China Cross Border E-commerce Report

1. 2019 H1 China Cross-border E-commerce Report
2019-08-20
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2. Content
• Highlights
• 2019 H1 Development of China Cross-border E-commerce
• 2019 H1 Cross-border E-commerce Shopping Behaviour – 618 Promo
• 2019 H1 China Cross-border E-commerce Case Study
• China E-commerce Trends Analysis
• Summary
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3. Highlights
• The implementation of e-commerce law helps standardize x-border e-commerce environment, e-commerce
market is expected to reach RMB1 trillion (US$1.78 trillion) by 2020
• X-border shoppers are most concerned with quality guarantee during 618 promotion
• Online and offline complement each other. Over 90% of shoppers are satisfied with offline shopping experience
during 618 promo
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4. 2019 H1 Development of China Cross-border E-commerce
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E-commerce Law of People’s Republic of China, the comprehensive law in e-commerce area was enacted on 1 Jan
2019. The law concerns e-commerce operators, e-commerce contracts and resolution of disputes, it involves e-
commerce tax, business license and transaction standard aiming to strengthen the standardisation of cross-border
e-commerce market and protect consumer rights.
Implementation of e-commerce Law
Merchants behaviour
E-commerce tax Business license
Transaction standard
After sale service Bundle sales
Deposit refund
Fake & defectiive
product
Dispute resolution
Merchant collect
evidence
Market standard
Consumer rights

5. 2019 H1 Development of China Cross-border E-commerce
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Platform Upgrade Supply Chain
Supply Chain Warehouse/Logistic
• Jan 2019: Signed agreement with Abbott
• Mar 2019: Upgraded strategic alliance with Biostime
• May 2019: Signed agreement with Healthy Care,
Johnson & Johnson
• July 2019: Signed agreement with Pigeon
June 2019: Kaola No. 1 warehouse
opened
• May 2019: Signed strategic alliance with Smooth Skin
• July 2019: English business-invitation site launched
Built overseas warehouses
June 2019: Signed strategic alliance with Swisse Jan 2019: Upgraded supply chain,
strengthened overseas business, set up
office in the US, Europe & Australia
• May 2019: Signed agreement with Kiko
• June 2019, Signed strategic alliance with Corporate
Japan
• July 2019: Signed strategic alliance with Rotbckchen
Set up over 110 overseas warehouses

6. 2019 H1 Development of China Cross-border E-commerce
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Development of major x-border e-commerce platform
Platform Highlights Analysis
Offline deployment
Jan 2019: Opened 1st brick-and-mortar flagship store in Hangzhou
April 2019: Opened 1st outlet store in Hangzhou
New product launch
Mar 2019: Launched “Kaola Time Capsule”
Anniversary Celebration
Mar 2019: Kaola 328 grand promo to celebrate 4th anniversary
Offline deployment
Jan 2019: Opened 3 brick-and-mortar store REDhome in Changzhou
Social commerce
Mar 2019: Launched social e-commerce platform Xiaohongdian; launched video product Hey
Platform Management
July 2019: Sorted out UGC content
3 Strategies
Mar 2019: Announced 3 strategies – self-managed store, overseas warehouse & content creation.
Supply Chain Management
May 2019: Launched Tmall Import Supermarket
July 2019: Launched English business-invitation site
Offline deployment
April 2019: Opened brick-and-mortar store in Shenzhen
May 2019: Opened brick-and-mortar store in Guangzhou
June 2019: Opened brick-and-mortar store in Beijing
Anniversary Celebration
Mar 2019: 516 4th anniversary celebration
Authentic Product Source Alliance
April 2019: 4th anniversary, set up Authentic Product Source Alliance
Supply Chain Management
May 2019: Signed agreement with Kiko
June 2019: Signed agreement with Corporate Japan

7. 2019 H1 Development of China Cross-border E-commerce
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Reputation index of major x-border e-commerce platform
Netease Kaola has the highest reputation index, score whereas Xiaohongshu has the lowest socre

8. 2019 H1 Development of China Cross-border E-commerce
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Market size of China’s e-commerce
China’s e-commerce market is expected to reach US$1.78 billion by 2020. Consumption upgrade brings higher
requirements for product quality and variety, which is to be met by cross-border e-commerce. Further increase of
demand and improvement of global logistic chain will continue to fuel annual growth for e-commerce transaction.
Unit: US$1 million

