china ecommerce landscape - chapter 2

China eCommerce Market

Analysis Report 2013

July 2013

Chapter Two Characteristics and evolution of Chinese eCommerce users

2.1 Characteristics and evolution of Chinese eCommerce users

2.2 New demand of Chinese eCommerce users

2.3 Chinese online users’preference for eCommerce sites

Table of Contents

2.1.1 Key Note – Demographics and Evolution of Chinese eCommerce users

Online shopping increases both in frequency and amount every year

Strong demand for luxury brands leading to great opportunities for international brands

Users’ shopping frequency increases

- Unprecedented growth of online shopping among Chinese consumers

- Online shoppers’ average spending reaches RMB 5,023, narrowing the gap with the U.S.

- Age group and income level of the users rise continuously

- Proportion of affluent consumers from the third and fourth tier cities increases

- Online shoppers demand for luxury brands are steadily increasing

- Popularity of smartphone and social media drives the penetration rate of online shoppers and trigger their purchasing desire

－1－

2.1.2 General Overview and Uptrend of China eCommerce Market

The growth of internet user population slows down, but online shoppers still maintain its strong momentum:

- Total number of Chinese online shoppers reached 242 million, with the proportion of online shoppers increased to 42.9%.

33574641

7400

10800

16051

19395

24202

24.5%22.1%

24.8%28.1%

35.1%37.8%

42.9%

2006 2007 2008 2009 2010 2011 2012

Number of online shopper (in ten thousand)

% of Online Shoppers

Online Shopper Population and Penetration Rate in 2006 - 2012

Data Source: CNNIC,“2012 Online Shopping Market in China Research Report”, March 2013－2－

2.1.3 New Online Shopper Population in China vs International Markets

The number of new Chinese online shoppers surpasses the total population of other countries. With the increment of per capita consumption, the market sees huge potential:

- In line with the data from CNNIC, Boston Consultancy Group remarked that the number of China’s new online shoppers hit 3.8 million, which exceeded Canada’s total population.

Internet user population propels the rapid development of China’s eCommerce market

100

80

60

40

20

02005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Population in million

France’s population

Korea’s population

Canada’s population

…brought about the era of rapid growth in eCommerce

The era of rapid growth of network connection…

New internet users

New online shoppers

1711

26

10

73

12

88

25

86

29

73

36

61

4348

38

50

38

47

3440

31

Data Source: BCG,“The World’s Next E-Commerce Superpower: Navigating China’s Unique Online-Shopping Ecosystem”, November 2011

－3－

2.1.4 Growth of Chinese Online Shoppers’ Per Capita Consumption (1)

In 2012, Chinese online shoppers’ per capita consumption reached RMB 5,023, YoY growth 25%.

- The purchasing power of Chinese online shoppers was strong, with more than half of the users spending over RMB 1,000 annually online.

- Most users spent about RMB 2,001 - 5,000 on online shopping, which is 22.6% of the total share.

Data Source: CNNIC,“2012 Online Shopping Market in China Research Report”, March 2013

Online Shoppers’ Annual Per Capita Consumption in 2012 (RMB)

1.1%

1.8%

3.9%

7.3%

4.8%

22.6%

14.5%

22.3%

10.8%

7.0%

3.9%

RMB 2,001－5,000

RMB 1,001－2,000

RMB 501－1000

RMB 301－500

RMB 101－300

Over RMB 50,000

RMB 20,001－50,000

RMB 10,001－20,000

RMB 8,001－10,000

RMB 5,001－80,00

Under RMB 100

－4－

2.1.4 Growth of Chinese Online Shoppers’ Per Capita Consumption (2)

- Mega spenders (annual spending over RMB 10,000) occupied 7% of the total number of online shoppers and 40% of the total spending of online shopping.

- Experienced online shoppers of the affluent class should be the main target consumers of eCommerce enterprises.

