the first time.”
Li would not disclose Alipay’s fees, but says they
are lower than the fees charged by major credit
card brands like MasterCard and Visa. Chinese
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consumers typically fund their Alipay accounts
from their bank accounts, which eliminates much
of the risk that credit card issuers take on when
they extend credit to cardholders. McCarthy of
iHerb says the fees he pays are comparable to what
he pays for other payment methods, and that he
views the fees as “attractive.”
For iHerb, adding Alipay is the latest step in
a campaign to boost sales to Chinese consumers
that began in 2010 when the e-retailer began
accepting orders from China. In late 2012, iHerb
introduced versions of its e-commerce site tailored
to consumers coming from nine countries in addition to the U.S. If a shopper chooses China, for
example, she is directed to the cn.iHerb.com subdomain, where the navigation guides and checkout
prompts are in Chinese, along with some product
information. (With 35,000 SKUs, iHerb has not
yet been able to translate all its products into
Chinese, McCarthy says.) At checkout, Alipay is
one of the payment options.
The e-retailer also operates an informational site
in China, iHerb.cn, which is completely in Chinese.
The site informs visitors what they can find on the
iHerb e-commerce site, including screen shots that
show how they can place an order. There is also a
blog in Chinese, and visitors can text questions that
native Chinese speakers respond to.
IHerb is also promoting itself in China via social
networks. It has posted videos to Youku, China’s
equivalent of YouTube, and seen Chinese fans post
27 videos to the site about iHerb.
The e-retailer also alerted Chinese consumers
to its new Chinese-language e-commerce site early
in 2013 by posting to Weibo, China’s equivalent
of Twitter. “That had a terrific impact,” McCarthy
says. “Within 24 hours we saw a spike in traffic.”
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Alibaba leads
$200 million funding
round in U.S.
shipping service
by Thad Rueter
S
Alibaba invests in ShopRunner
as eBay sells its remaining stake.
hopRunner, the two-day delivery service that competes with
Amazon.com Inc.’s Prime, raised at least $200 million in October
2013 in a funding round led by Alibaba Group Holding Ltd., China’s
leading e-commerce company.
American Express Co. also took part in the funding round, although
ShopRunner CEO Scott Thompson would not detail the specific amounts
either company contributed. Meanwhile eBay Inc., an Alibaba competitor as
a web marketplace operator in global markets, sold its ShopRunner stake. The
company is also expanding its own eBay Now same-day delivery service.
ShopRunner is owned by Kynetic LLC, a company launched by Michael
Rubin, the founder of e-commerce technology provider GSI Commerce, which
developed ShopRunner.
For $79 a year—the same price as Prime—ShopRunner members receive
two-day shipping on orders from ShopRunner participating merchants, which
include Toys ‘R’ Us Inc. (No. 30 in the Internet Retailer Top 500 Guide), Blue
Nile Inc. (No. 74) and eBags Inc. (No. 149).
ShopRunner has more than 80 participating retailers and at least 1 million members, Thompson told Internet Retailer. He said ShopRunner would
have about 100 retailers by the end of 2013; The Neiman-Marcus Group
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Inc. (No. 39) is expected to be one of those new
retailers. ShopRunner typically takes a fee of 2% to
5% on orders made by its members.
The new funding for ShopRunner will go
toward such areas as hiring more sales employees
and engineers, including those focused on mobile,
Thompson says.
“Alibaba and American Express recognize
ShopRunner as a disruptive model which will
have a significant role in U.S. e-commerce market,”
Thompson says. “This funding will help accelerate
ShopRunner’s growth and enable us to continue
to build great online shopping experiences for our
members and deliver value for our rapidly growing
retailer network. ShopRunner is in a unique position to shape the future of online shopping.”
Alibaba made the investment as it moves toward
an initial public offering in the United States.
Alibaba operates China’s dominant online retail
marketplaces, Taobao and Tmall, and is No. 1 in the
Internet Retailer Asia 500. Alibaba earlier in 2013
led a $50 million investment round in U.S.-based
mobile app search engine Quixey.
Thompson would not talk about the reasons
behind Alibaba’s investment or how much Alibaba
put in for this funding round. Alibaba was not
immediately available for comment.
The ShopRunner investment comes as other
e-commerce operators test and expand their sameday delivery efforts. In September 2013, for instance,
Google Inc. expanded its Google Shopping Express
service and launched a mobile app for the same-day
delivery service. Retailers participating in Google
