General retail p1

Beijing and Shanghai implement overseas tourist tax refund scheme from 1 July

Marks & Spencer and other shops in Shanghai offer tax refunds to overseas tourists

BGC: Half of China’s “high-speed” consumers are in lower-tier cities

E-commerce p1

Qihoo 360 to develop national monitoring system for third-party online trading platforms

IGD Research: China’s online grocery market to grow five-fold by 2020

Shanghai Post joins hands with North American mobile e-commerce enterprise to roll out “Wish

Post”

Tmall signs exclusive agreement with Kolon Sport to explore O2O cooperation

KFC China’s 5,000 restaurants to accept Alipay

JD.com to invest in US-based big data company to develop credit evaluation system

JD.com partners with Rufengda to tap O2O market

JD.com launches “Australian Mall”; to invest in cross-border e-commerce in three months

Department stores and shopping malls p4

RET: 16% of medical clinics in first-tier cities set up in shopping malls

Intime to further integrate with Alibaba to develop O2O business

Hankyu Hanshin Department Store to open first store in Ningbo in 2018

Macy’s opens authorized discount store in Beijing

Galeries Lafayette China’s sales revenue up 34% yoy in 1Q15; to open second store in China in

2017

French food supermarket Lafayette Gourmet opens in Lafayette Beijing department store

Parkson partners with Dianping.com to engage in O2O cooperation

FMCG p6

Bain & Company: Growth of China’s FMCG market slows down for third consecutive years

Luxury market p6 Armani taps Beijing’s real estate market for multi-format development

Apparel p7

Baoxiniao invests in Jim Brothers to develop online tailoring business

Cosmetics p7 Xiaohongshu.com partners with beauty website @Cosme to develop the Japan market

Consumer electronics p7 Suning speeds up Internet retail development; first cloud store in Shenyang to open soon

Retail logistics p8 Cainiao launches parcel order tracking app

26 June 2015 – 2 July 2015

1 China Retail Weekly Updates (26 June 2015 – 2 July 2015)

General retail

Beijing and Shanghai implement overseas tourist tax refund scheme from 1 July Beijing Municipality government and Shanghai Municipality government have both filed plans to Ministry of Finance, General Administration of Customs and State Administration of Taxation to implement the overseas tourist tax refund scheme. The plans have been examined and recorded. Starting from 1 July, Beijing and Shanghai have implemented the overseas tourist tax refund scheme. Overseas tourists can receive a rebate of 11% on consumer goods purchased at designated department stores when they leave China. People.com.cn, 29 June 2015 http://politics.people.com.cn/n/2015/0629/c70731-27225995.html (in Chinese only)

Marks & Spencer and other shops in Shanghai offer tax refunds to overseas tourists Starting from 1 July, Beijing and Shanghai has become one of the first batches of cities to carry out overseas tourist tax refund scheme. Overseas tourists can get refund of the 11% value-added tax on purchases made at designated shops when they leave China. A press conference by Shanghai Information Office announced the list of 27 shops that participate in the tax refund scheme, including Shanghai No.1 Department Store and Lao Feng Xiang Jewellery at East Nanjing Road, Marks & Spencer Department Store at West Nanjing Road, and Tian Yu Building at Yuyuan. These shops are mainly located in areas with more overseas tourists. Linkshop.com.cn, 2 July 2015 http://www.linkshop.com.cn/web/archives/2015/328598.shtml (in Chinese only)

BGC: Half of China’s “high-speed” consumers are in lower-tier cities Boston Consulting Group (BCG) has released a report titled A Tale of Two Chinese Consumers. It finds that China has a total of 81 million “high-speed” households (middle-class and affluent households), over half of which (46 million) live in lower-tier cities. It also points out that for every 1% fall in the savings rate of these “high-speed” consumers, there will be an additional US$30 billion of consumption expenditure, which is equivalent to a GDP growth of 0.3%. The report also finds that “high-speed” households are active online shoppers. 40% of affluent households shop online frequently (at least once a week). Linkshop.com.cn, 30 June 2015 http://www.linkshop.com.cn/web/archives/2015/328382.shtml (in Chinese only)

