China eCommerce Market Analysis Report 2013 – Chapter 1: Industry Review and Forecast
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Transcript of China eCommerce Market Analysis Report 2013 – Chapter 1: Industry Review and Forecast
China eCommerce Market
Analysis Report 2013
July 2013Chapter One Industry Review and Forecast
1.1 Growth trend of the eCommerce market in China
1.2 Growth trend of online shoppers in China
1.3 New trend of the eCommerce market in China
Table of Contents
1.1 Growth trend of the eCommerce market in China
1.2 Growth trend of online shoppers in China
1.3 New trend of the eCommerce market in China
Table of Contents
1.1.1 Key Note – China eCommerce Market
- Market scale in 2012: RMB 1.2 trillion
- CAGR in 2003-2011: >100%
- Share of total retail volume: >6%
- 3G/4G coverage increases opportunities for consumers to use mobile shopping via handset
- Spending from the affluent class increases and is shifting to online channels
- Increases in credit card usage together with more developed logistic facilities, both helping to lift the online shopper base
- The growth rate of online shopping market in China is faster than any other country in the world.
- Retail e-channels in China outweigh any other country in the world
- New market entrants can expect at least 3 times growth according to the recent forecast about the market volume in 2020
Largest online shopping market in the world
Growing number of online shoppers and more comprehensive peripheral services
China – Emerging retail online development for global brands
-1-
1.1.2 Growth Trend of the eCommerce Market in China
The size of online shopping transactions in China continues to grow rapidly, with 10 times the increase over 5 years.
In 2012, the online shopping transactions hit RMB 1,259.4 billion, with an annual growth rate of 66.5%.
2006-2012 Online shopping transaction amount and growth in China
258 5421208
2500
5231
7566
12594
64.0%
110.1%
122.9%
107.0%
109.2%
44.6%
66.5%
2006 2007 2008 2009 2010 2011 2012
Online shopping amount (hundred million dollars)
Annual growth rate
Data Source: CNNIC,“2012 Online Shopping Market in China Research Report”, March 2013-2-
1.1.3 Size Forecast of eCommerce Transactions in China
Putting aside inflation into consideration, the size of eCommerce transactions in China will reach a conservative guess of RMB 2.5 trillion to 4 trillion by 2020, which is 3.5 times of the size in 2011.
Size of online shopping transactions in China, 2003-2020
397
258
61
75
60
23
159
242
74
4527
136.131.91.20.6
2003 2004 2005 2006 2007 2008 2009 2010 2011 20151 20201
RMB 10 billion
High Case
Base Case
Low Case
Data Source: McKinsey Global Institute, China’s e-tail revolution: Online shopping as a catalyst for growth, March 2013-3-
1.1.4 Online Shopping in China vs International Markets
China will become the largest online shopping market in the world; its online shopping scale:
- Exceeded Japan’s to rank world’s No.2 in 2011
- Is even higher than the sum of UK, Germany and Korea combined
- Is predicted to exceed the United States’by 2015 and become the world’s largest online shopping market
Scale of online retail market in 2011
Data Source: McKinsey Global Institute, China’s e-tail revolution: Online shopping as a catalyst for growth, March 2013
119
74
66
34
20
13
12
7
6
United States
China
Japan
United Kingdom
Germany
Korea
France
Brazil
Russia
-4-
1.1.5 Growth Rate of Online Shopping Scale in China vs International Markets
The compound growth rate of online shopping in China in 2003-2011 exceeded 100%, with an expansion speed that was faster than any other country in the world.
Data Source: McKinsey Global Institute, China’s e-tail revolution: Online shopping as a catalyst for growth, March 2013
RMB 10 billion
2003 2004 2005 2006 2007 2008 2009 2010 2011
United States
China
Japan
United Kingdom
Germany
Korea
France
Brazil
Russia
Canada
17%
120%
27%
18%
22%
19%
35%
34%
39%
14%
CAGR03-11%
Online retail market in 2003-2011200
150
100
50
0
-5-
1.1.6 Share of eCommerce in Total Retail Sales
China’s eCommerce penetration has already surpassed the US:
- In 2012, China’s eCommerce trade sales was 6.3% of total retail amount, while US’s was only 5%.
- It is estimated that by 2020, China’s eCommerce trade sales will be 10-16% of the total retail amount.
Share of China’s eCommerce in total retail amount in 2008-2013
Data Source: CNNIC,“China Online Retail Market Data Analysis Report 2012”, February 2013
7.4%
6.3%
4.4%
3.5%
2.1%
1.3%
2008 2009 2010 2011 2012 2013e
-6-
1.1.7 Major Factors Pushing the Growth of eCommerce
Factor 1: By 2020, the online spending per capita will reach RMB 1,500 – 2,400 per year, which is 3 to 5 times the current size.
Factor 2: Expanded 3G and 4G penetration helps boost the no. of online shopping users, while broadband penetration drives the growth of PC-based online shoppers.
