In iClick's last chapter, we have explicitly focused on the characteristics and evolution of Chinese eCommerce users, together with the new demand and online users’ preference for eCommerce sites. In this final chapter, we provide strategies and solutions that help Chinese eCommerce practitioners to face the challenges today's digital landscape.
2. Table of Contents
1. 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
2. Characteristics and evolution of Chinese
eCommerce users
3. Strategies and solutions for Chinese
eCommerce enterprises
3. 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
4. 1.1.1 Key Note – China eCommerce Market
Largest online shopping
market in the world
Growing number of online shoppers and
more comprehensive peripheral services
- 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
China – Emerging retail online
development for global brands
- 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
-1-
5. 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
12594
122.9%
110.1%
109.2%
Online shopping amount
(hundred million dollars)
Annual growth rate
107.0%
7566
64.0%
66.5%
5231
44.6%
2500
1208
258
542
2006
2007
2008
2009
2010
2011
Data Source: CNNIC,“2012 Online Shopping Market in China Research Report”March 2013
,
2012
-2-
6. 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
RMB 10 billion
High Case
75
Base Case
Low Case
61
242
23
60
258
74
159
2011
20151
45
0.6
1.2
1.9
3
6.1
2003
2004
2005
2006
2007
13
2008
27
2009
2010
20201
Data Source: McKinsey Global Institute, China’e-tail revolution: Online shopping as a catalyst for growth, March 2013
s
-3-
7. 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’to rank world’No.2 in 2011
s
s
- Is even higher than the sum of UK, Germany and Korea combined
- Is predicted to exceed the United States’ 2015 and become the world’ largest online shopping market
by
s
Scale of online retail market in 2011
United States
119
China
74
Japan
66
United Kingdom
34
Germany
20
Korea
13
France
12
Brazil
7
Russia
6
Data Source: McKinsey Global Institute, China’e-tail revolution: Online shopping as a catalyst for growth, March 2013
s
-4-
8. 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.
200
Online retail market in 2003-2011
RMB 10 billion
CAGR
03-11%
United States
27%
United Kingdom
18%
Germany
22%
Korea
19%
France
35%
Brazil
34%
Russia
39%
Canada
50
120%
Japan
100
17%
China
150
14%
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
Data Source: McKinsey Global Institute, China’e-tail revolution: Online shopping as a catalyst for growth, March 2013
s
-5-
9. 1.1.6 Share of eCommerce in Total Retail Sales
China’eCommerce penetration has already surpassed the US:
s
- In 2012, China’eCommerce trade sales was 6.3% of total retail amount, while US’was only 5%.
s
s
- It is estimated that by 2020, China’eCommerce trade sales will be 10-16% of the total retail amount.
s
Share of China’ eCommerce in total retail amount in 2008-2013
s
7.4%
6.3%
4.4%
3.5%
2.1%
1.3%
2008
2009
2010
2011
2012
Data Source: CNNIC,“China Online Retail Market Data Analysis Report 2012”February 2013
,
2013e
-6-
10. 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.
2011-2020 Online spending per capita
Online spending per capita
RMB / person
High case
Year 2011
Year 2020
Base case
441
Low case
441
2360
5.3x
441
1839
4.3x
1533
3.5x
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’ total population. Spending will surpass Japan
s
to be world’ no. 2. 60% will choose online as their major spending channel as they shift to online
s
shopping from other spending channels.
Data Source: McKinsey Global Institute, China’e-tail revolution: Online shopping as a catalyst for growth, March 2013
s
BCG,“The Affluent Will Be a Major Driver of Consumption Growth in China”November 2012
,
-7-
11. 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
12. 1.2.1 Key Note – Growth Trend of Online Shoppers
in China
Largest eCommerce population
- No. of eCommerce users in 2012: 240 million
in the world
Vast territory impacts online
shops’
development
Online shop: the best channel
to enter the China Market
- 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
-8-
13. 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’online shoppers have reached 242 million people, raising the proportion to 42.9%.
s
China’ online shopping population and penetration in 2006-2012
s
42.9%
37.8%
24202
35.1%
Online shopping population
(ten thousand people)
Online shopping penetration
19395
16051
28.1%
22.1%
24.8%
24.5%
10800
7400
3357
2006.12
4641
2007.12
2008.12
2009.12
2010.12
2011.12
2012.12
Data Source: CNNIC, “2012 Online Shopping Market in China Research Report”March 2013
,
-9-
14. 1.2.3 China’Online Shopping Population Penetration
s
vs Other Countries
In China’retail market, the internet coverage already surpassed the coverage of real retail shops. Due to the vast
s
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
Retail Consolidation
Internet Coverage
(Proportion of top 20
(Population Proportion, %)
retailers in total retail sales, %)
81
UK
52
76
France
Germany
80
Korea
51
78
30
26
51
China (Cities)
7
… while retail consolidation almost reaches
a developing country’ level.
s
27
33
Brazil
Indiat
44
81
Japan
almost reaches a country’level…
s
49
87
USA
The internet coverage within cities in China
13
China’e-commerce benefits consumers
s
with its ability to offer more products.
3
Data Source: BCG,“The World’Next E-Commerce Superpower: Navigating China’Unique Online-Shopping Ecosystem”
s
s
,
November 2011
-10-
15. 1.2.4 Key Driving Factor for Online Shopping
Population Growth
The penetration of broadband network helps to increase China’internet users, as well as the popularity of
s
online shopping. China had 129 million broadband accounts but broadband penetration only accounted for 30%.
As broadband’popularity and speed increases, we can expect a better online shopper base which will drive the
s
expansion of eCommerce in rural areas.
Broadband users and penetration in 2011
Residential broadband users
Broadband penetration
Million
Percentage
129
China
30
68
81
USA
55
27
Japan
Germany
France
21
UK
18
Russia
18
Korea
15
Brazil
14
Canada
11
Mexico
9
India
8
59
22
77
67
35
81
26
78
33
3
Data Source: McKinsey Global Institute, China’e-tail revolution: Online shopping as a catalyst for growth, March 2013
s
-11-
16. 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
17. 1.3.1 Key Note – New Trend of eCommerce Market
in China
Huge growth potential for
- The independent merchants proportion in eCommerce
is 70% in US, while China’is only 10-20%
s
independent merchants
The use of smartphones increase
the online shopper base
Independent merchants have an advantage
for future development
- 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.
-12-
18. 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.
Comparison of eCommerce Platform and Independent Merchants
RMB billion
China
2
United States
5
16
27
56
128
263
461
774
eCommerce Platforms
24%
Independent Merchants
50%
80%
88%
89%
93%
93%
92%
93%
90%
76%
50%
20%
2003
2004
12%
11%
7%
7%
8%
7%
10%
2005
2006
2007
2008
2009
2010
2011
2011
Data Source: McKinsey Global Institute, China’e-tail revolution: Online shopping as a catalyst for growth, March 2013
s
-13-
19. 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.