E-commerce

2 China Retail Weekly Updates (26 June 2015 – 2 July 2015)

Qihoo 360 to develop national monitoring system for third-party online trading platforms State Administration for Industry and Commerce, Beijing Administration for Industry and Commerce and Qihoo 360 Technology Co. Ltd signed an agreement in Beijing. Qihoo 360 will examine the development of a national monitoring system for third-party online trading platforms. The system will collect relevant data from online trading platforms and their operators. Through Qihoo 360’s leading technology and strengths in big data analytics, a collaboration of industrial and commercial administration departments is promoted. This aims to get to the root of the problems of counterfeit goods, false promotions and shopping fraud, etc. that frequently arise in online transactions. Longsok.com, 1 July 2015 http://www.longsok.com/dt/2015/0701/13179.html (in Chinese only)

IGD Research: China’s online grocery market to grow five-fold by 2020 A report by IGD Research says China is already the largest market in the world for online grocery sales. It predicts that China’s online grocery sales will grow five-fold between now and 2020 – from the current US$41 billion to about US$180 billion. IGD CEO Joanne Denney-Finch says the massive Chinese growth will be driven by more Chinese people having access to the Internet through both smartphones and other devices. Moreover, most online sales in China take place through online marketplaces, such as Alibaba’s Tmall. This allows international retailers to tap into China market with limited investment. Inside Retail Asia, 2 July 2015 https://insideretail.asia/2015/07/02/five-fold-growth-ahead-for-china-online-grocery-market/

Shanghai Post joins hands with North American mobile e-commerce enterprise to roll out “Wish Post” Recently, Shanghai Post revealed that, after nearly six months of trial operation, it will partner with North America’s largest mobile shopping platform “Wish” to jointly launch a new cross-border logistics services “Wish Post”, which aims to sell the Made-in-China goods to overseas customers. Currently, a large number of Wish merchants have applied for the “Wish Post” service, with daily consignation volume rapidly rising. This is the first time Wish has cooperated with a domestic logistics service provider since it started the cross-border e-commerce business in China. Ebrun, 29 June 2015 http://www.ebrun.com/20150629/138665.shtml (in Chinese only)

Tmall signs exclusive agreement with Kolon Sport to explore O2O cooperation

3 China Retail Weekly Updates (26 June 2015 – 2 July 2015)

In June, South Korea outdoor brand Kolon Sport signed an exclusive agreement with Tmall. Tmall will be the only official e-commerce partner of Kolon Sport. They will also engage in deep cooperation in aspects such as product development, product prices, marketing and O2O development. Ebrun, 26 June 2015 http://www.ebrun.com/20150626/138552.shtml (in Chinese only)

KFC China’s 5,000 restaurants to accept Alipay KFC China has entered into a cooperation agreement with Alipay. All of the nearly 5,000 KFC restaurants in China will gradually accept Alipay. This is the first time KFC China has offered mobile payment. Currently, more than 700 KFC restaurants in Shanghai and Zhejiang Province have started to accept Alipay. Besides, KFC China will also engage in deep cooperation with Alipay in aspects such as brand operation and big data operation, so as to explore the possibilities of “Internet plus

restaurants”.

ChinaSSPP, 30 June 2015 http://www.chinasspp.com/News/Detail/2015-6-30/199950.htm (in Chinese only)

JD.com to invest in US-based big data company to develop credit evaluation system On 26 June, JD.com announced to invest in a U.S.-based big data analysis company ZestFinance. The two companies will also set up a joint venture named JD-ZestFinance Gaia. JD.com will leverage ZestFinance’s “machine learning underwriting technology” and JD.com’s reservoir of consumer data and business experience in China market to establish a more accurate big data credit evaluation system. The new credit evaluation model will first be applied to the consumer finance system of JD Finance, so that its product risk management and quantitative marketing can be improved. Ebrun, 26 June 2015 http://www.ebrun.com/20150626/138485.shtml (in Chinese only)