Shopping Express include Staples Inc., No. 2 in
the Internet Retailer Top 500 Guide; Office Depot
Scott
Thompson
Inc., No. 7; Target Corp., No. 18; Toys ‘R’ Us Inc.,
No. 30; and Walgreen Co., No. 36.
The investment for ShopRunner reportedly
values the company at about $600 million. “It’s
great for ShopRunner that they have such a high
valuation,” says Sucharita Mulpuru-Kodali, an
e-commerce analyst for Forrester Research Inc.
“Their biggest challenge is that it’s a for-profit business model and Amazon Prime, by my estimates, is
a money-losing model.”
Amazon in the second quarter of 2013 reported
that spending on fulfillment increased 35.5% to
$1.837 billion from $1.356 billion. According to an
estimate earlier this year from private equity firm
Robert W. Baird & Co., Amazon.com has made
at least 19 million items eligible for Prime, up 10%
from the first quarter of 2012. Besides those Primeeligible items—Baird estimates that 10% of products sold on Amazon qualify for Prime—Prime
members have access to at least 25,000 streamed
TV and film titles.
Estimates have put the number of Prime members at up to 10 million.
CONTENTS
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E-retailer
LightInTheBox adds
three languages to
its e-commerce site
by Kevin Woodward
R
The move supports the retailer’s
expansion in Southeast Asia
etailer LightInTheBox Holding Co. Ltd. has added language support for Bahasa Malaysia, Bahasa Indonesia
and Thai to its e-commerce site, a move that supports
its expansion into Southeast Asia, LightInTheBox
announced in September 2013.
The China-based retailer says customers in Malaysia,
Indonesia and Thailand now have easier access to its web site.
“The population covered by our three new languages is
greater than 100 million people, representing a strong base of
potential customers,” says Alan Gou, LightInTheBox chairman and CEO. “As this market rapidly grows in both number
of internet users and online consumers, it is only natural to
offer these potential customers a more attractive and localized
e-commerce experience.”
LightInTheBox now makes its e-commerce site available in
27 languages, with 10 added in 2013. While based in China, the
retailer sells mainly outside of that country, with more than half
of its 2012 sales going to consumers in Europe. LightInTheBox
is No. 177 in the Internet Retailer Europe 500 guide.
CONTENTS
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Alibaba creates
a U.S. e-commerce
investment
China’s leading
group
by Amy Dusto
C
e-commerce operator takes stakes
in several U.S. e-retail firms.
hina’s leading e-commerce company, Alibaba Group Holding Ltd.,
has established a U.S. investment group to back entrepreneurs
working on e-commerce and emerging technologies, it announced
in October 2013 In previous months, Alibaba had financed three
U.S. web businesses, including sports merchandise seller Fanatics, membership-based free two-day shipping provider (and Amazon Prime competitor)
ShopRunner and mobile search technology company Quixey.
“Alibaba is taking the commerce war to the U.S. front in its global battle
against Amazon,” says R. “Ray” Wang, principal analyst and CEO at business
advisory firm Constellation Research. “The goal is to tap into the innovation of
the U.S. tech scenes in New York and Silicon Valley.”
Michael Zeisser took charge of Alibaba’s new San Francisco-based team as
chairman of U.S. investments. Zeisser spent the last decade at Liberty Media
Corp., where he held executive positions in digital media and e-commerce. He
has also, according to his LinkedIn profile, served as a chairman, advisor or board
member for more than a dozen Internet companies, including Shutterfly Inc., No.
14 in the 2013 Top 500 Guide; XO Group Inc., No. 477; and Backcountry.com
and Provide Commerce, both units of No. 5, Liberty Interactive Corp. along
with Liberty’s primary e-commerce properties, QVC and ProFlowers.
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“Alibaba is run by entrepreneurs, and we
believe in supporting entrepreneurs with great
vision and a strong sense of mission for their
companies,” says Joe Tsai, executive vice chairman
of Alibaba and head of Alibaba’s strategic investments. “We are extremely excited to have someone
of Michael’s caliber and experience to lead our
investment efforts in the U.S.”
Next up for Alibaba: an IPO,
possibly on a U.S. exchange.
Alibaba, which operates China’s dominant
online retail marketplaces Taobao and Tmall and
is No. 1 in the Internet Retailer Asia 500, has said
it intends to go public in the near future. Having
failed to get approval from Hong Kong regulators for an ownership structure that would keep
management in control of the company, Alibaba
may conduct its initial public offering on a stock
exchange in the United States.

China The Emerging Global E-Commerce Powerhouse EN

Transcription

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