9. 2019 H1 Development of China Cross-border E-commerce
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Online shoppers for x-border e-commerce
Online shoppers for cross-border e-commerce reached 100 million in 2018. Along with the trend for consumption
upgrade and demands for personalised and high-quality products, as well as cultural environment created by
overseas study, overseas travel and culture input, consumers will demand more for high-quality cross-border e-
commerce, the number of online shoppers will continue to grow.
Unit: 1 million

10. 2019 H1 Development of China Cross-border E-commerce
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Market share of x-border e-commerce
In 2019 H1, Netease, Tmall Global and Dolphin Buy are No. 1, 2 and 3 in market share

11. 2019 H1 Cross-border E-commerce Shopping Behaviour – 618 Promo
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618 mid-year promo
57% online shoppers participated in 618 mid-year promotion. Due to the high-quality and high-price of x-border
products, there’s a high consumer demand for sales. 618 promo uses discount price to encourage x-border
shopping and to attract new customers.

12. 2019 H1 Cross-border E-commerce Shopping Behaviour – 618 Promo
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618 mid-year promo- Most popular product category
During 618 promo, the beauty cosmetic products are bought by the largest percentage of shoppers, followed by
personal care and food and beverage. Most shoppers are female who pay more attention to these product
categories selling at discount prices.

13. 2019 H1 Cross-border E-commerce Shopping Behaviour – 618 Promo
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618 mid-year promo - Avg. spend
During 618 promo, most shoppers spent between US$141-420 (RMB1,001-3,000). Discount price on various
platforms increased willingness for shopping and pushed up avg. spend.

14. 2019 H1 Cross-border E-commerce Shopping Behaviour – 618 Promo
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618 mid-year promo – Most important factors in choosing platform
During 618 promo, shoppers are most concerned with the guarantee of product authenticity, followed by level of
discount. Product quality is still the biggest differentiator for x-border e-commerce.

15. 2019 H1 Cross-border E-commerce Shopping Behaviour – 618 Promo
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618 mid-year promo – Most popular platform
During 618 promo, 42.9% shoppers used Netease Kaola and 42.1% used Tmall Global. Netease Kaola enjoys very
good reputation for x-border e-commerce and covers both online and offline during the promo.

16. 2019 H1 Cross-border E-commerce Shopping Behaviour – 618 Promo
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618 mid-year Promo – Participation of offline promo
During 618 promo, 12.3% shoppers participated in offline promo. With the increase of online customer acquisition
cost, x-border platforms started to deploy offline strategy with the 618 promo extending sales offline.

17. 2019 H1 Cross-border E-commerce Shopping Behaviour – 618 Promo
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618 mid-year promo – Online vs. offline
During 618 promo, 50.8% x-border e-commerce shoppers heard about offline promo via online channel, 21.6% via
recommendations from relatives or friends. During the promo period, most offline transactions was brought by
online channel.

18. 2019 H1 Cross-border E-commerce Shopping Behaviour – 618 Promo
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618 mid-year promo – Consumers satisfied with offline shopping
During 618 promo, 23.3% consumers are very satisfied with offline shopping, 69.8% quite satisfied. Offline shopping
benefits from tangible user experience and strengthens the product’s trustworthiness among users. The same
discount is adopted online and offline. “Experience + Low price” helps enhance user satisfaction for offline
shopping.
Quite
satisfied
69.8%
Very
satisfied
23.3%
618 promo user offline shopping satisfaction level survey

19. 2019 H1 Cross-border E-commerce Shopping Behaviour – 618 Promo
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618 mid-year promo – Trustworthiness
During 618 promo, Netease Kaola is the most trusted platform in terms of guarantee of product authenticity,
followed by Dolphin Buy and Tmall Global. Kaola has championed for guarantee of authenticity, its offline stores help
users check product authenticity and build trustworthiness for online platform.

20. 2019 H1 China Cross-border E-commerce Case Study
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Netease Kaola – Accelerate offline deployment
As the no. 1 cross-border platform, Netease Kaola accelerated offline deployment by opening offline flagship store
and outlet store to connect high-quality manufacturers with consumers. Offline store can supplement online
shopping experience and is becoming a trend for x-border e-commerce. Since its offline stores stress shopping
experience rather than sales, they may drive up operation cost for Kaola.
Offline flagship store
• Retail, experience and communication
• Intelligent interactive screen
• Online-offline connection
• Open 15 offline store in 2019
Outlet store
• Incubator for high-quality brands
• Connect high-quality manufacturers and consumers
• Open 12 offline stores in 2019
Global supply chain Intelligent bonded warehouse
Online platform Offline flagship store
Outlet store