JD.com partners with Rufengda to tap O2O market Recently, China’s largest home delivery company Rufengda Express has entered into a cooperation agreement with JD.com, which has the largest self-managed logistics network in China. Rufengda will provide O2O-based crowdsourcing services for “JD Daojia” (daojia.jd.com), a wholly-owned subsidiary of JD.com. The synergy of the two companies will provide users with more accurate and efficient delivery services. With immediate effect, Rufengda will leverage crowdsourcing delivery to provide home delivery services for users who have ordered fresh food, supermarket products, flowers and takeaway meals on “JD Daojia”. Ebrun, 26 June 2015 http://www.ebrun.com/20150626/138525.shtml (in Chinese only)

4 China Retail Weekly Updates (26 June 2015 – 2 July 2015)

JD.com launches “Australian Mall”; to invest in cross-border e-commerce in three months On 29 June, JD Worldwide launched the “Australian Mall” in Melbourne, Australia. Richard Liu, CEO of JD.com, said that JD.com will leverage its advantages in China’s e-commerce and its business model of “self-operated platform + open platform” to provide an e-commerce marketplace for Australian brands and merchants. It also provides Chinese consumers with a wider range of high-quality Australian products. He added that JD.com will invest in cross-border e-commerce within three months. Ebrun, 29 June 2015 http://www.ebrun.com/20150629/138769.shtml (in Chinese only)

Department stores and shopping malls RET: 16% of medical clinics in first-tier cities set up in shopping malls According to the latest survey by RET Property, a Chinese commercial real estate research centre, there have been more and more medical clinics set up in shopping malls in recent years. Among the 300 dental clinics, medical centres and Chinese medicine clinics in first-tier Chinese cities covered by the sample survey, 16% have set up businesses in shopping malls, which represent a significant increase compared with just 5% in 2010. Among the three types of medical clinics surveyed, dental clinics prefer shopping malls the most, with 34% opened in shopping centres. By contrast, only 6% to 8% of medical centres and Chinese medicine clinics are opened in shopping centres. Longsok.com, 25 June 2015 http://www.longsok.com/yetai/shopping_mall/2015/0625/12679.html (in Chinese only)

Intime to further integrate with Alibaba to develop O2O business On 30 June, Intime Retail Group, with a “New Intime” slogan, announced that its strategic Internet transformation has entered a new stage in scope and in depth. Intime will be fully integrated with Alibaba Group, and become an important platform for Alibaba to develop O2O business. Zhang Yong, CEO of Alibaba Group, as well as chairman of the Board and chairman of the strategic development committee of Intime, said that Intime will enter an era of “New Intime Internet plus”. Alibaba will inject more Internet elements into Intime, and use big data analytics to upgrade Intime’s consumer services and distribution of goods. These aims to accelerate New Intime’s remodeling in supply chain, customer relationship, enterprise informatization and other core areas. Caijing.com.cn, 1 July 2015 http://industry.caijing.com.cn/20150701/3916431.shtml (in Chinese only)

5 China Retail Weekly Updates (26 June 2015 – 2 July 2015)

Hankyu Hanshin Department Store to open first store in Ningbo in 2018 Japan-based Hankyu Hanshin Department Store will open its first store in Ningbo city of Zhejiang Province in 2018 spring. The department store project is jointly funded by Hankyu Hanshin Department Store and Dushi Real Estate Development Co. Ltd. Its industrial and commercial registration was completed on 14 October 2014. The project has a registered capital of 1.8 billion yuan and a total investment cost of 3 billion yuan. It plans to own and operate a 160,000 sqm shopping centre mainly made up of high-end department store items in Ningbo Zhongxin (Ningbo Centre). The project is reportedly the first overseas investment project of Hankyu Hanshin Department Store. Linkshop.com.cn, 30 June 2015 http://www.linkshop.com.cn/web/archives/2015/328450.shtml (in Chinese only)

Macy’s opens authorized discount store in Beijing The first offline discount store of the U.S.-based retail giant Macy’s has been open for business in Beijing. The Macy’s discount store is located at Tunsanli Mall. It is run by an authorized partner of Macy’s in China. Goods sold in the store are mostly imported from abroad, including Macy’s’ own brands such as INC, Alfani and Hotel Collection. Linkshop.com.cn, 30 June 2015 http://www.linkshop.com.cn/web/archives/2015/328393.shtml (in Chinese only)

