Interviews and insights from:
B2C E-‐Commerce is booming in China • Since 2008, B2C has grown by over 100% per year • China’s e-‐commerce has tradiConally been dominated by C2C on
Taobao, but B2C is now gaining tracCon • For the consumer: B2C beHer addresses quality issues than C2C
• For the brand: B2C offers ownership of the customer’s experience, data, and contact
• Apparel brands, foreign and domesCc, are expanding aggressively to capture this opportunity
These highlights are from a report on China’s Fashion E-‐commerce by BloggerInsight: hHp://www.bloggerinsight.com/blog/establishing-‐e-‐commerce-‐in-‐china
B2C is Taking Off in China
• B2C is now growing much faster than C2C
• But many Chinese shoppers have sCll not yet used B2C
52 120
207 300
400 500
4
9
32
87
176
292
0
100
200
300
400
500
600
700
800
900
2007 2008 2009 2010e 2011e 2012e
B2C
C2C
Source: iResearch, 2009
RMB Billions
B2C Fashion is on the Rise Too
B2C is expected to conCnue with 100%+ growth for the next 3 years
Source: iResearch, 2009
RMB Billions
15.8
28.47 37.6
48.8
62
1.2
2.4
4.7
9.2
18
0
10
20
30
40
50
60
70
80
90
100
2008 2009 2010e 2011e 2012e
B2C
C2C
Online Apparel
Taobao 76%
PaiPai 6%
DangDang 6% Taobao -‐ 76%
PaiPai -‐ 6%
DangDang -‐ 6%
Joyo -‐ 2%
360Buy -‐ 2%
Baidu -‐ 2%
EachNet -‐ 1%
Red Baby -‐ 1%
CNCard -‐ 0.4%
M18 -‐ 0.3%
99 Web -‐ 0.3%
Other -‐ 3%
Taobao sCll dominates overall E-‐commerce (a majority is C2C)
5 Source: CNNIC, 2009
Many Apparel Brands are Opening Taobao Mall Stores hHp://mall.taobao.com/
Source: Alibaba research 6
• Taobao Mall is Taobao’s B2C marketplace • Taobao Mall takes XX-‐XX% commission based on scale (see full report) • 33 apparel and accessories brands currently parCcipate
• Includes UNIQLO, Jack & Jones, ONLY, and ESPRIT currently parCcipate. Taobao is aggressively seeking more brand partners.
• Taobao is the online desCnaCon of choice for most Chinese, so it is essenCal for brands to have a presence • Taobao may launch a new mall for luxury brands (ex: Prada, Coach), but that is not branded as Taobao
B2C Market Share (2008)
Source: iResearch, 2009
Taobao Mall 20%
360 Buy 16%
Joyo 12% Dangdang
11%
M18 8%
VANCL 4%
139shop 4%
Redbaby; 4%
99read 2%
Menglu 2%
PPG 1%
Others 16%
Total Market: 8.7 billion RMB
But there are Other Strong Players in B2C
What do Chinese Shop for Online?
Apparel & home products are by far the most popular purchases online
Source: CNNIC, 2009
%
0.5%
2%
2%
2%
4%
5%
7%
8%
9%
13%
20%
24%
62%
0 10 20 30 40 50 60 70 80 90 100
Tickets & hotel bookings
Sports equipment
CollecCble items
Flowers & gils
Mother & baby products
Home electronic applicaCons
Computer & components
Food & health products
Card recharge
CommunicaCons & digital products
Books & videos
CosmeCcs & jewelry
Apparel & home products
Why are customers dissaCsfied with their experience?
• B2C addresses quality issues beHer than C2C • But all online retailers face a high level of mistrust
%
Reason #1:
Fakes or low-‐quality
Reason #2: Issues with delivery
11
11
15
21
23
25
52
0 10 20 30 40 50 60 70 80 90 100
Product lost or broken during delivery
High delivery fee
Poor customer service from deliveryman
Delivery Cme is too long
Low quality or broken products
Fake products
Products not as pictured
9
What are the Challenges for E-‐Commerce in China?
• Big apparel brands are moving quickly to establish and expand their e-‐commerce – Your brand is being sold online in China (via Taobao C2C and other
channels), but are you controlling the process or capturing the gains?
• VANCL and Mecox Lane (M18) are pioneering a revoluConary model as ‘online-‐only’ apparel brands – Fashion at a low to mid-‐range price point
– Promoted via heavy performance-‐based online adverCsing (VANCL is the #1 adverCser on RenRen, one of China’s largest social networks)
• 3 party infrastructure (logisCcs, delivery, solware soluCons, etc.) is improving
• Examples follow: UNIQLO, GAP, and Mecox Lane (M18)
Smart players are doubling down on B2C apparel in China
• Japan’s UNIQLO and the Taobao Mall formed a Cght partnership, they share Solbank as a common investor
– All products on uniqlo.cn link to UNIQLO’s popular Taobao Mall store
– Taobao Mall eager to help UNIQLO succeed as a “lighthouse” client in order to prove to others that it could work with internaConal brands
• Reaching new customers: 2/3 of UNIQLO's online sales come from regions without retail shops
UNIQLO
UNIQLO on Taobao Mall UNIQLO Standalone Site Products link to Taobao Store
“Gap is believed to be the first retailer [in China] to launch an e-‐commerce business in parallel with the opening of its first stores.” –Financial Times
• Opening a store front on the Taobao Mall (B2C)
• Launch is supported by a major print and online campaign, with a famous Chinese actress and bloggers. Photo shoots are top-‐class, done by the famous Annie Leibovitz.
GAP
Mecox Lane (M18)
Mecox Lane (M18) went public on the NASDAQ on October 26, 2010, raising $129 million. The next day shares jumped 57%. Mecox Lane was the first was the first
B2C e-‐commerce IPO from China.
• Online campaign to promote the launch of Shanghai flagship store on May 15, 2010
• Free polo shirt giveaways in 88 colors
• 88 lucky ladies who submit their pictures are featured in the final video (also broadcast on TV)
• “8” is a lucky number in China because it sounds like “発財,” which means success or wealth
• Official campaign site: hHp://www.uniqlo.com/shanghai/88colors/en/index.html
Apparel Brands are Using Social Media to Reach Fans
Example Campaign:
‘88 Colors’ by UNIQLO
• Fan page on Kaixin001, a popular social network for Chinese white-‐collars: www.kaixin001.com/uniqlo
• 30,000+ fans, 300,000+ views
• Promotes the 88 Colors promoCon, video, and main site
• Key: fan interacCon is sustainable; UNIQLO conCnues to engage fans daily long aler the conclusion of the ‘88 Colors’ campaign
UNIQLO on Kaixin001
Example Campaign:
‘88 Colors’ by UNIQLO