Factor 3: The use of credit cards is increasingly common, which further facilitates online shopping.
Factor 4: By 2020, the affluent class in China (with a minimum annual average household disposable income of RMB 120,000) will reach 280 million, i.e. 20% of China’s total population. Spending will surpass Japan to be world’s no. 2. 60% will choose online as their major spending channel as they shift to online shopping from other spending channels.
2011-2020 Online spending per capita
Data Source: McKinsey Global Institute, China’s e-tail revolution: Online shopping as a catalyst for growth, March 2013BCG,“The Affluent Will Be a Major Driver of Consumption Growth in China”, November 2012
Online spending per capitaRMB / person
High case Base case Low case
5.3x
441
2360 1839 1533
441 441
4.3x 3.5x
Year 2011
Year 2020
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1.1 Growth trend of the eCommerce market in China
1.2 Growth trend of online shoppers in China
1.3 New trend of the eCommerce market in China
Table of Contents
1.2.1 Key Note – Growth Trend of Online Shoppers in China
- No. of eCommerce users in 2012: 240 million
- The vast territory and high prices of real estate are beneficial to online shops’development
- Consumers from third or fourth tier cities or from rural areas tend to choose e-tailing as the coverage of actual shops is inadequate
- Online shop guarantees that brands achieve maximum penetration to target consumers
- High prices of real estate and increasing salaries eat up a large proportion of profits of traditional retail business
Largest eCommerce population in the world
Vast territory impacts online shops’development
Online shop: the best channel to enter the China Market
-8-
1.2.2 Population and Growth Trend of eCommerce Consumers
Despite the fact that the growth rate of internet users has slowed down, the online shopping population is rapidly growing. China’s online shoppers have reached 242 million people, raising the proportion to 42.9%.
China’s online shopping population and penetration in 2006-2012
Data Source: CNNIC, “2012 Online Shopping Market in China Research Report”, March 2013
33574641
7400
10800
16051
19395
24202
24.5%22.1%
24.8%
28.1%
35.1%
37.8%
42.9%
2006.12 2007.12 2008.12 2009.12 2010.12 2011.12 2012.12
Online shopping population (ten thousand people)
Online shopping penetration
-9-
1.2.3 China’s Online Shopping Population Penetration vs Other Countries
In China’s retail market, the internet coverage already surpassed the coverage of real retail shops. Due to the vast territory and high prices of real estate, the coverage of real retail shops is limited. For the consumers from third and fourth tier cities or rural areas who cannot access real retails shops, they will choose online shopping.
A unique factor in China is that internet coverage far exceeds coverage for top retail shops
Data Source: BCG,“The World’s Next E-Commerce Superpower: Navigating China’s Unique Online-Shopping Ecosystem”, November 2011
UK
France
Germany
Korea
USA
Japan
Brazil
China (Cities)
Indiat
The internet coverage within cities in China almost reaches a country’s level…
⋯ while retail consolidation almost reaches
a developing country’s level.
China’s e-commerce benefits consumers with its ability to offer more products.
52
51
49
44
30
27
26
13
3
Retail Consolidation (Proportion of top 20
retailers in total retail sales, %)
81
76
80
78
87
81
33
51
7
Internet Coverage(Population Proportion, %)
-10-
1.2.4 Key Driving Factor for Online Shopping Population Growth
The penetration of broadband network helps to increase China’s internet users, as well as the popularity of online shopping. China had 129 million broadband accounts but broadband penetration only accounted for 30%. As broadband’s popularity and speed increases, we can expect a better online shopper base which will drive the expansion of eCommerce in rural areas.
Data Source: McKinsey Global Institute, China’s e-tail revolution: Online shopping as a catalyst for growth, March 2013
Broadband users and penetration in 2011
China
USA
Japan
Germany
France
UK
Russia
Korea
Brazil
Canada
Mexico
India
129
81
27
22
21
18
18
15
14
11
9
8
30
68
55
59
77
67
35
81
26
78
33
3
Residential broadband usersMillion
Broadband penetrationPercentage
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1.1 Growth trend of the eCommerce market in China
1.2 Growth trend of online shoppers in China
1.3 New trend of the eCommerce market in China
Table of Contents
1.3.1 Key Note – New Trend of eCommerce Market in China
- The independent merchants proportion in eCommerce is 70% in US, while China’s is only 10-20%
- More than 50% users are influenced by social media when deciding to make a purchase
- The popularity of smartphones is only 1/4 of those in developed countries, but mobile shopping penetration rate is 1/2
- The advantages of independent merchants include high quality products and brands, integrated after-sales service and standardized logistic management
- Potential of shopping power driven from social media, as well as increase in number of traffic and users driven from smartphones.
Huge growth potential for independent merchants
The use of smartphones increase the online shopper base
Independent merchants have an advantage for future development
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1.3.2 Structure of China eCommerce Market vs Other Countries
Compared with the independent merchant proportion of 76% in US, there is a huge potential for independent merchants in China. According to the statistics by McKinsey, independent merchants in China numbered 10% in 2011, while there was 76% in USA at the same period. As there is an increasing need, in addition to maturity of new brands in the marketplaces, we foresee a great potential for independent merchants.