Social media platforms mainly used by online shoppers
Weibo
62.2%
Mogujie
33.1%
1 - 3 times
Over 10 times
25.9%
Meilishuo
iGuang
Leho
10.1%
7%
6 - 10 times
15%
7.1%
55%
Duitang
5.7%
23%
4 - 5 times
No. of purchases influenced by social media on users over the past 6 months
Data Source: CNNIC,“2012 Online Shopping Market in China Research Report”March 2013
,
-14-
20. 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
0.5%
1.5%
4.2%
99.5%
2010
98.5%
2011
95.8%
2012e
8.1%
91.9%
2013e
11.7%
88.3%
2014e
Data Source: iResearch,“China Online Shopping Research Report 2012”
15.1%
PC-based Online Shopping
percentage (%)
17.8%
84.9%
82.2%
2015e
Mobile Shopping percentage
(%)
2016e
-15-
21. 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’smartphone
s
penetration rate was only 10%. Just a year later, China’mobile eCommerce represented about 4% of the total
s
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
Share of mobile commerce
Smartphone penetration
% of eCommerce
% of population
USA
5.4
42
UK
4.8
49
Germany
3.6
35
France
3.4
37
China
1.9
10
Korea
0.6
42
Data Source: McKinsey Global Institute, China’e-tail revolution: Online shopping as a catalyst for growth, March 2013
s
-16-
22. 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’market.
s
-17-
23. 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
-18-
24. Table of Contents
1. Industry review and forecast
2. Characteristics and evolution of Chinese eCommerce users
2.1 Characteristics and evolution of Chinese eCommerce users
2.2 New demand of Chinese eCommerce
users
2.3 Chinese online users’
preference for
eCommerce sites
3. Strategies and solutions for Chinese
eCommerce enterprises
25. Table of Contents
2.1 Characteristics and evolution of Chinese eCommerce users
2.2 New demand of Chinese eCommerce users
2.3 Chinese online users’
preference for
eCommerce sites
26. 2.1.1 Key Note – Demographics and Evolution of
Chinese eCommerce users
Online shopping increases both in
frequency and amount every year
Strong demand for luxury brands
leading to great opportunities for
international brands
Users’
shopping frequency increases
- Unprecedented growth of online shopping among Chinese
consumers
- Online shoppers’
average spending reaches RMB 5,023,
narrowing the gap with the U.S.
- Age group and income level of the users rise continuously
- Proportion of affluent consumers from the third and fourth
tier cities increases
- Online shoppers demand for luxury brands are steadily
increasing
- Popularity of smartphone and social media drives the
penetration rate of online shoppers and trigger their
purchasing desire
-19-
27. 2.1.2 General Overview and Uptrend of China
eCommerce Market
The growth of internet user population slows down, but online shoppers still maintain its strong momentum:
- Total number of Chinese online shoppers reached 242 million, with the proportion of online shoppers
increased to 42.9%.
Online Shopper Population and Penetration Rate in 2006 - 2012
42.9%
35.1%
24.5%
22.1%
24.8%
37.8%
24202
28.1%
Number of online shopper
(in ten thousand)
% of Online Shoppers
19395
16051
10800
7400
4641
3357
2006
2007
2008
2009
2010
2011
2012
Data Source: CNNIC,
“2012 Online Shopping Market in China Research Report”March 2013
,
-20-
28. 2.1.3 New Online Shopper Population in China vs
International Markets
The number of new Chinese online shoppers surpasses the total population of other countries. With the increment
of per capita consumption, the market sees huge potential:
- In line with the data from CNNIC, Boston Consultancy Group remarked that the number of China’new
s
online shoppers hit 3.8 million, which exceeded Canada’total population.
s
Internet user population propels the rapid development of China’eCommerce market
s
Population in million
New internet users
100
88
New online shoppers
86
73
73
80
61
France’population
s
60
43
36
40
26
20
17
25
11
10
2006
2007
38
47
38
29
34
Korea’population
s
40
31
Canada’population
s
12
2005
50
48
0
2008
2009
2010
2011
2012
2013
2014
2015
The era of rapid growth of network connection…
…brought about the era of rapid growth in eCommerce
Data Source: BCG,
“The World’Next E-Commerce Superpower: Navigating China’Unique Online-Shopping Ecosystem”
s
s
,
November 2011
-21-
29. 2.1.4 Growth of Chinese Online Shoppers’
Per Capita Consumption (1)
In 2012, Chinese online shoppers’ capita consumption reached RMB 5,023, YoY growth 25%.
per
- The purchasing power of Chinese online shoppers was strong, with more than half of the users spending over
RMB 1,000 annually online.
- Most users spent about RMB 2,001 - 5,000 on online shopping, which is 22.6% of the total share.
Online Shoppers’
Annual Per Capita Consumption in 2012 (RMB)
Over RMB 50,000
1.1%
RMB 20,001-50,000
1.8%
RMB 10,001-20,000
3.9%
RMB 8,001-10,000
7.3%
RMB 5,001-80,00
4.8%
RMB 2,001-5,000
22.6%
RMB 1,001-2,000
14.5%
RMB 501-1000
22.3%
RMB 301-500
10.8%
RMB 101-300
7.0%
Under RMB 100
3.9%
Data Source: CNNIC,
“2012 Online Shopping Market in China Research Report”March 2013
,
-22-
30. 2.1.4 Growth of Chinese Online Shoppers’
Per Capita Consumption (2)
- Mega spenders (annual spending over RMB 10,000) occupied 7% of the total number of online shoppers and 40%
of the total spending of online shopping.
- Experienced online shoppers of the affluent class should be the main target consumers of eCommerce enterprises.
Online Shoppers Classification
Type
Small spender
Annual online shopping spending (RMB)
Distribution in 2010
14
<2,000
57
Moderate spender
21
2,000-5,000
24
Big spender
5,000-10,000
24
40
Mega spender
>10,000
12
7
Proportion of online
shoppers (%)
Proportion of consumer
spending (%)
Data Source: BCG,
“The World’Next E-Commerce Superpower: Navigating China’Unique Online-Shopping Ecosystem”
s
s
,
November 2011
-23-
31. 2.1.5 Growth of Chinese Online Shoppers’
Per Capita Shopping Frequency
In 2012, Chinese online shoppers’
shopping frequency recorded a substantial growth:
- Users’
bi-annual average shopping frequency reached 18 times, which is 3.5 times of the size in 2011.
- The proportion of online shopping with over 10 times bi-annually took up more than 50% and increased
substantially by 23.8%.
- As time passes by, online shopping beginners became experienced online shoppers on a steady pace.
According to the research conducted by PwC, the online shopping frequency of Chinese consumers surpassed
the average level of the world. In China, nearly 50% of online shoppers browsed online at least once a week,
while the average of around the world was 29%.
2011 - 2012 Online Shopping Frequency within 6 Months
54.5%
Year 2011
Year 2012
21.9%
21.0%
18.9%
18.5%
10.5%
1-2 times
30.7%
14.1%
3-4 times
5-10 times
Data Source: CNNIC,
“2012 Online Shopping Market in China Research Report”March 2013
,
Over 10 times
-24-
32. 2.1.6 Types of Goods Purchased by Chinese
Online Shoppers
Clothing, footwear and accessories, daily necessities and 3C products are the goods that are mostly purchased by
the users:
- In 2012, 81.8% of users had bought clothing, footwear or accessories via internet, mainly due to their strong
desire for personalization and the limited diversity and insufficient coverage of offline actual stores’
merchandise.
- Standardized products such as 3C products also have a higher purchase rate, mainly due to the price advantage
of online shopping.
Percentage of Online Shoppers Purchasing Various Commodities in 2012
Clothing, footwear & accessories
81.8%
Daily necessities
31.6%
Computers, digital communications products & accessories
29.6%
Home electrical appliances
22.9%
Books & audio-visual publications
18.4%
Virtual cards, e.g. prepaid cards, game cards
16.6%
Cosmetics & beauty products
15.2%
Food & health products
14.5%
Handbags & luggage
12.8%
Food & beverage service
8.5%
Movie & show tickets
8.5%
Maternity & baby products
6.9%
Stationery
6.8%
Jewelery & accessories
6.7%
Data Source: CNNIC,
“2012 Online Shopping Market in China Research Report”March 2013
,
-25-
33. 2.1.7 Factors Affecting Chinese Online Shoppers’
Consumption Behaviour
When more and more users are elevated to affluent consumers, they demand more upmarket goods to enhance the
quality of life:
- Categories related to personal care and lifestyle will develop rapidly along with the upgrade of the user class.
- Categories related to health care, 3C products and baby products will continue to grow as income level rises.
