China Online Retail

How are they doing it in China?

“A whooping US$ 720 Billion is the value of the Chinese e-commerce industry in 2010 – according to iResearch.” 53,000 items are sold on Taobao every minute of the day.” – Taobao is a Chinese e-commerce website Traditional media in China has observed a steady downturn in revenues as more and more companies are shifting to online marketing and e-commerce “Two-Thirds of Chinese households with internet connections bought an everyday item online in the past six months” – Nielsen.

“10% of baby gear is now sold online in China”

The Chinese love to shop, with retail sales in the country enjoying double digit growth. But it’s the E Commerce industry in China that has experienced tremendous growth in recent years. Sites like Joyo.com (owned by Amazon), Taobao (owned by Alibaba group), 360buy.com, DangDang.com, are the doing huge business & spearheading this growth.

Online retail is about 10.5% of this huge billion dollar e-commerce business in China at around US$ 77 billion with over 18,600 e commerce sites. The total worth of the whole e-commerce business is measured at USD 720 Billion Dollar!!

Most of China’s e-commerce activities occur in the B2B, or Business-to-Business, realm. Although a growing number of B2C or C2C (Consumer-to-Consumer) players are entering the market, the number is still very small for them to dominate the e-commerce scene. Why people here prefer to interact with a screen & not a sales assistant? “Goods are generally sold online at an even greater discount relative to bricks-and-mortar stores in China than elsewhere”a survey by Credit Suisse revealed an average discount of 21%. What customer says?

1. “Even while I live in the outskirts of the city (where housing is affordable), I can still order the best brands online without going to actual stores located  in the main city” 2. “I will do my own research online for this consumer electronic product. These sales assistants at malls aren’t much aware bout the latest gadgets” 3. “The products will be genuine as we are buying directly from the manufacturer’s site” 4. “This saves money, time & effort. Moreover these are a lot many options to choose from” 5. Some clever buyers will even visit a branch to take a look, and then order via the internet due to the discounts offered online.

Payment Facilities

Up to 80 percent of China’s online shopping activities are coursed through Taobao and online payment gateway Alipay. These two companies are both owned by Alibaba, which boasts over 200 million registered users on its e-commerce site. Unlike in the west where payment facilities are mostly pre-paid Chinese e-commerce third-party payment facilities (such as Alipay, Tenpay and Chinapay) only release the payment after goods or services arrive safely and according to the needs of the consumer.

Sales & Marketing

E-commerce companies in China are now making more extensive use of site measurement tools and other analytics tool to optimize their marketing and advertising campaigns. These include

  • Ad tracking tools,
  • Web analytic tools,
  • Customized Bid management tools
  • Video analytic tools.

The general distrust for ad exchanges and ad networks in China is changing now, with affiliate marketing now based more on the final sale and purchases, and not on the clicks and leads. The most common item Unilever sells through Taobao is Lipton’s tea; the consumer-goods firm cleverly matches offline advertising campaigns to online promotions. In other markets, all of these products are typically bought in shops.

Fulfillment & Logistics

Companies are setting up their own storage units across the country & even launching their own logistics business for delivering the products to their customers. VANCL, a fashionable internet B2C brand in China, has recently announced that it will set up storage centers all over the country within a year. The logistics subsidiary of VANCL has opened business in 28 cities, and 17 of which have realized full-range cover. Delivery costs almost nothing: For 5Yuan ($0.73) flocks of scooter drivers are willing to deliver almost anything to anyone in Shanghai and many other cities in less than an hour. Thus, in China the low cost of delivery and the high cost of property are feeding an e-tailing frenzy.

Any learning for India in here?

Well, India’s e-commerce industry has been developing rapidly and is set to hit the US$10 billion mark in 2011. Increasing internet penetration would make online retailers accessible to a large number of potential buyers. Although things are looking better with increasing broadband connectivity and lower costs for accessing the internet, the pace needs to improve.

A major challenge is that online retailers depend on a network of offline service providers (suppliers, logistics service providers, etc.) whose service delivery is not amongst the best, thereby affecting the service of such online stores.

Some of the businesses have already begun to set up their own inventory & logistics to deliver the products to their customers on time, without depending on 3rd party courier services

e.g. Flipkart has set up its own logistics arm called Flipkart Logistics (FKL). They also have their own warehouses & fulfill most of the orders from their inventory only.

China market is already US$ 720 Billion in the e-commerce business & the Indian industry has a lot (a hell lot) to learn from their Asian counterparts who have already perfected this business model & reaped in the desired benefits.   More Similar Stories:

   

2 thoughts on “How are they doing it in China?

  1. Though we accept the fact that China has embraced the e-commerce industry well, India surely has a mega market in this space and it is interesting to see how this is going to be tapped.

    1. Yup Agreed & guess we are already on this growth path..I already see people around me ordering stuff from the net – something which we couldn’t even think of 2-3 years back.

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