Data Source: BCG, “The World’s Next E-Commerce Superpower: Navigating China’s Unique Online-Shopping Ecosystem”, November 2011

Online Shoppers Classification

－5－

Type Annual online shopping spending (RMB) Distribution in 2010

Proportion of online shoppers (%)

Proportion of consumer spending (%)

Small spender

Moderate spender

Big spender

Mega spender

<2,000

2,000-5,000

5,000-10,000

>10,000

14

21

24

40

57

24

12

7

2.1.5 Growth of Chinese Online Shoppers’ Per Capita Shopping Frequency

In 2012, Chinese online shoppers’ shopping frequency recorded a substantial growth:

- Users’ bi-annual average shopping frequency reached 18 times, which is 3.5 times of the size in 2011.

- The proportion of online shopping with over 10 times bi-annually took up more than 50% and increased substantially by 23.8%.

- As time passes by, online shopping beginners became experienced online shoppers on a steady pace. According to the research conducted by PwC, the online shopping frequency of Chinese consumers surpassed the average level of the world. In China, nearly 50% of online shoppers browsed online at least once a week, while the average of around the world was 29%.

2011 - 2012 Online Shopping Frequency within 6 Months

Data Source: CNNIC, “2012 Online Shopping Market in China Research Report”, March 2013

1－2 times 3－4 times 5－10 times Over 10 times

10.5%

18.5%14.1%

18.9%21.0%

21.9%

54.5%

30.7%

Year 2011

Year 2012

－6－

2.1.6 Types of Goods Purchased by Chinese Online Shoppers

Clothing, footwear and accessories, daily necessities and 3C products are the goods that are mostly purchased by

the users:

- In 2012, 81.8% of users had bought clothing, footwear or accessories via internet, mainly due to their strong desire for personalization and the limited diversity and insufficient coverage of offline actual stores’ merchandise.

- Standardized products such as 3C products also have a higher purchase rate, mainly due to the price advantage of online shopping.

Data Source: CNNIC, “2012 Online Shopping Market in China Research Report”, March 2013

Percentage of Online Shoppers Purchasing Various Commodities in 2012

81.8%

31.6%

29.6%

22.9%

18.4%

16.6%

15.2%

14.5%

12.8%

8.5%

8.5%

6.9%

6.8%

6.7%

Virtual cards, e.g. prepaid cards, game cards

Cosmetics & beauty products

Food & health products

Handbags & luggage

Food & beverage service

Clothing, footwear & accessories

Daily necessities

Computers, digital communications products & accessories

Home electrical appliances

Books & audio-visual publications

Movie & show tickets

Maternity & baby products

Stationery

Jewelery & accessories

－7－

2.1.7 Factors Affecting Chinese Online Shoppers’ Consumption Behaviour

When more and more users are elevated to affluent consumers, they demand more upmarket goods to enhance the quality of life:

- Categories related to personal care and lifestyle will develop rapidly along with the upgrade of the user class.

- Categories related to health care, 3C products and baby products will continue to grow as income level rises.

Consumption Pattern of Different Commodities and Income Groups

Data Source: BCG, “The Affluent Will Be a Major Driver of Consumption Growth in China”, November 2012

Low income groupQuasi-middle classEmerging middle classMiddle classAffluent consumers

Skincare, clothing, footwear & accessories Vitamins, handsets, baby products

Family Income

Per capita consumption (index)

Family Income

Per capita consumption (index)

Turning point Continuous growth

－8－

2.1.8 Overview of Chinese Online Shoppers’ Consumption by Region

Consumers from the third and fourth tier cities have a higher demand for online shopping, which offers them a greater variety of goods to choose from:

- The number of affluent consumers from the third and fourth tier cities had been gradually increasing. They preferred online shopping because the coverage of offline actual stores in their cities was limited, particularly that of the middle to luxury brands.

- The spending amount of the online shoppers in the fourth tier cities is similar to that in the second and third tier cities, yet accounting for a larger share of disposable income.