Consumption Pattern of Different Commodities and Income Groups
Turning point
Continuous growth
Per capita consumption (index)
Per capita consumption (index)
Low income group
Quasi-middle class
Emerging middle class
Middle class
Affluent consumers
Family Income
Skincare, clothing, footwear & accessories
Family Income
Vitamins, handsets, baby products
Data Source: BCG,
“The Affluent Will Be a Major Driver of Consumption Growth in China”November 2012
,
-26-
34. 2.1.8 Overview of Chinese Online Shoppers’
Consumption by Region
Consumers from the third and fourth tier cities have a higher demand for online shopping, which offers them a
greater variety of goods to choose from:
- The number of affluent consumers from the third and fourth tier cities had been gradually increasing. They
preferred online shopping because the coverage of offline actual stores in their cities was limited, particularly
that of the middle to luxury brands.
- The spending amount of the online shoppers in the fourth tier cities is similar to that in the second and third
tier cities, yet accounting for a larger share of disposable income.
Average Spending and Share of the Total Retail Spending in the Third and Fourth Tier Cities
Online spending per online shopper (RMB)
Percentage of online shopper’retail spending (share of disposable income)
s
Top tier
6,819
18
Second tier
4,922
17
Third tier
4,624
21
Fourth tier
4,467
27
Data Source: McKinsey Global Institute, China’e-tail revolution: Online shopping as a catalyst for growth, March 2013
s
-27-
35. 2.1.9 Analysis of Demographics and Purchasing
Behaviour of Chinese Online Shoppers (1)
- Chinese online shoppers had a tendency moving towards middle-age group, with 35.7% of users aged 31 or
above and increased by 9% as compared with 2011.
- Purchasing power of users from the middle age group is even stronger. They are interested in luxury fashion
brands, and maternity and baby products which are related to their next generation.
Age Group of Online Shoppers in 2006 - 2012
Year 2011
Year 2012
37.5%
34.4%
33.1%
30.3%
18.4%
14.9%
10.2%
6.2%
1.5%
7.1%
5.6%
1.0%
Under 18 years old
18 -24 years old
25 - 30 years old
31 - 35 years old
Data Source: CNNIC,
“2012 Online Shopping Market in China Research Report”March 2013
,
36 - 40 years old
Over 40 years old
-28-
36. 2.1.9 Analysis of Demographics and Purchasing
Behaviour of Chinese Online Shoppers (2)
With ongoing age growth of online shoppers and economic development in China, the income level of online
shoppers has been improved:
- The proportion of online shoppers with personal monthly income of RMB 8,000 or above has increased,
indicating that the number of users from the middle class or above has increased.
- The decline in the proportion of the low income group indicated that the economy of China’third and
s
fourth tier cities boomed and the income level of the local citizens improved.
Income Groups of Online Shoppers in 2011 - 2012
Over RMB 8,000
9.5%
12.9%
RMB 5,001 - 8,000
10.5%
12.6%
RMB 3,001 - 5,000
26.3%
29.7%
RMB 2,001 - 3,000
22.0%
19.2%
RMB 1,001 - 2,000
17.7%
12.6%
RMB 501 - 1,000
7.7%
7.0%
Under RMB 500
6.3%
6.2%
Year 2011
Year 2012
Data Source: CNNIC,
“2012 Online Shopping Market in China Research Report”March 2013
,
-29-
37. 2.1.9 Analysis of Demographics and Purchasing
Behaviour of Chinese Online Shoppers (3)
Users’
purchasing behaviours may vary from different demographics, in particular their preference on product
categories:
- Take gender as an example, men are generally more preferred with 3C products while women pay more
attention to cosmetics / personal care / baby products.
Top 10 Commodities Purchased by Chinese Male Online Shoppers in 2012
Top 10 Commodities Purchased by Chinese Female Online Shoppers in 2012
Clothing, footwear,
luggage, outdoor products
30.9%
Clothing, footwear,
luggage, outdoor products
47.3%
Mobile phone prepaid package
21.2%
Cosmetics & personal care
11.7%
Books & audio-visual publications
7.6%
Mobile phone prepaid package
11.4%
Home decor
5.8%
Home decor
7.0%
IT products
4.7%
Maternity & baby products
5.4%
Online lottery
4.6%
Books & audio-visual publications
3.9%
Maternity & baby products
3.9%
Fresh fruits & other food
2.9%
Communications products
3.5%
Small electrical appliances
1.8%
Cosmetics & personal care
3.3%
Digital products
1.5%
Digital products
2.8%
Online lottery
1.3%
Percentage (%)
Percentage (%)
Data Source: McKinsey Global Institute, China’e-tail revolution: Online shopping as a catalyst for growth, March 2013
s
-30-
38. Table of Contents
2.1 Characteristics and evolution of Chinese eCommerce users
2.2 New demand of Chinese eCommerce users
2.3 Chinese online users’
preference for
eCommerce sites
39. 2.2.1 Key Note – New Demand of Chinese
eCommerce users
Growing desire in international brands
- In the second half of 2012, online shoppers purchased
overseas goods from local eCommerce sites 4 times on
average
- User spent over RMB 400 for each purchase
Stronger demand for choosing more
brands with lower prices
Logistics and after-sales service
are key to success
- Purchasing overseas’
goods reveals the behaviour of the
affluent class - concern about brand and quality
- The major advantage of purchasing goods from overseas
is that users can choose from a wide variety of brands with
relatively lower prices
- The major problems in purchasing overseas’
goods are
long delivery time and lack of after-sales service
- Set up online store to reduce the cost of expanding actual
store. Provide worldwide after-sales service and acknowledge
the users by lowering the prices
-31-
40. 2.2.2 Market Scale of Chinese Online Shoppers
Buying Overseas Goods
Chinese online shoppers buying overseas goods are growing rapidly:
- In 2012, the amount spent on buying overseas goods hit RMB 48.3 billion, with an increase of 82.3% yearly.
- According to the estimation by China E-Business Research Center, the growth of buying overseas goods this
year will remain steady and the amount is expected to exceed RMB 70 billion.
Amount in purchasing overseas goods in China in 2008 - 2013
Transaction amount (in RMB 100 million)
744
483
265
120
24.1
2008
50
2009
2010
2011
2012
2013e
Data Source: China E-Business Research Center, China B2C E-Commerce Report 2013 Mid - year Report, February 2013
-32-
41. 2.2.3 Overview of Chinese Online Shoppers’
Buying Overseas Goods
The product categories of overseas goods reflect the needs from the affluent consumers:
- Clothing, cosmetics, baby products, 3C products and health care products are the major product categories.
- As the income level of online shoppers increases, there is a stronger demand for luxury brands which have
not yet entered the Chinese market. For foreign brands, they must seize the opportunity to enter the Chinese
market.
Common Overseas Goods Purchased by Chinese Online Shoppers
Clothing (including clothes & bags)
50.0%
Cosmetics & beauty products
26.8%
Milk powder, infant products
15.2%
Computers, digital communications
products & accessories
10.7%
Household products
5.4%
Health products
5.4%
Jewellery & watch
3.6%
Books, audio and visual publications
1.8%
Others
8.0%
Data Source: CNNIC,
“2012 Online Shopping Market in China Research Report”March 2013
,
-33-
42. 2.2.4 Analysis of Chinese Online Shoppers’Motives
and Demand for Overseas Goods (1)
Users choose to buy foreign products because of a wide range of different brands, low prices and better quality:
- Despite the tax, the domestic pricing of foreign products are cheaper than that when imported to China due
to markup of prices.
- 1/3 of Chinese online shoppers purchase overseas goods via local eCommerce sites because they are unable
to reach the foreign brands. To the foreign brands which have not yet entered the Chinese market, they should
be aware of this phenomenon and set up their own online store to expand their business in China.
- The food safety and product quality issues in China have caused the affluent consumers to look for foreign
goods online from the developed countries. The quality assurance of goods is the major considering factor
when the middle class or the upper class tends to purchase.
Reasons of Users’
Purchasing Overseas via Purchasing Agent
Cheaper than local pricing
39.3%
Favourite brands do not exist in China
33.9%
Guaranteed quality
30.4%
Trendy and fun
8.9%
Others
10.7%
Data Source: CNNIC,
“2012 Online Shopping Market in China Research Report”March 2013
,
-34-
43. 2.2.4 Analysis of Chinese Online Shoppers’Motives
and Demand for Overseas Goods (2)
The major problems of buying overseas goods are long delivery time and lack of after-sales service:
- Most of the couriers of the overseas eCommerce operators fail to deliver the goods on the next day, not to
mention the delivery time of the aircraft cargo and the time for custom check. Therefore, the average delivery
time of the goods purchased oveseas is usually more than two weeks.
