2019 h1 china cross-border e-commerce report · 2019 h1 development of china cross-border...

2019 H1 China Cross-border E-commerce Report 2019-08-20

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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

COMPANY CONFIDENTIAL 2

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


2019 H1 Development of China Cross-border E-commerce


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

Merchantsbehaviour

E-commercetax Businesslicense

Transactionstandard

Aftersaleservice Bundlesales

Depositrefund Fake&defectiiveproduct

Disputeresolution Merchantcollectevidence

Marketstandard

Consumerrights



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



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



Reputation index of major x-border e-commerce platform

Netease Kaola has the highest reputation index, score whereas Xiaohongshu has the lowest socre



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



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



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

2019 H1 Cross-border E-commerce Shopping Behaviour – 618 Promo


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.



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.



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.



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.



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.



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.



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.



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



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.

2019 H1 China Cross-border E-commerce Case Study


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



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



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



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



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



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

Summary


•  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.

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2019 h1 china cross-border e-commerce report · 2019 h1 development of china cross-border...

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