e-commerce in China by SCcouncil

VIEWS: 16 PAGES: 3

									E-commerce retail sales in China more than doubled from a year earlier to 211.8 billion yuan
($31 billion) in the first half this year, along with the rapid expansion of e-shopping amid the
government drive to make the economy more consumer-dependent.


In 2009, China's e-commerce market totaled 263 billion RMB (approximately $38.5 billion)
with growth equivalent to about 105% increase year-on-year.

Retail sales at e-shops more than tripled between 2007 and 2009, much faster than the
averaged annualized 18 percent growth of retail sales in general during the same period,
according to the annual report on China's Internet market released by Alibaba.

Total turnover of China's e-commerce reached 3.8 trillion yuan last year, up 22% year-on-
year, according to the data released by the Ministry of Commerce.

At Taobao.com, China's largest consumer auction site, some 70% of sellers are aged
between 21 and 30. The number of e-shoppers hit 142 million, or one third of the nation's
total online population, the world's biggest.

E-commerce created more than 1.3 million jobs in the world's most populous country last
year, as e-shopping has become a new platform for Chinese start-ups.


Currently, consumer-to-consumer (C2C) represents the largest segment of China's e-
commerce market; however, business-to-consumer (B2C) is increasingly growing in
importance due to two trends.

Traditional Retailer to Online Retailer: Traditional retailers are developing e-commerce
platforms as additional channels to get consumers to buy their products. From brand name
domestic retailers to state-owned enterprises, there is a major push to go online. It has even
been reported that Wal-Mart is set to release its own e-commerce platform for the Chinese
and Japanese markets.

Individual Seller to Online Retailer: Due to the extreme success of particular sellers on
existing C2C sites like Taobao.com, online shops that began with a single college student or
a small family have been forced to seek out additional support to satisfy market demand. As
a result, these one-time, single-person operations have been incorporating into formal
enterprises stepping into the B2C space.
What types of business models exist?

China's e-commerce platforms can be classified by the following three models: marketplace
model, online retail model and traditional retail model.




Marketplace Model: The marketplace model connects buyers and sellers, whether it is
business-to-business or C2C. The company provides a platform to facilitate business
between two parties but has no products of its own to offer. It maintains a searchable
database of information for buyers and seller to connect, and a secure means to facilitate
payment between both parties.

    Top B2B players: Alibaba.com, HC360.com, Myekoo.com

    Top C2C players: Taobao.com, Paipai.com, Eachnet.com

Online Retail Model: The online retail model is where a company has no formal real-world
storefront. It provides both products and a channel to sell directly to end customers.

    Top B2C Online Retailers: 360buy.com, Joyo.com, Dangdang.com

Traditional Retail Model: The traditional retail model is similar to the online retail model;
however, in addition to the online website the company also has real-world retail outlets.
    Top B2C Traditional Retailers: Gome (electronics), COFCO (state-owned: food and
     beverage), Lining (athletic apparel)
Who's shopping online and what are they buying?

Shanghai-based iResearch estimates that by the end of 2010 there will be 145 million online
shoppers in China. Online shoppers are relatively young - the majority are between the ages
of 18 and 35. While this number is split roughly evenly, slightly more women shop than men.

In the early days of Chinese e-commerce, products such as software and DVDs were the top
purchases. Currently clothing, books and cosmetics are the top sellers. Additionally, as we
have seen in the U.S. with sites like Etsy, companies that focus on niche markets are also
sprouting up. For example, 21Cake.com is a popular made-to-order online cake company
that sells custom-made cakes online and delivers to China's major cities.

Where do we go from here?

China's e-commerce market is yet to fully mature, but it is entering a period of high-speed
growth. C2C sellers that are growing more successful will begin to establish more formal
companies, leading to an increase in the number of companies in China's B2C space. While
many view the Internet as a sensitive area subject to regulation by the Chinese government,
the government supports e-commerce due to its economic benefit and potential for job
creation.

One example is Xinjiang, a remote province in western China which recently experienced
social unrest. Most websites and email there are blocked - but you can still access
Alibaba.com and Taobao.com. Of China's e-commerce companies, Alibaba Group will
remain the company to watch in this space for many years to come. However, there is still a
lot of room for niche operators to capitalize on the growth potential of China's e-commerce
market.

								
To top