- To foreign brands which aim for success in China, they should opt for setting up their own online store to take
the advantage of the low cost of China’speedy courier service to meet customers’
s
needs.
- To tackle the after-sales service issue, brand owners should consider providing worldwide after-sales service.
Opening an online store in China is also a strategy to meet users’
demand for sales service.
Major Problems Encountered when Buying Overseas Goods
Long delivery time
92.6%
Fail to return or exchange goods
22.2%
Unauthorized use of credit card overseas
7.4%
Quality issue of the purchased goods
3.7%
Damage or lost during delivery
3.7%
Data Source: CNNIC,
“2012 Online Shopping Market in China Research Report”March 2013
,
-35-
44. Table of Contents
2.1 Characteristics and evolution of Chinese eCommerce users
2.2 New demand of Chinese eCommerce users
2.3 Chinese online users’
preference for
eCommerce sites
45. 2.3.1 Key Note – Chinese Online Shoppers’
Preference
for eCommerce
Consistent growth rate of eCommerce
- New users are quickly taken up by top eCommerce operators
operators and network users
- The number of online shopping channels increases, driving the
loyalty towards a specific site decreases
Consistent low conversion rate
- The churn rate of top eCommerce enterprises is around 10%,
mainly because users are unable to locate the goods they want
induces business difficulties
- The conversion rate of eCommerce website is generally low.
Audience targeting is required to push product information
which match the characteristics of users’
behaviour
- In view of the significant cost increment for acquiring new users
in recent years, optimization and development are required for
customer relationship management
Different eCommerce operators need
different solutions to cope with
fierce competition
- For eCommerce platform operators, they need to improve online
sales conversion rate, tackle the churn issue of existing clients and
enhance the conversion rate of proprietary products
- For independent merchants, they have to face the challenge of
acquiring new users
- For newly established eCommerce operators, they have to enhance
brand awareness to rapidly expand the new user group in order to
strive for market share during a short period of time
-36-
46. 2.3.2 Increasing number of eCommerce Websites
in China
In 2012, the number of eCommerce websites in China increased by 20% as compared with 2011, reflecting the severe
competition of this industry:
- The number of eCommerce websites increased by nearly 20%, yet that of online shoppers increased by 24% only.
- New users were mostly attracted to top eCommerce websites, implying a bigger pressure for the newly
established eCommerce players.
- The emergence of new eCommerce players gave rise to a more scattered user base due to the increasing number
of choices. User loyalty to a specific website drops.
Growth of Chinese B2C and C2C eCommerce Enterprises in 2008 - 2013
Amount (in unit)
24875
25529
20750
15800
9962
5460
2008
2009
2010
2011
2012
2013e
Data Source: China E-Business Research Center, China B2C e-Commerce Report 2013 Mid-year Report, February 2013
-37-
47. 2.3.3 Loyalty Change of Chinese eCommerce Users
The increasing number of eCommerce websites has led to a greater diversity of options, causing the users to be less
loyal to a specific website:
- During 2009 to 2012, the proportion of online shoppers using only one shopping website has dropped
significantly.
- Users will compare the types of goods, brands and discounts from different eCommerce websites prior to their
purchase.
- Since the payment methods are relatively the same, the cost of users switching among eCommerce operators is
relatively low as well. To the eCommerce enterprises, brand differentiation of their products and price war
become the core strategies to retain customers.
Proportion of Using One Shopping Website
Only in 2009-2012
Proportion of Loyal Users of Major Shopping Websites in 2012
2012
89.2%
JD.com
8.9%
91.1%
8.6%
91.4%
6.3%
93.7%
6.2%
93.8%
4.8%
95.2%
1 The Store
2011
10.8%
Suning.com
2010
84.8%
VANCL
2009
15.2%
Amazon China
51.1%
50.8%
Dongdong.com
61.1%
49.2%
Tmall
72.7%
Taobao
PaiPai.com
80.0%
2.7%
97.3%
Users using one website only
Data Source: CNNIC,
“2012 Online Shopping Market in China Research Report”March 2013
,
Users using more than one website
-38-
48. 2.3.4 Change of Chinese Online Shoppers’
Browsing
Time of eCommerce Websites
Online shoppers’
average browsing time decreased, yet the conversation rate of each eCommerce operator did
not increase significantly:
- Average age of users rose. Average time for browsing the shops decreased significantly from 20 minutes to
17 minutes.
- The drop of users’
browsing time was not caused by the optimization of users’
experience of each
eCommerce website, which might help users save time for decision making. Data showed that the conversion
rate of each eCommerce enterprise did not show significant improvement.
Online Shopping Daily Coverage and Average Browsing Time per User
Daily coverage (in million persons)
8000
Daily Effective browsing time per user
68%
June 2010
7000
June 2011
6000
5000
-16%
4000
3000
2000
1000
0
Data Source: China E-Business Research Center, Data Analysis Enhances E-Commerce Conversion Rate, September 2012
-39-
49. 2.3.5 Analysis of Chinese eCommerce Websites
Conversion Rate
In an extremely competitive business environment, the conversion rate of top eCommerce websites, from the page
displaying the products to the payment confirmation page, was merely 1%:
- The conversion rate of top eCommerce enterprises remained low at around 1%.
- For the long-tailed independent merchants, they should broaden their client base by expanding the traffic and
reinforcing users’
purchasing power so as to improve the business. If eCommerce operators are able to attract
or direct users which match the characteristics of potential customers of products on their website, the client
base can be expanded and the website conversion rate will be enhanced simultaneously.
Visit Conversion Rate Data of Selected eCommerce Websites during 8-14 July 2012
Conversion
Dongdong.com
Product description
page
Shopping cart
Order
confirmation
Payment
JD.com
51buy.com
14.9%
4.5%
2.5%
1.3%
20.3%
30.2%
4.8%
23.6%
55.6%
4.7%
97.9%
27.1%
52.0%
1.4%
29.8%
4.6%
2.0%
1.0%
17.0%
43.5%
50.0%
Method of calculating conversion rate: Hitwise monitored the network visiting behaviours of over 10 million online devices. Based on users’
visiting
behaviours on the transaction milestone page, the purchase conversion rate was restored. Such data only included browser data via PC, excluding data
of mobile phones and APP. Statistics indicator is defined as Visits.
Data Source: China E-Business Research Center, Data Analysis Enhances E-Commerce Conversion Rate. September 2012; Hitwise,
Visit Conversion Rate Data of E-Commerce Websites, August 2012
-40-
50. 2.3.6 Overview of New Users of Chinese
eCommerce Websites
Most of the new Chinese online shoppers are absorbed by top eCommerce enterprises. Independent merchants
face the challenge of acquiring new users:
- Most of the new users choose top eCommerce platforms such as Taobao, Tmall and JD.com, etc.
- To tackle this challenge, on one hand the independent merchants can implement product differentiation, on
the other hand, they can fill the niche by catering to the users when the top eCommerce enterprise loses.
Percentage of New Users Using Various Shopping
Websites in 2012
Growth Rate of User Volume of Major Shopping
Websites in 2012
44.2%
27.6%
22.2%
22.1%
14.3% 13.9%
15.3%
Data Source: CNNIC,
“2012 Online Shopping Market in China Research Report”March 2013
,
9.9%
l
al
Tm
on
az
ng
Am
m
do
ng
Do
JD
.co
St
or
e
Th
e
CL
1
VA
N
Pa
i
Pa
i
ni
ng
m
Su
p.
co
m
ho
Vi
ps
y.c
o
bu
Su
51
1
Th
e
CL
11.1% 11.0% 10.6%
2.8%
St
or
e
2.8%
ni
ng
3.7%
VA
N
az
on
4.6%
Am
Pa
i
6.4%
Pa
i
ng
do
ng
l
Do
al
Tm
m
JD
.co
Ta
o
ba
o
7.1%
12.4% 12.3%
-41-
51. 2.3.7 Cost Change of Chinese Independent
Merchants in Acquiring New Users
The costs for Chinese B2C eCommerce enterprises to acquire new users increase year by year, with a rise of
several times in 5 years:
- The costs for independent merchants to acquire new users increase due to intense competition and
increment of advertising rates. The costs of acquiring a new user rose from around RMB 20 in 2009 to
over RMB 100 in 2012.