Data Source: McKinsey Global Institute, China’s e-tail revolution: Online shopping as a catalyst for growth, March 2013

Average Spending and Share of the Total Retail Spending in the Third and Fourth Tier Cities

Online spending per online shopper (RMB) Percentage of online shopper’s retail spending (share of disposable income)

Top tier

Second tier

Third tier

Fourth tier

6,819

4,922

4,624

4,467

18

17

21

27

－9－

2.1.9 Analysis of Demographics and Purchasing Behaviour of Chinese Online Shoppers (1)

- Chinese online shoppers had a tendency moving towards middle-age group, with 35.7% of users aged 31 or above and increased by 9% as compared with 2011.

- Purchasing power of users from the middle age group is even stronger. They are interested in luxury fashion brands, and maternity and baby products which are related to their next generation.

Age Group of Online Shoppers in 2006 - 2012


Under 18 years old 18 -24 years old 25 - 30 years old 36 - 40 years old31 - 35 years old

1.0%1.5%

30.3%

37.5%

33.1%34.4%

18.4%

14.9%

7.1%6.2%

Over 40 years old

10.2%

5.6%

Year 2011

Year 2012

－10－


With ongoing age growth of online shoppers and economic development in China, the income level of online shoppers has been improved:

- The proportion of online shoppers with personal monthly income of RMB 8,000 or above has increased, indicating that the number of users from the middle class or above has increased.

- The decline in the proportion of the low income group indicated that the economy of China’s third and fourth tier cities boomed and the income level of the local citizens improved.


Income Groups of Online Shoppers in 2011 - 2012

9.5%

10.5%

26.3%

22.0%

17.7%

7.7%

6.3%

RMB 501 - 1,000

Under RMB 500

Over RMB 8,000

RMB 5,001 - 8,000

RMB 3,001 - 5,000

RMB 2,001 - 3,000

RMB 1,001 - 2,000

12.9%

12.6%

29.7%

19.2%

12.6%

7.0%

6.2%

Year 2011 Year 2012

－11－


Users’ purchasing behaviours may vary from different demographics, in particular their preference on product categories:

- Take gender as an example, men are generally more preferred with 3C products while women pay more attention to cosmetics / personal care / baby products.

Data Source: McKinsey Global Institute, China’s e-tail revolution: Online shopping as a catalyst for growth, March 2013

Clothing, footwear, luggage, outdoor products

Mobile phone prepaid package


Home decor

IT products

Online lottery


Communications products

Cosmetics & personal care

Digital products

30.9％

21.2％

7.6％

5.8％

4.7％

4.6％

3.9％

3.5％

3.3％

2.8％

Top 10 Commodities Purchased by Chinese Male Online Shoppers in 2012 Top 10 Commodities Purchased by Chinese Female Online Shoppers in 2012

Clothing, footwear, luggage, outdoor products

Cosmetics & personal care

Mobile phone prepaid package

Home decor



Fresh fruits & other food

Small electrical appliances

Digital products

Online lottery

47.3％

11.7％

11.4％

7.0％

5.4％

3.9％

2.9％

1.8％

1.5％

1.3％

Percentage (%) Percentage (%)

－12－




Table of Contents

2.2.1 Key Note – New Demand of Chinese eCommerce users

Growing desire in international brands

Stronger demand for choosing more brands with lower prices

Logistics and after-sales service are key to success

- In the second half of 2012, online shoppers purchased overseas goods from local eCommerce sites 4 times on average

- User spent over RMB 400 for each purchase

- Purchasing overseas’ goods reveals the behaviour of the affluent class - concern about brand and quality

- The major advantage of purchasing goods from overseas is that users can choose from a wide variety of brands with relatively lower prices

- The major problems in purchasing overseas’ goods are long delivery time and lack of after-sales service

- Set up online store to reduce the cost of expanding actual store. Provide worldwide after-sales service and acknowledge the users by lowering the prices

－13－

2.2.2 Market Scale of Chinese Online Shoppers Buying Overseas Goods

Chinese online shoppers buying overseas goods are growing rapidly:

- In 2012, the amount spent on buying overseas goods hit RMB 48.3 billion, with an increase of 82.3% yearly.

