The explosion in e-commerce in China is a reality. With more than 170 cities with a population of more than 1 million people brands are finding that the only way to reach the complete population is through e-commerce. More importantly, China is leading the world in providing e-commerce services. Six hour delivery times is the standard. Incredibly sophisticated online brand experiences. Customer services that are about true sales and building deep relationships. Success in China doesn't only provide great financial results. It also provides learnings that can elevate e-commerce experiences around the world.

1. Page 1
China Digital Landscape FY15

2. 2
“Bricks-and-mortar retailing is a mature business in the US, where
consumers have been shopping in malls for decades and
continue to do so, augmenting their purchases with occasional
forays on the web.
Online shopping is dessert in the US, but in China, it is the main
course”
Jack Ma

3. 3
632M
INTERNET USERS
TODAY:
BY 2017:
850M
INTERNET USERS
EACH INTERNET USER IN CHINA
SPENDS AN AVERAGE OF
25.9 hours
PER WEEK ONLINE
LARGE AND GROWING
INTERNET POPULATION
ECOMMERCE
TRANSACTIONS REACHED
$2 TRILLION
MORE THAN 10% TOTAL
RETAIL REVENUES.
Source: CNNIC (JUNE 2014), iResearch
ACCELERATING ECOMMERCE
PENETRATION
MORE TIME SPENT ONLINE
THAN EVER BEFORE
76%
56%
19%
33%
0%
50%
100%
China US
Many times a day Several times per day

4. 4
Online shopping on track to reach 10% of total retail transactions in 2014
Source: CNNIC, JUNE 2014, iResearch, Alibaba, CIW
CHINA ONLINE SHOPPING MARKET 2010-2017E
785
1,187
1,892
2,760
3,780
4,772
5,634
461
0
1,000
2,000
3,000
4,000
5,000
6,000
0
2
4
6
8
10
12
14
16
3%
2017E
16%
2016E
15%
2015E
13%
%
B RMB
2014E
10%
2013
8%
2012
6%
2011
4%
2010
% of Total Retail Transactions
Total Online Shopping Transactions
CHINA ONLINE SHOPPING MARKET 2010-2017E
Total online shopping transactions reached $101B in Q2 2014, more than 10% of total retail

5. 5
3.3
3.6
3.9
4.2
Awareness Choosing Transaction Delivery Aftersales service
China Russia US UK
The internet is a primary influence at each point of the purchase cycle
IMPORTANCE OF THE INTERNET AT EACH DECISION (1-5)
Source: Capgemini, 2014

6. 6
Internet use is more about entertainment than efficiency
0
25
50
75
100
US
China
KEY ONLINE ACTIVITIESEmarketer 2012

7. 7
China has become truly mobile first
468 million
active users
55% OF CHINESE INTERNET USERS HAVE MADE A PAYMENT BY MOBILE.
IN THE US ONLY 19% HAVE.
Fashion brands
averaging more than
60% of transactions from
Tmall mobile app

8. 8
Brand and product discovery and purchase happening on platforms
8
Source: iResearch, July 2014, China Internet Watch
C2C
$188B
6%
4%
2%
17%
3%
96%
1%
B2C
$107B
52%
18%
JD.com +
Tencent
B2C
Suning
Amazon
Other
AlibabaTencent
Tmall Taobao
SHARE OF B2C AND C2C IN CHINA (2013)

9. 9
13%
41%
China US
 Limited product selection especially in
lower-tier cities
 Consumers in China are increasingly
concerned about product quality and
safety both online and offline
Combined Market Share of Top 20 Retailers, 2014
0.6
2.6
China US
Retail Space per Capita in sqm, 2014
 Complicated distribution channel
presents challenges for leading brands
to gain significant nationwide market
share offline in China
 Brand image and control is important
given fragmented retail channels
Source: Euromonitor Source: Euromonitor
Consumers Brands
Underdeveloped Offline Retail Infrastructure Highly Fragmented Retail Landscape
Structural issues will accelerate the importance of ecommerce