- To tackle this problem, independent merchants should be based on existing information to redefine
users’
characteristics by means of CRM. With such data, they can explore the source of new users by
audience targeting or marketing.
Data source: Interviews with industry professionals, March 2013
-42-
52. 2.3.8 Change of Repurchase Rate of Chinese
Online Shoppers
Except for some of the top eCommerce enterprises, the repurchase rates of most eCommerce websites in China
exhibit a downward trend:
- Chinese online shoppers’
monthly repurchase rates at most of the eCommerce websites show a downward
trend.
- Main reasons are the increasing number of eCommerce enterprises which lead to intense competition with
more options for users and their frequent switch from one website to another, resulting in the rise of churn
rate. In addition, some of the eCommerce operators are incapable of sustaining their business and expose
their weakness regarding product quality and integrity after running their business for a while.
China’Top 10 B2C eCommerce Websites with Highest Monthly Repurchase Rate in 1H 2012
s
Rank
Website
Monthly Repurchase Rate (%)
Monthly Repurchase Rate Relative Trend (Jan - Jun 2012)
1
Vipshop.com
82.41%
Fashion, clothing
2
OkBuy
68.60%
Footwear, bags & accessories
3
1 The Store
59.52%
General merchandise
4
Fclub.cn
57.89%
Fashion, clothing
5
JD.com
54.98%
General merchandise
6
Dongdong.com
53.48%
General merchandise
7
Mbaobao.com
51.49%
Footwear, bags & accessories
8
YouGou
51.46%
Footwear, bags & accessories
9
COFCO womai.com
50.91%
Food
10
LAFASO
47.65%
Cosmetics
Data source: iResearch,
“China Online Shopping Report in Q2 2012”July 2012
.
Website category
-43-
53. 2.3.9 Change of Churn Rate of Chinese Online
Shopping Website
The churn rate of China’ eCommerce websites was around 10%, the long-tailed independent merchants were
top
facing more user loss:
- In 2012, 6.5% of users stopped using the shopping website which they used 6 months ago. The differences
among different websites’
user loss varied, even the top independent merchants had a churn rate as much
as 10%.
Proportion of Major Shopping Websites’
User Loss vs.
Total User Loss in 2012
Churn Rate of Major Shopping Website in 2012
22.9%
37.5%
17.8%
14.0%
10.2%
14.8%
1.9%
7.2%
St
or
e
e
Th
1
uy
.co
51
b
Pa
i
Pa
i
CL
m
m
VA
N
co
ps
ho
p.
on
Data Source: CNNIC,
“2012 Online Shopping Market in China Research Report”March 2013
,
Vi
az
Am
N
.co
op
ew
eg
m
g.
co
m
1.9%
ne
La
ox
ec
M
1
Th
e
St
or
e
m
g.
co
on
gd
CL
Do
n
VA
N
l
al
Tm
Pa
i
Pa
i
on
az
Am
m
JD
.co
ba
o
11.5% 11.0%
8.7%
3.2%
Ta
o
12.5%
6.4%
sh
7.0%
Vi
p
7.0%
-44-
54. 2.3.10 Analysis of Reasons Causing User Loss of
Chinese Online Shopping Websites
User loss of Chinese online shopping website is mainly due to incomplete product range, lack of quality assurance
and after-sales service:
- For eCommerce website, the way to enhance conversion rate and sustain users’
loyalty is to implement targeting
strategy which target potential users and push appropriate SKU of the products and enhance the conversion rate
of SKU of the proprietary products, so as to minimize users’
frustration in locating the products they want.
- Meanwhile, eCommerce enterprises should concentrate on developing sustainable business, ensuring product
quality and after-sales services even during promotional period / price war. Otherwise, users will have the feeling
of being deceived.
Reasons for Users to Stop Using Specific Website
Unable to locate goods they want
47.1%
Poor quality of goods
24.2%
Expensive pricing of goods
17.8%
Deceive consumers
8.3%
Dissatisfactory after-sales service
4.5%
Poor delivery service
4.5%
Unable to open the website
2.5%
Data Source: CNNIC,
“2012 Online Shopping Market in China Research Report”March 2013
,
-45-
55. Summary
- There is an unprecedented growth of online shopping among Chinese consumers. Online shopping
frequency and spending amount increase year by year. Online shoppers’
average spending is around
RMB 5,203, narrowing the gap with the U.S. each year.
- As the age group and income level of the users as well as the proportion of affluent consumers from
the third and fourth tier cities increase, Chinese online shoppers desire luxury brands which enhance
the quality of life, resulting in a trend of overseas online shopping through purchasing agent.
International brands should seize this opportunity.
- The increasing number of Chinese eCommerce enterprises gives rise to fierce competition in the market
and a war to fight for users and traffic. eCommerce enterprises are facing common challenges such as
increasing costs of acquiring new users and churn rate of existing users.
- To solve the fundamental management problems, different types of eCommerce enterprises need to
establish the right direction of running the business and implement appropriate strategic solutions.
-46-
56. Appendix – Definition of terms
- Internet users : Chinese residents who have used the internet in the past 6 months
- E-commerce: 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 industry. Independent merchants comprise of a
full range of services tailored to its consumers, providing a strong channel for sales and marketing
and branding promotions, for example, VANCL and LAFASO.
- 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.
- Shopping website user loss: Refer to users stop using a specific website, that they used 6 months ago,
in the past 6 months
- Shopping website churn rate = user loss in the past 6 months / total user volume 6 months ago
-47-
57. Table of Contents
1. Industry review and forecast
2. Characteristics and evolution of Chinese eCommerce users
3. Strategies and solutions for Chinese eCommerce enterprises
3.1 Operational difficulties for eCommerce
enterprises
3.2 eCommerce strategies and solutions
3.3 About iClick
58. Table of Contents
3.1 Operational difficulties for eCommerce enterprises
3.2 eCommerce strategies and solutions
3.3 About iClick
59. 3.1.1 Key Note – Operational Difficulties for
eCommerce Enterprises
Severe loss of
eCommerce users
- The user churn rate of top eCommerce enterprises is
around 10%, mainly because users are unable to locate the
goods they desire.
- With the increasing number of websites, the number of
online shopping channels increases, which means the loyalty
towards a single site decreases.
Generally low
conversion rate
New users conversion
cost increases year by year
- The conversion rate of top eCommerce enterprises
remains relatively low at around 1%.
- New users are quickly taken up by top
eCommerce enterprises.
- The cost for acquiring new users has risen
several times in 5 years’
time.
-48-
60. 3.1.2 Trend of User Churn Rate of China’
s
eCommerce websites
The churn rate of China’top eCommerce websites was nearly 10%, while some eCommerce websites have
s
even reached to 37.5%.