- According to the estimation by China E-Business Research Center, the growth of buying overseas goods this year will remain steady and the amount is expected to exceed RMB 70 billion.

Data Source: China E-Business Research Center, China B2C E-Commerce Report 2013 Mid - year Report, February 2013

Amount in purchasing overseas goods in China in 2008 - 2013

Transaction amount (in RMB 100 million)

2008 2009 2010 20122011

24.150

120

265

483

2013e

744

－14－

2.2.3 Overview of Chinese Online Shoppers’ Buying Overseas Goods

The product categories of overseas goods reflect the needs from the affluent consumers:

- Clothing, cosmetics, baby products, 3C products and health care products are the major product categories.

- As the income level of online shoppers increases, there is a stronger demand for luxury brands which have not yet entered the Chinese market. For foreign brands, they must seize the opportunity to enter the Chinese market.


Common Overseas Goods Purchased by Chinese Online Shoppers

50.0％

26.8％

15.2％

10.7％

5.4％

5.4％

3.6％

1.8％

8.0％

Clothing (including clothes & bags)

Cosmetics & beauty products

Milk powder, infant products

Computers, digital communications products & accessories

Household products

Health products

Jewellery & watch

Books, audio and visual publications

Others

－15－

2.2.4 Analysis of Chinese Online Shoppers’ Motives and Demand for Overseas Goods (1)

Users choose to buy foreign products because of a wide range of different brands, low prices and better quality:

- Despite the tax, the domestic pricing of foreign products are cheaper than that when imported to China due to markup of prices.

- 1/3 of Chinese online shoppers purchase overseas goods via local eCommerce sites because they are unable to reach the foreign brands. To the foreign brands which have not yet entered the Chinese market, they should be aware of this phenomenon and set up their own online store to expand their business in China.

- The food safety and product quality issues in China have caused the affluent consumers to look for foreign goods online from the developed countries. The quality assurance of goods is the major considering factor when the middle class or the upper class tends to purchase.


Reasons of Users’ Purchasing Overseas via Purchasing Agent

39.3％

33.9％

30.4％

8.9％

10.7％

Cheaper than local pricing

Favourite brands do not exist in China

Guaranteed quality

Trendy and fun

Others

－16－

2.2.4 Analysis of Chinese Online Shoppers’ Motives and Demand for Overseas Goods (2)

The major problems of buying overseas goods are long delivery time and lack of after-sales service:

- Most of the couriers of the overseas eCommerce operators fail to deliver the goods on the next day, not to mention the delivery time of the aircraft cargo and the time for custom check. Therefore, the average delivery time of the goods purchased oveseas is usually more than two weeks.

- To foreign brands which aim for success in China, they should opt for setting up their own online store to take the advantage of the low cost of China’s speedy courier service to meet customers’ needs.

- To tackle the after-sales service issue, brand owners should consider providing worldwide after-sales service. Opening an online store in China is also a strategy to meet users’ demand for sales service.


Major Problems Encountered when Buying Overseas Goods

92.6％

22.2％

7.4％

3.7％

3.7％

Long delivery time

Fail to return or exchange goods

Unauthorized use of credit card overseas

Quality issue of the purchased goods

Damage or lost during delivery

－17－




Table of Contents

2.3.1 Key Note – Chinese Online Shoppers’ Preference for eCommerce

Consistent growth rate of eCommerce operators and network users

Consistent low conversion rate induces business difficulties

Different eCommerce operators need different solutions to cope with fierce competition

- New users are quickly taken up by top eCommerce operators

- The number of online shopping channels increases, driving the loyalty towards a specific site decreases

- The churn rate of top eCommerce enterprises is around 10%, mainly because users are unable to locate the goods they want