Data Source: McKinsey Global Institute, China’s e-tail revolution: Online shopping as a catalyst for growth, March 2013
Comparison of eCommerce Platform and Independent Merchants
50%
80%88% 89% 93% 93% 92% 93% 90%
24%
50%
20%12% 11% 7% 7% 8% 7% 10%
2003 2004 2005 2006 2007 2008 2009 2010 2011
76%
2011
RMB billion
2 5 16 27 56 128 263 461 774
China United States
eCommerce Platforms
Independent Merchants
-13-
1.3.3 The Growth Trend of Users Driven by SoLoMo
Sharing on social media drives users’passion in online shopping. Half of its users were stimulated by social media to shop or choose a brand. The development of social media drives some behaviors such as conformed purchasing, conspicuous purchasing and advance purchasing – but mostly to help users have better choices in products and brands.
Data Source: CNNIC,“2012 Online Shopping Market in China Research Report”, March 2013
Social media platforms mainly used by online shoppers
Mogujie
Meilishuo
iGuang
Leho
Duitang
62.2%
33.1%
25.9%
10.1%
7.1%
5.7%
No. of purchases influenced by social media on users over the past 6 months
Over 10 times
6 - 10 times
4 - 5 times
1 - 3 times
7%
15%
23%
55%
-14-
1.3.4 The Growth Trend of Users Driven by SoLoMo
The popularity of smartphones helps the 3rd and 4th tier cities and rural areas to overcome the limitation of fixed broadband to directly enter the mobile shopping era. Mobile shopping in China was less than 2% in 2011 but grown to 4% in 2012, expecting an even higher jump in the future.
PC-based online shopping vs mobile shopping in 2010-2016
Data Source: iResearch,“China Online Shopping Research Report 2012”
99.5% 98.5% 95.8% 91.9% 88.3% 84.9% 82.2%
0.5% 1.5%4.2% 8.1% 11.7% 15.1% 17.8%
2010 2011 2012e 2013e 2014e 2015e 2016e
PC-based Online Shopping percentage (%)
Mobile Shopping percentage (%)
-15-
1.3.5 The Proportion of Users Driven by SoLoMo vs Other Countries
As of 2011, mobile commerce accounted for only 2% of the eCommerce market, while China’s smartphone penetration rate was only 10%. Just a year later, China’s mobile eCommerce represented about 4% of the total eCommerce market. Research also showed that the smartphone penetration is likely to increase to 23% in 2015, because of the higher tendency of average Chinese smartphone users to shop online, which brings much potential to future development.
2011 mobile commerce and smartphone penetration in major eCommerce markets
Data Source: McKinsey Global Institute, China’s e-tail revolution: Online shopping as a catalyst for growth, March 2013
Share of mobile commerce% of eCommerce
Smartphone penetration% of population
USA
UK
Germany
France
China
Korea
42
49
35
37
10
42
5.4
4.8
3.6
3.4
1.9
0.6
-16-
-17-
Summary
- eCommerce development in China is yet saturated given the growing number of internet users, broadband coverage, smartphone coverage, and the rising of average disposable income.
- The affluent consumers in China, especially for those from small cities, are looking for high quality products and brands. The expansion rate of offline shops is far behind the expectations of these consumers.
- For brands and retail merchants who want to enter China market, the best way to maximize contact with target consumers is to set up online shops. This way they can also standardize service levels and maintain the brand image.
- Compared with the United States’market structure, and in addition to the users’increased need and maturity of new brands in the marketplaces, independent merchants will play an important role in the future of China’s market.
-18-
Appendix – Definition of terms
- Internet users : Chinese citizens who have used the internet in the past 6 months
- eCommerce: The trade of products or service via internet, mainly referring to the B2C and C2C trading. Users search for the product information on the internet, send a purchase request via the e-order service, and then complete the purchase via online payment or COD. Online travel booking and B2B trading are not included.
- eCommerce consumer: Internet users who have purchased products or services online in the past 6 months.
- Independent merchants: A sub-industry or mini-market which operates an e-trading platform, and provides a complete e-commerce solution to the consumers. Independent merchants comprise of a full range of services tailored to its consumers, providing a strong channel for sales and marketing and branding promotions. Example: VANCL and Lefeng
- eCommerce Platform: A platform for corporations to provide online trading to individuals. Corporations and merchants can make use of the shared resources such as basic infrastructure, payment platform, security platform and management platform to operate their business activities in a more efficient and low cost manner.
- Exchange rate: Based on USD and RMB rate of 6.13 in July 2013
-19-
China eCommerce Market Analysis Report
Chapter OneIndustry Review and Forecast
END
Stay tuned for
Chapter TwoCharacteristics and evolution of China eCommerce users
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