User Churn Rate of Major Shopping Websites in 2012
37.5%
14.8%
12.5%
11.5%
11.0%
8.7%
Newegg.com
Amazon
Vipshop.com
VANCL
PaiPai.com
7.2%
51buy.com 1 The Store
Data Source: CNNIC, “2012 Online Shopping Market in China Research Report”March 2013
,
-49-
61. 3.1.3 Loyalty Change of Chinese eCommerce Users
The increasing number of eCommerce websites has led to a greater diversity of options,
causing the users to be less loyal to a specific website:
- From 2009 to 2012, the proportion of online shoppers using only one shopping website dropped significantly
- Users will compare the types of goods, brands and discounts from different eCommerce websites prior to
their purchase
- Since the payment methods are relatively the same, the cost for users switching among eCommerce enterprises
is relatively low as well. For eCommerce enterprises, the brand differentiation of their products and price war has
become their core strategies to retain customers
Proportion of Using One Shopping Website Only in 2009-2012
Loyal Users Proportion of Major Shopping Websites in 2012
Taobao
PaiPai.com
2011
2012
JD.com
8.9%
91.1%
8.6%
91.4%
6.3%
93.7%
6.2%
93.8%
4.8%
95.2%
1 The Store
2010
89.2%
Suning.com
2009
10.8%
VANCL
51.1%
84.8%
Amazon China
61.1%
15.2%
Tmall
72.7%
50.8%
Dongdong.com
80.0%
49.2%
2.7%
97.3%
Single Users
Data Source: CNNIC,“2012 Online Shopping Market in China Research Report”March 2013
,
Non-single users
-50-
62. 3.1.4 Analysis of Chinese eCommerce Websites
Conversion Rate
In a fierce competitive business environment, the conversion rate of top eCommerce websites,
from the page displaying the products to the payment confirmation page, was merely 1%:
- The conversion rate of top eCommerce enterprises remained relatively low at around 1%
- For the long-tailed independent merchants, they should broaden their client base by expanding
the traffic and reinforcing users’
purchasing power so as to improve their business. If eCommerce
enterprises are able to attract or direct users which match the characteristics of their potential customers
in terms of their products on their website, the client base can be expanded and the website conversion
rate will be enhanced simultaneously
Visit Conversion Rate Data of Selected eCommerce Websites during 8 - 14 July 2012
Conversion
Dongdong.com
Product description
page
Shopping
cart
Order
confirmation
Payment
JD.com
14.9%
4.5%
2.5%
1.3%
51buy.com
20.3%
30.2%
4.8%
23.6%
55.6%
4.7%
97.9%
52.0%
1.4%
29.8%
27.1%
4.6%
2.0%
1.0%
17.0%
43.5%
50.0%
Method of calculating conversion rate: Hitwise monitored the network visiting behaviours of over 10 million online devices.
Based on users’
visiting behaviours on the transaction milestone page, the purchase conversion rate was restored.
Such data only included browser data via PC, excluding data of mobile phones and APP. The statistics indicator is defined as Visits.
Data Source: China E-Business Research Center, Data Analysis Enhances eCommerce Conversion Rate, September 2012;
Hitwise, Visit Conversion Rate Data of eCommerce Websites, August 2012
-51-
63. 3.1.5 An overview of new users on Chinese
eCommerce websites
Most of the new Chinese online shoppers are absorbed by top eCommerce enterprises.
Independent merchants face the challenge of acquiring new users:
- Most of the new users choose top eCommerce platforms such as Taobao, Tmall and JD.com, etc.
- To tackle this challenge, the independent merchants can implement product differentiation on one hand.
Conversely, they can fill the niche by catering to the users when the top eCommerce enterprise loses.
44.2%
Percentage of New Users Using Various Shopping
Websites in 2012
User Volume Growth Rate of Major Shopping
Websites in 2012
27.6%
22.2%
22.1%
14.3% 13.9%
15.3%
11.1% 11.0% 10.6%
9.9%
l
al
Tm
on
Am
az
ng
do
ng
m
Do
JD
.co
St
or
e
Th
e
CL
Data Source: CNNIC, “2012 Online Shopping Market in China Research Report”March 2013
,
1
VA
N
Pa
i
Pa
i
Su
ni
ng
m
.co
m
op
sh
y.c
o
bu
Vi
p
ni
ng
2.8%
Su
St
or
e
2.8%
51
1
Th
e
CL
3.7%
VA
N
az
on
4.6%
Am
Pa
i
6.4%
Pa
i
ng
do
ng
al
l
Do
Tm
m
JD
.co
Ta
o
ba
o
7.1%
12.4% 12.3%
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64. 3.1.6 Cost Change of Chinese Independent
Merchants in Acquiring New Users
The costs for Chinese B2C eCommerce enterprises to acquire new users has largely increased year by year,
with a rise of several times in 5 years:
- The costs for independent merchants to acquire new users has largely increased due to intense competition
and increment of advertising rates. The costs of acquiring a new user rose from around RMB20
in 2009 to over RMB100 in 2012.
- To tackle this problem, independent merchants should refer to existing information to redefine users’
characteristics by means of CRM. With such data available, they can further drive the source of new users
by audience targeting or marketing strategies.
Data source: Interviews with industry professionals, March 2013
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65. Table of Contents
3.1 Operational difficulties for eCommerce enterprises
3.2 eCommerce strategies and solutions
3.3 About iClick
66. 3.2.1 Key Note – eCommerce Strategies
and Solutions
New entrant
- Challenge: Less popular
- Strategy 1: Search engine marketing
Strategy 2: On-target advertising – audience buy
Independent merchant
- Challenge: Increasing cost of acquiring new users
- Strategy 1: Use search retargeting to search for potential customers
Strategy 2: Use machine learning and CRM data mining
eCommerce platform
- Challenge: Low customer loyalty and conversion rate
- Strategy: Use targeting to reach potential customers
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67. 3.2.2 Challenge for New Entrant – Low Popularity
- Challenge: Low popularity at an early stage and relatively low visitors volume
- Marketing advice: To establish an online store
Firstly: Improve the brand image to create a unique shopping experience
- To improve the brand image, brand owners can have complete control over the designing
process of the shopping experience to create a unique service experience for the brand.
Secondly: To enhance the conversion rate effectively
- By establishing an online store, brand owners can get an in-depth understanding about
their target users so as to increase their loyalty towards the brand and minimize the chance
that users are unable to locate their favourite products.
Thirdly: To collaborate with professional service providers
- More and more professional service providers (such as logistics, payment, etc.)
enter the market and provide cost-effective solution for proprietary online stores
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68. 3.2.3 Marketing Strategies for New Entrant (1)
Marketing strategies for new entrant
Search Marketing + Brand Zone
Display advertising with highly accurate
audience characterization
Product Strengths:
Product Strengths:
- Search Marketing can direct users who are interested in
eCommerce products into the website with exceptionally
good results.
- As the advertising technology becomes more mature,
display advertising allows advertisers to achieve on-target
results with accurate audience targeting.
- Brand Zone effectively enhances the brand image, hence
increase brand awareness rapidly.
- Audience buy relies on the Big Data which categorizes
a number of demographic models according to internet users’
characteristics. Advertisers can choose the model which matches
with their target audience and expose their customized ad to that
particular group of users to attain on-target customized advertising.
- Resolve new entrants’
problem in developing new customer
base and increasing the user growth rate despite a lack of
cumulative CRM data.
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69. 3.2.3 Marketing Strategies for New Entrant (2)
iClick’targeted audience buying solution:
s
- iClick connects to premium media with hundreds of millions of advertising audience,
which is categorized into 22+ audience segments and further classified into 4-6 levels
under each group according to their population attributes. Based on these classified data,
iClick can help advertisers perform audience buy in which customized advertising can form
an audience base that is most relevant and valuable to your business.
Enrich and expand
mass audience
Audience buying seamlessly
integrate into accuracy optimization
Insightful and practical
data analysis
- Unique audience database will break the established
rules of the current market and cover more than 400
million Internet users in Asia.
- Reinforce the exclusive optimization platform and
unleash the power of audience data, allowing marketers
to reach the mass audience and predict their future
purchases accurately.