10. 10
Resulting in online shopping rates that are more than double of global peers
36%
15% 14%
11%
6%
% OF INTERNET USERS WHO SHOP ONLINE SEVERAL TIMES PER WEEK
Source: PWC 2012 Global multichannel consumer survey

11. 19%
44%
16%
33%
19%
1%
19%
6%
17%
2%
10%
14%
US
China
Social digital shoppers Digital shopaholics Rational online shoppers
Value seekers Occasional online shoppers Techno-shy shoppers
Ecommerce is more about lifestyle than valueAnd almost 80% of online shoppers see themselves as lifestyle shoppers
THE ONLINE CONSUMER CARES AS MUCH ABOUT QUALITY,
EXPERIENCE AND SERVICE AS THEY CARE ABOUT PRICE
Source: Capgemini, 2014

12. 12
The market is dominated by two companies
ECOMMERCE
SOCIAL
VIDEO
PAYMENTS
1 2
3 1,2
1,2 4
1 2

13. 13
With consumer interest focused across two platforms
10%
E-commerce
9.4%
Search
16%
Social
5.3%
News
4.6%
Games
34%
Online
Video
21%
Other
ONLINE VIDEO DOMINATES IN SHARE OF TIME SPENT, HOWEVER
ECOMMERCE AND SOCIAL ARE WHERE BRANDS ARE INNOVATING

14. 14
Wechat has attracted more than 400+million monthly users
Messaging Payments Social
TO
CONSUMERS
Notifications Rich Content Service Commerce
Notifications Rich Content Service Commerce
TO BRANDS
THE WECHAT MODEL HAS NO COMPARISON TO ANY WESTERN MEDIA

15. 15
15
If I just look at digital, what digital has been historically, not just for us, but for the industry
and, frankly, for all of retail, is a really efficient transactional channel, for lack
of a better term.
If I look at digital going forward, it is, number one, going to be that because this industry
will move from physical space to digital space. The digital expression of the
brand will become one of the primary ways for customers to engage
with the brand.
Art Peck, Gap CEO, 2014
What is being proclaimed as a vision for the US is already a reality in China.

16. 16
Brands are coming to life through rich Wechat content
16
ADIDAS DRIVES ITS BRAND IMAGE THROUGH
HTML5 SITE
BURBERRY STREAMS ITS EVENTS LIVE
THROUGH WECHAT AND ENCOURAGES
IMMEDIATE PURCHASE

17. 17
Chinese brands are providing an online experience that surpasses that of
offline stores
Model shots
for key
product
image
Video intros
for every
product
Extremely
detailed
product
information
Editorial
shots for
each
product.

18. 18
BRANDS ARE ENABLING CUSTOMER SERVICE
THROUGH WECHAT
BANKS, HOTELS, LUXURY BRANDS ARE
INTEGRATING THEIR AUTOMATED SYSTEMS
WITH WECHAT
2012 CHINA
MERCHANTS BANK
INTEGRATES
BALANCE ENQUIRIES
AND STATEMENTS
WITH WECHAT
SERVICE IS A MIXTURE OF AUTOMATED
AND HUMAN RESPONSES
Wechat is becoming a key customer conversation channel

19. 19
Product
related
64%
Delivery
10%
Shop
process
3%
Promotion
info.
13%
Return/exch
ange
8%
Complaint
0.003%
others
2%
On Tmall, presales conversations are essential for conversion
86% OF CONVERSATIONS BY LIVE
CHAT
LESS THAN 20% CONVERSATIONS
ARE ABOUT PROBLEM SOLVING

20. 20
Consumers are continuously rating your brand
MOST CONSUMERS WILL RANK YOUR STORE ON – CUSTOMER SERVICE,
LOGISITICS, PRODUCT DESCRIPTION QUALITY.

21. 21
Summary – China is a very different market
1. Brand and product discovery driven by platforms
2. A completely independent digital ecosystem
3. Consumers with heightened expectations from brands
4. Consumer, market and competitors changing at an accelerated pace

22. 22
Summary – What we can take from China
1. A heightened focus on the digital customer
2. A laboratory for new business models
3. Mobile and Internet of Things leadership
4. Speed and flexibility
5. Producing global assortments means including Chinese tastes

23. 23