Galeries Lafayette China’s sales revenue up 34% yoy in 1Q15; to open second store in China in 2017 Paul Burke, CEO of Galeries Lafayette China, announced that the sales revenue of the company increased by 34% year-on-year (yoy) in 1Q15. Besides, Galeries Lafayette will open its second store in China in 2017, and the number of stores will reach 10 to 15 over the next few years. He added that the company has been trying to understand the Chinese market, and has been actively taking the initiatives to make adjustments. It is also committed to improving the in-store shopping experiences. Linkshop.com.cn, 28 June 2015 http://www.linkshop.com.cn/web/archives/2015/328280.shtml (in Chinese only)

French food supermarket Lafayette Gourmet opens in Lafayette Beijing department store On 18 June, Galeries Lafayette’s well-known French food supermarket Lafayette Gourmet has opened a supermarket in Galeries Lafayette Beijing flagship department store, which marks its entry into the China market. It is the largest

6 China Retail Weekly Updates (26 June 2015 – 2 July 2015)

French imported food specialty store in Beijing. All food produces sold in the supermarket are directly shipped from Europe and over 80% are from France. Besides, Galeries Lafayette Beijing store also features a 7,000-sqm dining area, housing over ten restaurants from different parts of the world. Paul Burke, CEO of Galeries Lafayette China, said that the French food supermarket is an important step for Galeries Lafayette’s food and beverage brand portfolio adjustment. ChinaSSPP, 26 June 2015 http://www.chinasspp.com/News/Detail/2015-6-26/199768.htm (in Chinese only)

Parkson partners with Dianping.com to engage in O2O cooperation Parkson Retail Group and Dianping.com have announced a strategic cooperation agreement. Dianping.com will provide O2O solutions for all the 60 stores of Parkson, including a mobile official website, O2O traffic diversion, group buying, online payment, member-feedback system, big data and other new products and services. This will speed up Parkson’s transition from an offline business to an O2O business. The partnership will also provide the 200 million monthly active users of Dianping.com with more diverse consumption contexts such as shopping information. Linkshop.com.cn, 30 June 2015 http://www.linkshop.com.cn/web/archives/2015/328439.shtml (in Chinese only)

FMCG Bain & Company: Growth of China’s FMCG market slows down for third consecutive years According to a report titled Winning over Shoppers in China’s “New Normal” jointly released by Bain & Company and Kantar Worldpanel, there has been a continued deceleration in overall market growth for the fast-moving consumer goods (FMCG) market in China – from nearly 12% in 2011-2012 to 4.4% in 1Q15. The research also shows that the deceleration in China’s FMCG market varies across sales channels. Hypermarkets’ growth rate slowed by half, from 7.9% in 2013 to 3.7% in 2014 due to declining traffic, while traffic for smaller format supermarkets, mini-marts and convenience stores remained relatively stable. E-commerce accounted for 3.3% of total sales in 2014, yet, e-commerce sales grew by 34% yoy. Linkshop.com.cn, 1 July 2015 http://www.linkshop.com.cn/web/archives/2015/328522.shtml (in Chinese only) Link to the report: http://www.bain.com/about/press/press-releases/2015-china-shopper-report-number-one-press-release.aspx

Luxury market

7 China Retail Weekly Updates (26 June 2015 – 2 July 2015)

Armani taps Beijing’s real estate market for multi-format development Armani/Casa, the interior design studio of Giorgio Armani, will design the common areas and amenities as well as several luxury apartments in Central Park Plaza in Beijing. Covering a gross floor area of 223,400 sqm and developed by Smart Hero (HK) Investment Development Limited, the plaza has seven components including residential buildings, 5A grade A office buildings, road side shops, underground shops and company-owned buildings. The construction is expected to be completed in 2017. At present, Armani/Casa is also undergoing the Armani Art Residence project in Jinjiang district of Chengdu. Linkshop.com.cn, 1 July 2015 http://www.linkshop.com.cn/web/archives/2015/328514.shtml (in Chinese only)