- A collection of clear KPI reports offer remarkable insights
about advertising campaigns to help brand owners to make
wiser decisions
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70. 3.2.4 Successful Case of iClick’New
s
Brand Promotion (1)
International brand: a world-renowned lifestyle brand
Performance indicators: branding message, enhance brand awareness
Target users:
Sex Ratio
16.73%
83.27%
Age Distribution
Education Level Distribution
Vocation Distribution
Retail
Service
Primary school
Telecommunication /
Junior school
internet
High School
Civil /
Tertiary institution
public service
Undergraduate
Energy / mining
Education /
student
Architecture
Media /
entertainment
Finance /
property development
IT
Aged 10~19
Aged 20~29
Aged 30~39
Aged 40~49
- Women is the dominating gender for luxury fashion brands
- Mainly well-educated working ladies aged 20-39
Aged 50~59
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71. 3.2.4 Successful Case of iClick’New
s
Brand Promotion (2)
Holistic marketing strategy
Phase 2: 2nd – 3rd month
1 Activate all channels of display advertising to expand
customer base, develop regions with potential in
consumption and strengthen brand spectrum.
2 Gradually increase the number of online user registrations
3 Control registration costs – Cost per Click (CPC) and
Phase 1: 1st month
Cost per Action (CPA)
1 Activate all channels of search engine advertising
to exhibit the brand’online image
s
02
2 Direct Unique Visitors (UV) and traffic to website
and stress the quality of traffic – Page Views (PV)
3 Control Cost per Click (CPC)
01
Search engine:
- Brand Zone
- Search Engine Advertising
Search engine:
Display Advertising:
- Brand Zone
- Targeted Audience Buy
- Search Engine Advertising
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72. 3.2.4 Successful Case of iClick’New
s
Brand Promotion (3)
Result evaluation – popularity of website increases
Click rate
Increased by 244%
Page Views (times)
450,000
360,000
270,000
180,000
90,000
0
Phase 2
Phase 1
2012/01/01
2012/01/31
2012/02/28
2012/03/30
Before
After
optimization optimization
Through diversified media placement, specific keyword search optimization and
extensive coverage of comprehensive audience, clients see significant improvement
in brand exposure, brand engagement and sales conversion, leading to a breakthrough
in clients’
internet development in Mainland China.
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73. 3.2.5 Challenge for Independent Merchant –
Increasing Cost of Acquiring New Users
Challenge: Increasing cost for independent merchant to acquire new users
Marketing advice:
- Most new users choose to visit top eCommerce platforms. To solve this problem, client can implement
product differentiation, on the other hand, exploit opportunities from those top eCommerce
platforms which lose its customers
- Use CRM to derive and develop user characteristics from existing user information and implement search
retargeting to expand the source of new users
Promotion recommendations:
- Search retargeting
- Machine Learning
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74. 3.2.6 Marketing Strategies for Independent
Merchant (1)
Marketing strategies for independent merchant
Search retargeting
Machine learning algorithm – recruit potential
target users from CRM data
Consumer behaviours have already changed
Pay
attention
Show
interest
Desire
Memorize
Purchase
Pay
attention
Show
interest
Search
Purchase
Share
Product strengths:
Product strengths:
- Leverage the target users referred by search advertising
and “re-capture” them via display advertising.
- Identify customer characteristics from the loyal customers through
machine learning and search for Internet users who share the same
buying preference, then perform display advertising.
- For users who have already performed search related to
eCommerce products, advertisement will be displayed to
them once again, maximizing the chance of conversion.
- Surpass the traditional search method which focuses on website
attributes and understand customer characteristics more in depth
so as to expand the target customer base.
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75. 3.2.6 Marketing Strategies for Independent
Merchant (2)
Search retargeting technology – search for users with consumption needs:
- Search retargeting technology enables display advertising to be based on users’
previous search history, i.e.
based on users’
previous searched content to place targeting advertising, allowing independent merchants
to locate potential consumers.
- Solve independent merchants’
difficulty in acquiring new users and the respective costs incurred.
User performs
keyword search
(Travel)
When the user revisits the
page, system will match
his/her search history with
cookies and display the most
relevant advertisements.
System will
automatically
record that
particular users’
searching activities
and data.
Strengths of iClick’search retargeting technology are as follows:
s
- Vast user data resources covering users who are interested in different types of products and services.
- iClick’propriety buy-side platform, XMO, covers more than 400 million Internet users in Asia and is able
s
to efficiently locate target customers among a large pool of Internet users.
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76. 3.2.6 Marketing Strategies for Independent
Merchant (3)
- iClick’machine learning algorithm - based on the existing CRM data to expand the potential target user base
s
and deliver on-target advertising:
- Locate new users whose behaviours are similar with those of the existing customers by using independent
merchant’own CRM data and then implement targeting advertising.
s
- Solve independent merchant’budget issue resulted from the mass advertising placement in acquiring new users.
s
Population characteristics:
Male aged 30-39 high income Beijing
Browsing habits and preferences:
Online devices
Browser
Resolution
Online duration
Browsed websites by keyword search
Page views
Sample of business class travelers
…
(More than 600 characteristics)
- Strengths of iClick’machine learning algorithm are as follows:
s
- XMO Direct Technology: locate potential consumers for independent merchants through "XMO Direct", which
integrate our own CRM data and tens of thousands of third-party audience data.
- Sample-based mining prediction feature: XMO algorithm can compare independent merchants’
CRM consumer
- data with third-party audience data to estimate which network users have a particular buying preference.
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77. 3.2.7 Successful Case of iClick’Promotion for
s
Independent Merchant (1)
Independent merchant: a well-known local food online franchise store
Performance indicators: 1. To reinforce and enhance audience reach and brand awareness
2. To ensure ROI is able to decrease the cost of new users and orders in the
most effective way
Target users:
Energy / mining
Primary school
61.33%
Junior school
High School
Tertiary institution
38.67%
Undergraduate
Forestry / chemical industry
Service
Media / entertainment
IT
Architecture
Civil / public service
Telecommunication / internet
Finance / property development
Sex Ratio
Education Level Distribution
Education / student
Vocation Distribution
Aged 10 ~ 19
Aged 20 ~ 29
Aged 30 ~ 39
Aged 40 ~ 49
Aged 50 ~ 59
- Male users are slightly more than female users. The
target user is mainly youth aged 20-39.
- Mainly well-educated professionals and students.
Age Distribution
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78. 3.2.7 Successful Case of iClick’Promotion for
s
Independent Merchant (2)
Holistic marketing strategy:
The whole process of advertising placement is mainly driven by result-oriented. We leverage machine
learning algorithm to develop target user group based on client’own CRM data; and at the same
s
time utilize targeting advertising such as search retargeting to explore potential consumers. Placement
strategy and budget can be adjusted and reallocated flexibly to act against any situation according to
the result and client’needs.
s
Phase 2: Optimize ROI to reduce the cost of new customers
1 Use machine learning algorithm to expand target user group
2 Promotion refinement improves conversion rate, thereby
increasing sales
Phase 1: Reinforce and enhance brand awareness
1 Capture brand’loyal users to convey brand image
s
2 Diversified creative placement to enhance the brand
promotions
3 Use search retargeting technology to explore potential
consumer group
3 Continuous marketing based on CRM data analysis to
increase sales
02
01
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79. 3.2.7 Successful Case of iClick’Promotion for
s
Independent Merchant (3)
Result evaluation – Cost of new users decreases
ROI
Increase by an average of 52%
Before
After
optimization optimization
Cost of new users
Decrease by an average of 244%
Before
After
optimization optimization
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80. 3.2.8 Challenge for eCommerce Platform - Drop in
User Conversion Rate
Challenge: eCommerce platform user loyalty decline and conversion rate remains low over the years
- With the fierce market competition from 2009 to 2012, online shopper loyalty declined continuously, especially
the repeating price wars had caused the users to compare the discount rates prior to their purchase.
Proportion of Using One Shopping Website Only in 2009 - 2012
80.0%
72.7%
61.1%
51.1%
2009
2010
2011
2012
Marketing advice: If eCommerce platforms are able to identify the characteristics of the potential consumers of their
eCommerce products and push the right products to their potential consumers through targeting, the conversion rate
can be enhanced.
