Tag Archives: e-commerce

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:

   

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We are Indians & we don’t shop Online!!

Most of the Indian shoppers would actually like to touch & feel or even try a product before they would even think about parting away with their hard earned money to buy the product.
But this feature isn’t available in the online stores, though these stores are offering huge discounts & promise of a quality service, in addition to the convenience of shopping.
So how are the Indian customers getting adapted to this, or is it the other way around, that the online stores have to adapt to the Indian market? What’s the future of shopping?
There is a lot of euphoria in e-commerce right now and the industry in India is expected to grow by 47% to reach Rs 46,000 crore in 2011, according to a report published by Internet and Mobile Association of India (IMAI).  Considering such a huge market potential, I wonder what will be the role of online retail & Internet shoppers in fueling this growth.

An initial glance at the IMAI report can easily tell you that online retail isn’t doing that great compared to the whole market segment.  If you compare the share of Online Retail in the growth of the Total Online Commerce, one can easily see that there is huge potential for the Online Retails market to grow & capture the major part of the Indian e-commerce space.

Online Retail which primary constitutes buying computers & computer peripherals, cameras, mobiles, MP3 players, home & kitchen appliances, books, flowers,  toys & other gifts via Internet, currently has only 7.8 % of the e-commerce market share (where Online Travel Industry with players like makemytrip.com, cleartrip.com are the king makers with more than 75% of the market space). Source: IMAI

Activity Pattern of Indian Internet User

If you look at the activity pattern of Indian Internet Users, as described in the picture here, a majority of them look to the internet only for information about a product. The offline medium or the retail store becomes the Point of Sale instead of the internet store probably for majority of these information seekers.

Thus only 50% of these Information seeking people actually shop & pay on the internet. And a majority of them pay for Online Travel Booking services.

Consumer Behavior – Indian Internet Shopper

If you further look down at the reason behind this kind of consumer behavior we will find one basic attribute – the lack of which prohibits the customer from moving ahead to actually buy the virtual looking product & that single factor is Trust.

“99% of the people who are Active on the Internet but haven’t ever purchased online lack trust in the online merchants & quality of their products”

Lack of Trust

Most of non-shoppers do not shop online due to lack of trust in transactions.
1. Lack of trust in Payment security
Online payment via credit or debit cards isn’t preferred due to security concerns.
2. Lack of trust in Product quality
Unlike conventional shopping, buyers worry about online shopping. They aren’t sure if they will get good quality products online
3. Lack of trust in Delivery of Goods
When person is transacting over Internet, they are not sure who is sitting across the table. They are worried about delivery of goods. It includes issues such as delay in or non-delivery of goods.
4. Lack of touch & feel
Touch & feel of product being purchased lacks while shopping online. Online shopping is best suitable for products and services that do not require touch & feel experience by buyer. Probably that’s one of the reasons for books & ticketing being more successful than apparels while shopping online.

Probable Growth Parameters

Based on the above Consumer Behavior research, one can easily interpret that a Great (& not just good) Customer Service is the key to gain back trust of the Indian Internet Customer, backed by a WYSIWYG policy for the product i.e. a customer gets whatever he sees on the net.

Innovative payment mechanisms like Cash-On-Delivery should be employed along with simpler secured online payment gateways.

Policies like Cash-back should be used where customers should be given the convenience to easily return the products they are not satisfied with. This will take care of their fear for lack of touch & feel.

Guaranteed Delivery schedule along with self-imposed penalty will give the customer confidence related to delivery of goods. A very good example that comes to my mind is Dominos Pizza’s “30 minutes or free offer” to abolish fears of late delivery from customer’s mind.

In the end, we can say that with current changing consumer space, information awareness, upcoming new technology assistance, customer maturity & growth of Internet penetration in the Indian Market, the online retail is here to stay & has great potential in the overall internet commerce space, especially for India. It is a business with huge potential which is a revolution already & will be so in the near future.

What do you feel about online retail? Have you ever bought something else online other than a travel ticket? Do feel free to share …