- The conversion rate of eCommerce website is generally low. Audience targeting is required to push product information which match the characteristics of users’ behaviour

- In view of the significant cost increment for acquiring new users in recent years, optimization and development are required for customer relationship management

- For eCommerce platform operators, they need to improve online sales conversion rate, tackle the churn issue of existing clients and enhance the conversion rate of proprietary products

- For independent merchants, they have to face the challenge of acquiring new users

- For newly established eCommerce operators, they have to enhance brand awareness to rapidly expand the new user group in order to strive for market share during a short period of time

－18－

2.3.2 Increasing number of eCommerce Websites in China

In 2012, the number of eCommerce websites in China increased by 20% as compared with 2011, reflecting the severe competition of this industry:

- The number of eCommerce websites increased by nearly 20%, yet that of online shoppers increased by 24% only.

- New users were mostly attracted to top eCommerce websites, implying a bigger pressure for the newly established eCommerce players.

- The emergence of new eCommerce players gave rise to a more scattered user base due to the increasing number of choices. User loyalty to a specific website drops.

Data Source: China E-Business Research Center, China B2C e-Commerce Report 2013 Mid-year Report, February 2013

Growth of Chinese B2C and C2C eCommerce Enterprises in 2008 - 2013

Amount (in unit)

2008 2009 2010 20122011

5460

9962

15800

20750

24875

2013e

25529

－19－

2.3.3 Loyalty Change of Chinese eCommerce Users

The increasing number of eCommerce websites has led to a greater diversity of options, causing the users to be less loyal to a specific website:

- During 2009 to 2012, the proportion of online shoppers using only one shopping website has dropped significantly.

- Users will compare the types of goods, brands and discounts from different eCommerce websites prior to their purchase.

- Since the payment methods are relatively the same, the cost of users switching among eCommerce operators is relatively low as well. To the eCommerce enterprises, brand differentiation of their products and price war become the core strategies to retain customers.


Proportion of Using One Shopping Website Only in 2009-2012

Proportion of Loyal Users of Major Shopping Websites in 2012

Taobao

PaiPai.com

Tmall

JD.com

Dongdong.com

Amazon China

VANCL

Suning.com

1 The Store

49.2％

15.2％

10.8％

8.9％

8.6％

6.3％

6.2％

4.8％

2.7％

50.8％

84.8％

89.2％

91.1％

91.4％

93.7％

93.8％

95.2％

97.3％

2009 2010 2011 2012

80.0%72.7%

61.1%

51.1%

Users using one website only Users using more than one website

－20－

2.3.4 Change of Chinese Online Shoppers’ Browsing Time of eCommerce Websites

Online shoppers’ average browsing time decreased, yet the conversation rate of each eCommerce operator did not increase significantly:

- Average age of users rose. Average time for browsing the shops decreased significantly from 20 minutes to 17 minutes.

- The drop of users’ browsing time was not caused by the optimization of users’ experience of each eCommerce website, which might help users save time for decision making. Data showed that the conversion rate of each eCommerce enterprise did not show significant improvement.

Data Source: China E-Business Research Center, Data Analysis Enhances E-Commerce Conversion Rate, September 2012

Online Shopping Daily Coverage and Average Browsing Time per User

Daily coverage (in million persons) Daily Effective browsing time per user

8000

7000

6000

5000

4000

3000

2000

1000

0

June 2010

June 2011

-16％

68％

－21－

2.3.5 Analysis of Chinese eCommerce Websites Conversion Rate

In an extremely competitive business environment, the conversion rate of top eCommerce websites, from the page displaying the products to the payment confirmation page, was merely 1%:

- The conversion rate of top eCommerce enterprises remained low at around 1%.

- For the long-tailed independent merchants, they should broaden their client base by expanding the traffic and reinforcing users’ purchasing power so as to improve the business. If eCommerce operators are able to attract or direct users which match the characteristics of potential customers of products on their website, the client base can be expanded and the website conversion rate will be enhanced simultaneously.