Promotion recommendations: Marketing retargeting
Data Source: China E-Business Research Center, Data Analysis Enhances E-Commerce Conversion Rate, September 2012
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81. 3.2.8 Marketing Strategies for eCommerce
Platform (1)
Marketing strategies for eCommerce platform
Implement diversified placement of retargeting
A customer visits your B2C online
store to select handbag
he hasn’found the right one after browsing
t
for a while. On the next day when she is
browsing through a news website, she
suddenly see the ad of your handbags
Purchasing desire is
triggered. She clicks the
ad and enter your website
to see if there are other
products
Suddenly she discovers a bag which looks
quite nice, so she buys it.
“Strange to say,
yesterday I think it’so-so, but today the
s
more I see it, the more I like it!”
Product strengths:
- Retargeting technology is based on various data to track potential consumers who have left the
website.
- Through technical measures, customers are able to see the ad of the eCommerce platform on
other channels, amplifying their impression on the brand and enhance their purchasing desire.
- It is proven that retargeting can improve the conversion rate by 125%.
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82. 3.2.8 Marketing Strategies for eCommerce
Platform (2)
Common types of retargeting:
- Behavioral retargeting: If a user has clicked and visited a certain brand’ad, this user can be traced and this
s
brand’ad will be displayed again on other sites that this user will visit.
s
- Past customer retargeting: Don’overlook the values brought by the past customers. You can combine CRM
t
users’
consumption data and third-party dataset to target the past customers to upsell and cross-sell them.
- Look-alike targeting: The latest data analysis technology can help advertisers identify potential customers
which are imilar to their existing customers on the network.
Strengths of iClick’retargeting technology are as follows:
s
- Accurate targeting with various formats: A wide variety of targeting formats including geographic, time, content,
websites, devices and operating systems, etc.
- Cover quality media resources: Connect to Asia’major quality online media and advertising platform with
s
hundreds of millions of advertising audience, for instance, coverage in China reaches up to 90%.
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83. 3.2.9 Successful Case of iClick’Promotion for
s
eCommerce Platform (1)
eCommerce platform: an eCommerce platform of an international top department store
Performance indicators:
1 Through optimizing the exposure on the search engine, reinforce the
image of eCommerce department store.
2 Through search retargeting, expand consumer group to improve
conversion rate
Target users:
Aged 10 ~ 19
Aged 20 ~ 29
62%
Aged 30 ~ 39
38%
Aged 40 ~ 49
Aged 50 ~ 59
Sex Ratio
Age Distribution
Primary school
Junior school
High School
Tertiary institution
Undergraduate
- Male users are slightly more than female users. The target user
is mainly people aged 20-39.
- Mainly well-educated professionals and students.
Education Level Distribution
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84. 3.2.9 Successful Case of iClick’Promotion for
s
eCommerce Platform (2)
Holistic marketing strategy:
With accurate placement of display advertising, eCommerce platforms can match up with their target
users by targeting to maximize brand exposure and improve sales record. At the same time, they should
optimize their marketing resources on their website to attract the past customers to revisit their site in
order to create sales opportunities.
Phase 2: organize activities to attract past customers
to revisit
1 Based on the characteristics of products which have
been purchased by the past customers to re-market the
product
Phase 1: accurate placement of targeting outside
the website
1 Behavioral retargeting can trace and explore
interested users
2 Identify potential consumers’
characteristics using
its own data
2 analyze user data and continue re-marketing to
increase sales
02
01
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85. 3.2.9 Successful Case of iClick’Promotion for
s
eCommerce Platform (3)
Result evaluation - conversion rate increases
Communication result
4 months of Optimization cycle
Increase by 183%
Prominent
increment
Increase by 2949%
Increase by 50%
Prominent
increment
56
%
Brand search
volume
Average monthly
orders
84
%
Effective order
rate
Increase by 629%
0.07%
0.51%
Order conversion
rate
Conclusion
After implementing optimization for 4 months, brand search volume increases by 183%; average
monthly orders increases by 2949%; effective order rate increases by 50%; order conversion rate
increases by 629%.
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86. Table of Contents
3.1 Operational difficulties for eCommerce enterprises
3.2 eCommerce strategies and solutions
3.3 About iClick
87. 3.3.1 About iClick
Who We Are…?
Asia’first online buy-side
s
platform that enables real-time,
programmatic media buying and
dynamic optimization through
advanced algorithms and
data technology.
iClick helps marketers to unlock
the value from the complex online
ecosystem by simplifying and
automating the entire online
marketing process.
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88. 3.3.2 Key Clients Portfolio
E-commerce
(5 out of China’TOP 10
s
e-commerce players are using iClick
to make better decisions)
Travel & Hospitality
Banking & Finance
Consumer Products
Others
-75-
89. 3.3.3 Buy-side Platform - XMO
Search
Engines
iClick Propriety
Advertisers
Buy-side Platform
Ad
Exchanges
Online Users
Publishers
1st Party
3st Party
Data
Data
A one-stop shop for aggregating, bidding and optimizing inventory
across different online channels in the most efficient way.
-76-
90. 3.3.3 Buy-side Platform - XMO
Media Aggregator
Access to a variety of digital
channels, biddable inventories and
RTB exchangesto reach the
maximum audience.
Data Analytics
Audience Builder
Sophisticated data-based
empirical analysis yields accurate
insights via a comprehensive set of
performance reports.
Pre-packaged audience segment
and tailor made audience development
tools at your choice to identify the
highest value customers.
Programmatic buy
Suite of targeting options and
advanced attribution model to support
single and cross-channel optimization
according to your own
marketing objectives.
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91. 3.3.4 Media Resources
Media Aggregator
Access to a variety of digital channels, biddable inventories and
RTB-enabled exchanges
Connect to a wide supply sources across search, display, social and
mobile.
Reach the most number of relevant audience in your target markets:
95% reach in Hong Kong
90%* reach in China
80%* reach in Southeast Asia
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92. 3.3.5 Audience Builder
Understand your current customers deeper and expand to a even larger
audience base:
Audience Builder
XMO distinct audience segments:
22+ audience segments classified by industries, interests and
lifestyles
XMO audience data covers over 400 million Internet users in Asia,
with 200 million audience profiles and over 200 million online
transaction cookies.
Custom segment building tools
“XMO Direct” - Combine 1st party CRM data with tens of
thousands of 3rd party segments to form an audience base
that is the most relevant and valuable to your business.
Machine learning to identify online users who exhibit similar
behavioral to your converting users
-79-
93. 3.3.6 Programmatic Buy
One-stop access and manage online inventories across channels in a
data-driven approach
Leading RTB technology that is built on our own cloud-based
infrastructure and featuring the highest queries per second (QPS).
Programmatic Buy
Comprehensive targeting suite base on a broad set of parameters:
Geo-location, Day-parting, Placement, Contextual, Site, Device,
Operating Systems
Advanced attribution model with multiple attribution settings
available right from the platform:
First Event, Weight First More, Evenly Distributed, Weight Last
More and Last Event
Easy, intuitive goal setting to allow marketers to enter their goals
(e.g. lower CPA, maximize conversions or increasing ROI).
-80-
94. 3.3.7 Data Analytics
Robust, intuitive, easy-to-use reporting system
Data Analytics
XMO unique data analytics solution is designed around the purchase
funnel – mapping to user behavior and interaction with a brand.
Sophisticated data-based empirical analysis yields accurate insights
that enable marketers to learn how customer behavior is affected at
the key points along the converting funnel.
Specialized in visualizing performance through a combination of
canned and custom reports:
Cross-channel Dashboard
Post-campaign Cookie Analysis
Top Conversion Paths
Channel Assist Report
And more….
Multi-advertiser interface makes it easy to manage multiple accounts
with clear role-based access control for users and organizations
-81-
95. Appendix – Definition of terms
- Internet users : Chinese residents who have used the internet in the past 6 months
- E-commerce: 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 industry. Independent merchants comprise of a full range of services tailored to its consumers,
providing a strong channel for sales and marketing and branding promotions, for example, VANCL and LAFASO.
- 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.
- Shopping website user loss: Refer to users stop using a specific website, that they used 6 months ago, in the past 6 months
- Shopping website churn rate = user loss in the past 6 months / total user volume 6 months ago
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