WINNING CHINESE CONSUMERS THROUGH E-COMMERCE

Julia Q. Zhu, Founder julia@observersolutions.com | www.ObserverSolutions.com

Twitter: @JuliaQZhu

About Observer Solutions

Observer Solutions is a boutique China e-market research and advisory firm. We partner with companies across industries on their e-commerce and digital strategies for China.

Services include:

China E-Commerce Market Research & Consumer Insights Subscription Offering

China E-Market Entry Assessment & Strategy Consulting

E-store Set-Up & Operational Consulting

Why E-commerce Matters in China: 3 facts about China e-commerce

China Has Become the World’s Largest E-commerce Market

1

128 213

301

395

510 619

202 231 262 291 319 345

70.2% 66.1%

41.3% 31.5% 28.9% 21.5%

2011 2012 2013 2014e 2015e 2016e

China(Billion USD)

U.S. (Billion USD)

China Year-on-year Growth Rate %

Online Shopping Market Transaction Volume 2008-2016E (China vs U.S. )

Source: Forrester Research, iResearch. ObserverSolutions analysis . As of 2013.

161 194 242

302

172 179 184 190

35.1% 37.8% 42.9%

48.9%

87.1% 87.5% 88.1% 88.7%

2010 2011 2012 2013China Online Shoppers U.S. Online Shoppers

% of internet users (China) % of internet users (U.S.)

Online Shoppers in China vs U.S. 2010-2013 (in Millions)

Source: China Internet Network Information Center, eMarketer. ObserverSolutions analysis. 2013.

One in Every Five Chinese is an Online Shopper

2

…while the same percentage worldwide is 26%.

And… Consumers in China’s tier 4 cities spend

27% of their disposable income on online

shopping.

76% of Chinese Digital Consumers Shop Online Every Week…

3

Source: PwC, Mckinsey. ObserverSolutions analysis . As of 2013.

Overview

Why Ecommerce Matters in China:

3 facts about China e-commerce

What Make China Ecommerce Unique : 3 fundamentals you need to know to win China e-commerce

How to Get E-commerce Right in China:

3 questions to answer in forming an effective e-commerce strategy

Latest Trend: Mobile Commerce

Keys to Winning E-commerce in China: 3 fundamentals that make China ecommerce unique

Foundation:

Trust

Drivers:

Value & Accessibility

Phenomenon:

Marketplaces Dominate

C2C Market B2C Market

Where Do Most Online Sales Happen?

Market Share of China’s Top Ecommerce Players (% of retail ecommerce transaction volume)

Foundation:

Trust

Drivers:

Value & Accessibility

Phenomenon:

Marketplaces Dominate

How to Get E-commerce Right in China: 3 questions to answer

in forming an effective ecommerce strategy

How do I set up my online presence?

How do I integrate my offline store and online store strategies?

How do I build trust with Chinese online shoppers?

3 Questions to Answer

How Do I Set Up My Online Presence？

Prada Store, Marfa Texas. Photo by Noel Kerns.

1

Nanjing shopping district(南京路), Shanghai, China.

Open your e-store on marketplaces like Tmall

Build your independent online store

Strategy Pro Con

Open your e-store on marketplaces like Tmall , JD

Tap into huge aggregated traffic

A fairly quick start: there are well-developed tools and procedures (listing, payment, logistics, customer service procedures, etc,) to follow

Fierce inner-platform competition

Need to follow platform policy

Build your independent online store

Brand differentiation Own full control of store

management

Challenge of building trust High investment to acquire

traffic/new users

Pros & Cons of Each Approach

Most customers who shop at Forever21 China’s independent e-store are brand fans who have experiences living abroad and therefore already like or are loyal to the brand. In comparison, Forever21’s Tmall store plays a major role in attracting new customers and gaining traffic. We then convert these new customers to brand followers.

—— Jasmine, Director of Ecommerce, Forever21 China

Spread Brand and Attract New Customers

Rapidly by Exploiting Tmall’s Huge User Base

Case Study

Source : Global E-BusinessMan(天下网商)

How Do I Integrate My Offline Store and Online Store Strategies?

Online store: Customer Coverage & Reach

Offline flagship store: Brand Prestige & Influence

2

The chief value of Nike’s Tmall store is that a large portion of its customers are from tier 3 and tier 4 and even tier 5 cities. These customers cannot reach Nike’s offline flagship stores. They don’t visit Nike’s standalone online store or Nike distributers’ either. They like to buy from Nike’s Tmall store because they need guaranteed authenticity from Nike’s official e-store. —— YiFang, Head of Tmall overseas merchants department

Reach Tier 3 and Tier 4 Cities’

Customers via E-commerce

Case Study

Source . Global E-BusinessMan(天下网商)

Trust

Store Status

Store

Presentation

Q&A

Services

Customer

Reviews

Payment Safety

Delivery

How Do I Build Trust with Chinese Online Shoppers?

3

1. Be Clear about Official Status and Authenticity

Certification

Display authorized online distribution rights certificate

Official online store claim

1 2

3

2. Detailed & Informative Product Presentation

Including multi-angle pictures, specifications, user directions, packaging info, after-sale service guarantees, and brand stories are all essential.

GAP CHINA GAP USA

3. Online responsive customer service

Live chat customer service

4. Manage Customer Reviews

85% of Chinese online shoppers read through almost all the reviews

Use coupon to encourage customers to write reviews

Promptly reply to the negative customer reviews

1

2

5. Provide Safe And Easy Payment Options

Online Card Payment (Credit/Debit Card)

Third Party Payment Tools

Cash-on-delivery (COD)

• Online Banking • Fast Pay/Express Check Out

(快捷支付)

• POS Machine • Cash

6. Make Returning & Exchange Easy: Provide Return Shipping Insurance

Check the option box to

buy return insurance

Conclusion

Build consumer trust

throughout the entire

online shopping process

Provide

good value & accessibility

via online channels

Leverage Local Marketplaces to

boost traffic

Latest Trend: Mobile Commerce

Online Mobile Commerce Offline Mobile Commerce

14%

Offline Mobile Commerce: Example of Alipay Wallet

Click to view the short video: Offline Mobile Commerce: Example of Alipay Wallet

Special Offer

Go to: http://observersolutions.com/global

Receive a FREE COPY of our flagship:

Everything You Need to Know

About China E-Commerce Market Overview Report

Julia Q. Zhu – Founder, Observer Solutions Contact: Julia@observersolutions.com www.ObserverSolutions.com

Twitter: @JuliaQZhu