Apparel

Baoxiniao invests in Jim Brothers to develop online tailoring business Apparel enterprise Zhejiang Baoxiniao Garment Co. Ltd. announced that its wholly-owned subsidiary Baoxiniao Venture Capital has signed a capital investment agreement with Jim brothers (Wuxi) Garment Co. Ltd. and its shareholders. Baoxiniao will make a capital contribution of 20 million yuan in two phases to Jim brothers, to buy a 35% stake in the company. Jim Brothers is mainly engaged in the provision of online tailoring services of shirts. After the investment is made, Jim Brothers will gradually develop cross-border e-commerce business to provide convenient tailoring services for overseas consumers. Baoxiniao said that it aims to promote the development of personal tailoring business and deepen Internet marketing. Caixin.com, 29une 2015 http://companies.caixin.com/2015-06-29/100823620.html (in Chinese only)

Cosmetics Xiaohongshu.com partners with beauty website @Cosme to develop the Japan market Community e-commerce platform Xiaohongshu.com announced that it has entered into strategic cooperation agreements with Japan’s largest beauty website @Cosme, Japan’s largest drug chain store Kirindo and Panasonic. It will introduce a number of Japanese products including cosmetics, skin care products, household items and small home appliances. It is reported that Xiaohongshu.com will next target the U.S. and South Korea markets. Ebrun, 29 June 2015 http://www.ebrun.com/20150629/138730.shtml (in Chinese only)

Consumer electronics

8 China Retail Weekly Updates (26 June 2015 – 2 July 2015)

Suning speeds up Internet retail development; first cloud store in Shenyang to open soon Suning Commerce Group will set up the Northeast open platform management headquarters in Shenyang Hunnan International Park for Emerging Industries. After the construction is completed, it will become the regional management headquarters that combine the functions such as O2O platform vendor management, procurement settlement, supply chain management and logistics distribution. Famous brands in Shenyang such as 96192.com and Maylin Silk have set up their businesses on the platform and more brands will be introduced in the future. Suning also plans to construct eight commercial plazas in Shenyang by 2020, which will be developed as an O2O product exhibition and experiential platform. Besides, the first Suning cloud store in Shenyang will be opened on Dongzhongjie Street one month later. Linkshop.com.cn, 28 June 2015 http://www.linkshop.com.cn/web/archives/2015/328310.shtml (in Chinese only)

Retail logistics Cainiao launches parcel order tracking app Recently, Cainiao Network has rolled out a mobile app called “Guoguo”, which provides parcel order tracking services for consumers. Currently, the app can be found in a number of app stores for Android and Apple OS systems. It is reported that “Guoguo” covers all the parcels by Tmall, Taobao and Juhuasuan, and supports parcel order tracking regarding all major courier companies. The app is targeted at consumers with logistics demand. Ebrun, 4 June 2015 http://www.ebrun.com/20150604/136164.shtml (in Chinese only)

Fung Business Intelligence Centre

The Fung Group is a privately held multinational group of companies headquartered in Hong Kong whose core businesses are trading, logistics, distribution and retailing. The Fung Group employs over 45,000 people across 40 economies worldwide, generating total revenue of more than US$22.6 billion in 2013. Fung Holdings (1937) Limited, a privately held business entity headquartered in Hong Kong, is the major shareholder of the Fung group of companies.

The Fung Business Intelligence Centre collects and analyses market data on sourcing, supply chains, distribution and retail. It also provides thought leadership on technology and other key issues shaping their future. Headquartered in Hong Kong, FBIC leverages unique relationships and information networks to track and report on trends and developments in China and other Asian countries. In addition, its New York-based Global Retail & Technology research team follows broader retail and technology trends, specialising in how they intersect and building collaborative knowledge communities around the revolution occurring worldwide at the retail interface. Since its establishment in 2000, the FBIC (formerly known as the Li & Fung Research Centre) has served as the knowledge bank and think tank for the Fung Group. Through regular research reports and other publications, it makes its market data, impartial analysis and expertise available to businesses, scholars and governments around the world. It also provides advice and consultancy services to colleagues and business partners of the Fung Group on issues related to doing business in China, ranging from market entry and company structure, to tax, licensing and other regulatory matters.

Contact

Teresa Lam Vice President Asia Distribution and Retail

Fung Business Intelligence Centre 10/F LiFung Tower 888 Cheung Sha Wan Road Kowloon, Hong Kong

T: (852) 2300 2466 F: (852) 2635 1598 E: TeresaLam@fung1937.com W: www.fbicgroup.com

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