Digital China 2015
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Transcript of Digital China 2015
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“Bricks-and-mortar retailing is a mature business in the US, where consumers have been shopping in malls for decades
and continue to do so, augmenting their purchases with occasional forays on the web.
Online shopping is dessert in the US, but in China, it is the main course”
Jack Ma
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632M INTERNET USERS
TODAY:
BY 2017:
850M INTERNET USERS
EACH INTERNET USER IN CHINA SPENDS AN AVERAGE
OF
25.9 hours
PER WEEK ONLINE
LARGE AND GROWING INTERNET POPULATION
ECOMMERCE TRANSACTIONS REACHED
$2 TRILLION MORE THAN 10% TOTAL
RETAIL REVENUES.
Source: CNNIC (JUNE 2014), iResearch
ACCELERATING ECOMMERCE
PENETRATION
MORE TIME SPENT ONLINE THAN EVER
BEFORE
China US0%
50%
100%
76%
56%
19%
33%
Many times a day Several times per day
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Online shopping on track to reach 10% of total retail transactions in 2014
Source: CNNIC, JUNE 2014, iResearch, Alibaba, CIW
CHINA ONLINE SHOPPING MARKET 2010-2017E
3%
2017E
16%
2016E
15%
2015E
13%
%B RMB
2014E
10%
2013
8%
2012
6%
2011
4%
2010
% of Total Retail Transactions
Total Online Shopping Transactions
CHINA ONLINE SHOPPING MARKET 2010-2017E
Total online shopping transactions reached $101B in Q2 2014, more than 10% of total retail
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Awareness Choosing Transaction Delivery Aftersales service3.3
3.6
3.9
4.2
China Russia US UK
The internet is a primary influence at each point of the purchase cycle
IMPORTANCE OF THE INTERNET AT EACH DECISION (1-5)
Source: Capgemini, 2014
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Internet use is more about entertainment than efficiency
Emai
l
Seach
Shopping
Trave
l
Onlin
e Ban
king
Recru
itmen
t
Onlin
e Pay
men
ts
Friends
(SNS)
Sellin
g
Educatio
n
Forum
s
Bloggin
g
Gam
ing
Video
Inst
ant M
essa
ging
News
Musi
c
0
25
50
75
100
USChina
KEY ONLINE ACTIVITIESEmarketer 2012
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China has become truly mobile first
468 million active users
55% OF CHINESE INTERNET USERS HAVE MADE A PAYMENT BY MOBILE. IN THE US ONLY 19% HAVE.
Fashion brands averaging more than
60% of transactions from Tmall mobile app
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Brand and product discovery and purchase happening on platforms
8Source: iResearch, July 2014, China Internet Watch
C2C
$188B
6%4%2%
17%3%
96%
1%
B2C
$107B
52%
18%JD.com
+ Tencent
B2C
Suning
Amazon
Other
AlibabaTencent
Tmall Taobao
SHARE OF B2C AND C2C IN CHINA (2013)
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China US
13%
41%
Limited product selection especially in lower-tier cities
Consumers in China are increasingly concerned about product quality and safety both online and offline
Combined Market Share of Top 20 Retailers, 2014
China US
0.6
2.6
Retail Space per Capita in sqm, 2014
Complicated distribution channel presents challenges for leading brands to gain significant nationwide market share offline in China
Brand image and control is important given fragmented retail channels
Source: Euromonitor Source: Euromonitor
Consumers Brands
Underdeveloped Offline Retail Infrastructure
Highly Fragmented Retail Landscape
Structural issues will accelerate the importance of ecommerce
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Resulting in online shopping rates that are more than double of global peers
36%
15% 14%11%
6%
% OF INTERNET USERS WHO SHOP ONLINE SEVERAL TIMES PER WEEK
Source: PWC 2012 Global multichannel consumer survey
US
China
19%
44%
16%
33%
19%
1%
19%
6%
17%
2%
10%
14%
Social digital shoppers Digital shopaholics Rational online shoppers Value seekers
Occasional online shoppers Techno-shy shoppers
Ecommerce is more about lifestyle than valueAnd almost 80% of online shoppers see themselves as lifestyle shoppers
THE ONLINE CONSUMER CARES AS MUCH ABOUT QUALITY, EXPERIENCE AND SERVICE AS THEY CARE ABOUT PRICE
Source: Capgemini, 2014
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With consumer interest focused across two platforms
10%E-commerce
9.4%Search
16% Social
5.3%News
4.6%Games
34%Online Video
21%Other
ONLINE VIDEO DOMINATES IN SHARE OF TIME SPENT, HOWEVER ECOMMERCE AND SOCIAL ARE WHERE BRANDS
ARE INNOVATING
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Wechat has attracted more than 400+million monthly users
Messaging Payments Social
TO CONSUMERS
Notifications Rich Content Service Commerce
Notifications Rich Content Service Commerce
TO BRANDS
THE WECHAT MODEL HAS NO COMPARISON TO ANY WESTERN MEDIA
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If I just look at digital, what digital has been historically, not just for us, but for the
industry and, frankly, for all of retail, is a really efficient transactional channel, for lack of a better term.
If I look at digital going forward, it is, number one, going to be that because this
industry will move from physical space to digital space. The digital expression of the brand will become one of the primary
ways for customers to engage with the brand.
Art Peck, Gap CEO, 2014
What is being proclaimed as a vision for the US is already a reality in China.
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Brands are coming to life through rich Wechat content
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ADIDAS DRIVES ITS BRAND IMAGE THROUGH HTML5 SITE
BURBERRY STREAMS ITS EVENTS LIVE THROUGH WECHAT AND
ENCOURAGES IMMEDIATE PURCHASE
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Chinese brands are providing an online experience that surpasses that of offline stores
Model shots for key product image
Video intros for every product
Extremely detailed product information
Editorial shots for each product.
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BRANDS ARE ENABLING CUSTOMER SERVICE THROUGH WECHAT
BANKS, HOTELS, LUXURY BRANDS ARE INTEGRATING THEIR AUTOMATED
SYSTEMS WITH WECHAT
2012 CHINA MERCHANTS
BANK INTEGRATES BALANCE
ENQUIRIES AND STATEMENTS WITH
WECHATSERVICE IS A MIXTURE OF AUTOMATED AND HUMAN
RESPONSES
Wechat is becoming a key customer conversation channel
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Product related
64%
Delivery10%
Shop process
3%
Promo-tion info.
13%
Return/exchange8%
Complaint0.003%
others2%
On Tmall, presales conversations are essential for conversion
86% OF CONVERSATIONS BY LIVE CHAT
LESS THAN 20% CONVERSATIONS ARE
ABOUT PROBLEM SOLVING
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Consumers are continuously rating your brand
MOST CONSUMERS WILL RANK YOUR STORE ON – CUSTOMER SERVICE, LOGISITICS, PRODUCT DESCRIPTION
QUALITY.
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Summary – China is a very different market
1. Brand and product discovery driven by platforms
2. A completely independent digital ecosystem
3. Consumers with heightened expectations from brands
4. Consumer, market and competitors changing at an
accelerated pace
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Summary – What we can take from China
1. A heightened focus on the digital customer
2. A laboratory for new business models
3. Mobile and Internet of Things leadership
4. Speed and flexibility
5. Producing global assortments means including Chinese tastes