Data Source: China E-Business Research Center, Data Analysis Enhances E-Commerce Conversion Rate. September 2012; Hitwise, Visit Conversion Rate Data of E-Commerce Websites, August 2012

Visit Conversion Rate Data of Selected eCommerce Websites during 8-14 July 2012

Conversion

Product description page

Shopping cart

Order confirmation

Payment

51buy.comJD.comDongdong.com

27.1％

17.0％

43.5％

50.0％

4.6％

2.0％

1.0％

20.3％

23.6％

97.9％

29.8％

4.8％

4.7％

1.4％

14.9％

30.2％

55.6％

52.0％

4.5％

2.5％

1.3％

Method of calculating conversion rate: Hitwise monitored the network visiting behaviours of over 10 million online devices. Based on users’ visiting behaviours on the transaction milestone page, the purchase conversion rate was restored. Such data only included browser data via PC, excluding data of mobile phones and APP. Statistics indicator is defined as Visits.

－22－

2.3.6 Overview of New Users of Chinese eCommerce Websites

Most of the new Chinese online shoppers are absorbed by top eCommerce enterprises. Independent merchants face the challenge of acquiring new users:

- Most of the new users choose top eCommerce platforms such as Taobao, Tmall and JD.com, etc.

- To tackle this challenge, on one hand the independent merchants can implement product differentiation, on the other hand, they can fill the niche by catering to the users when the top eCommerce enterprise loses.


Percentage of New Users Using Various Shopping Websites in 2012

Growth Rate of User Volume of Major Shopping Websites in 2012

51buy

.com

Vipshop.co

m

Sunin

g

Pai P

ai

VANCL

1 The

Store

JD.co

m

Dongdong

Tmall

9.9％

Amazon

27.6％

22.2％

14.3％ 13.9％12.4％ 12.3％

11.1％ 11.0％ 10.6％

Taoba

o

JD.co

mTm

all

Dongdong

Pai P

ai

Amazon

VANCL

1 The

Store

Sunin

g

44.2％

22.1％

15.3％

7.1％ 6.4％4.6％ 3.7％ 2.8％ 2.8％

－23－

2.3.7 Cost Change of Chinese Independent Merchants in Acquiring New Users

The costs for Chinese B2C eCommerce enterprises to acquire new users increase year by year, with a rise of several times in 5 years:

- The costs for independent merchants to acquire new users increase due to intense competition and increment of advertising rates. The costs of acquiring a new user rose from around RMB 20 in 2009 to over RMB 100 in 2012.

- To tackle this problem, independent merchants should be based on existing information to redefine users’ characteristics by means of CRM. With such data, they can explore the source of new users by audience targeting or marketing.

Data source: Interviews with industry professionals, March 2013－24－

2.3.8 Change of Repurchase Rate of Chinese Online Shoppers

Except for some of the top eCommerce enterprises, the repurchase rates of most eCommerce websites in China exhibit a downward trend:

- Chinese online shoppers’ monthly repurchase rates at most of the eCommerce websites show a downward trend.

- Main reasons are the increasing number of eCommerce enterprises which lead to intense competition with more options for users and their frequent switch from one website to another, resulting in the rise of churn rate. In addition, some of the eCommerce operators are incapable of sustaining their business and expose their weakness regarding product quality and integrity after running their business for a while.