21. 2019 H1 China Cross-border E-commerce Case Study
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Netease Kaola – Connect online and offline
During 618 promo, Netease Kaola adopted same discount for online and offline sales. Such practice helped bring
offline consumers online and improve the penetration rate for brands.
Item Description
Promo Coupon, red packet
Kaola ONE item Use short video to demo product’s look, use and user
scenario
Interactive sharing Sharing red packets
Member events Discount on discount
Offline flagship store
Get a Kaola stuffed toy after spending over RMB618
Offline outlet store
20-50% discount for selected products
100 brands authentic product guarantee
Online promo
Offline promo
Quality guarantee
Same discount online & offline

22. 2019 H1 China Cross-border E-commerce Case Study
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Dolphin Buy – 3 Must-Win Battles
Its 3 Must-win Battle shows a trend in Dolphin Buy’s product deployment. This strategy aims to create an integration
of marketing, warehousing and shipping in order to improve quality control. The process needs higher requirement
for its industry chain and better overall control.
Improve trust
• Strengthen cooperation with brands, improve quality
control through block chain tech
Increase variety of products to offer more choice
• Pandora New Products Project creates life scenario
centred around consumers
• Super New Product Project helps brands build
reputation and create sales
Twin-Mode Drive – complete industry chain
• Enable marketing support and data tool to enable
“Twin-Mode Drive” and complete 3rd party ecosystem
• Provide “People, Goods & Factory” matching
principle, push “Worry-free shopping” & “Dolphin
Select”, launch JD + 3rd party shipping service
3 Must-win
battles
Product variety
Improve trust
Twin-mode
drive
2019 new aim for Dolphin Buy

23. 2019 H1 China Cross-border E-commerce Case Study
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Dolphin Buy – Social commerce
Use City Relay, a social commerce mechanism to attract x-border users. Users in 367 cities can “like” product to get
red packet. By taking advantage of users’ social interaction to promote 618, it increases users’ interest, enhances
participation and increase topic level.
618 mid-year shopping festival
• Sales of beauty, personal care &
skincare increased by 42.5%
• Sales of formula milk increased by
200%
• Sales of food supplement exceeds that
of 1 June 2018 in half an hour…
Increase interaction
Celebrity promo
Discount
Extended sales
period
Warm-up period
• Global Shopping Day
• City Relay
Special sales period
• One major special sale per day
• 618 Rocket Charge Project
Climax period
• High-value Coupon
• Discount
Come back period
• Come back sales
Promo

24. 2019 H1 China Cross-border E-commerce Case Study
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Aomygod – Online & offline integration
Aomygod’s online and offline integration helps further develop Chinese market. However offline expansion poses
significant challenge for its logistic and warehousing facilities.
Online & offline integration
Merge online & offline shopping. Use data to drive users,
products, stock & marketing and provide consumers with
seamless shopping experience
Innovative deployment
Supply chain Offline
Supply chain upgrade Accelerate offline deployment
Upgrade supply chain for
overseas deployment. Set up US,
Europe & Australia office
Increase brick-and-mortar store
coverage, deploy in Guangzhou,
Zhuhai, Shenzhen & Beijing, North
China market

25. 2019 H1 China Cross-border E-commerce Case Study
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Aomygod – 618 results
Aomygod exemplifis online/offline model. During 618, it successfully sent online traffic to offline channel to improve
the development of its brick-and-mortar stores.
618 promo
• Daily transaction increased by 75% YOY
Offline brick-and-mortar store
• Visitors increased by 72%
• Orders increased by 17% YOY
• Online traffic converted from offline 580%
• 50% discount flash sale with
selected products
• Discount for cross-shop
shopping and coupon
• Joint promo by brands
• Aodou Double
• Benefits from merchants
Major promo
Member promo
Same discount
online & offline

26. Summary
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• Policy opportunities: The Chinese government encourages foreign trade as part of the effort on open-up policy.
As a new form of x-border trade with the emergence of the Internet era, x-border e-commerce is promoted by the
government on the policy level. E-commerce platforms are tapping into the potential by completing their x-border
trade supply chain in order to increase the scale of their operation.
• Consumption upgrade: Along with the improvement of their living standard, Chinese consumers are demanding
consumption upgrade. X-border e-commerce platforms can provide high-quality overseas products by creating
global supply chain with high-efficient logistic service. Covering more countries and wider variety of products, x-
border e-commerce will become the best means to satisfy the requirements for consumption upgrade.
• X-border e-commerce popularises shopping: Completion of x-border e-commerce supply system enables
consumers to get to know more overseas products of greater variety and personalisation. Products for daily
consumption such as fresh fruits and daily chemical products will become available through x-border e-
commerce in the future.

27. The End
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