Data source: iResearch,“China Online Shopping Report in Q2 2012”. July 2012

China’s Top 10 B2C eCommerce Websites with Highest Monthly Repurchase Rate in 1H 2012

Rank Website Monthly Repurchase Rate (%) Monthly Repurchase Rate Relative Trend (Jan - Jun 2012) Website category

1

2

3

4

5

6

7

8

9

10

Vipshop.com

OkBuy

1 The Store

Fclub.cn

JD.com

Dongdong.com

Mbaobao.com

YouGou

COFCO womai.com

LAFASO

82.41％

68.60%

59.52%

57.89%

54.98%

53.48%

51.49%

51.46%

50.91%

47.65%

Fashion, clothing

Footwear, bags & accessories

General merchandise

Fashion, clothing

General merchandise

General merchandise



Food

Cosmetics

－25－

2.3.9 Change of Churn Rate of Chinese Online Shopping Website

The churn rate of China’ top eCommerce websites was around 10%, the long-tailed independent merchants were facing more user loss:

- In 2012, 6.5% of users stopped using the shopping website which they used 6 months ago. The differences among different websites’ user loss varied, even the top independent merchants had a churn rate as much as 10%.


Proportion of Major Shopping Websites’ User Loss vs. Total User Loss in 2012

Churn Rate of Major Shopping Website in 2012

Taoba

o

JD.co

m

Amazon

Pai P

aiTm

all

VANCL

Dongdong

.com

1 The

Store

Vipshop.co

m

1.9％

Mecox

Lane

22.9％

17.8％

14.0％

10.2％

7.0％ 7.0％ 6.4％

3.2％1.9％

Neweg

g.com

Amazon

Vipshop.co

m

VANCL

Pai P

ai

51buy

.com

1 The

Store

37.5％

14.8％12.5％ 11.5％ 11.0％

8.7％7.2％

－26－

2.3.10 Analysis of Reasons Causing User Loss of Chinese Online Shopping Websites

User loss of Chinese online shopping website is mainly due to incomplete product range, lack of quality assurance and after-sales service:

- For eCommerce website, the way to enhance conversion rate and sustain users’ loyalty is to implement targeting strategy which target potential users and push appropriate SKU of the products and enhance the conversion rate of SKU of the proprietary products, so as to minimize users’ frustration in locating the products they want.

- Meanwhile, eCommerce enterprises should concentrate on developing sustainable business, ensuring product quality and after-sales services even during promotional period / price war. Otherwise, users will have the feeling of being deceived.


Reasons for Users to Stop Using Specific Website

47.1％

24.2％

17.8％

8.3％

4.5％

4.5％

2.5％

Unable to locate goods they want

Poor quality of goods

Expensive pricing of goods

Deceive consumers

Dissatisfactory after-sales service

Poor delivery service

Unable to open the website

－27－

Summary

－28－

- There is an unprecedented growth of online shopping among Chinese consumers. Online shopping frequency and spending amount increase year by year. Online shoppers’ average spending is around RMB 5,203, narrowing the gap with the U.S. each year.

- As the age group and income level of the users as well as the proportion of affluent consumers from the third and fourth tier cities increase, Chinese online shoppers desire luxury brands which enhance the quality of life, resulting in a trend of overseas online shopping through purchasing agent. International brands should seize this opportunity.

- The increasing number of Chinese eCommerce enterprises gives rise to fierce competition in the market and a war to fight for users and traffic. eCommerce enterprises are facing common challenges such as increasing costs of acquiring new users and churn rate of existing users.

- To solve the fundamental management problems, different types of eCommerce enterprises need to establish the right direction of running the business and implement appropriate strategic solutions.

Appendix – Definition of terms

－29－

- Internet users : Chinese residents who have used the internet in the past 6 months

- E-commerce: The trade of products or service via internet, mainly referring to the B2C and C2C trading. Users search for the product information on the internet, send a purchase request via the e-order service, and then complete the purchase via online payment or COD. Online travel booking and B2B trading are not included.

- eCommerce consumer: Internet users who have purchased products or services online in the past 6 months.

- Independent merchants: A sub-industry or mini-market which operates an e-trading platform, and provides a complete e-commerce solution to the industry. Independent merchants comprise of a full range of services tailored to its consumers, providing a strong channel for sales and marketing and branding promotions, for example, VANCL and LAFASO.

- eCommerce platform: A platform for corporations to provide online trading to individuals. Corporations and merchants can make use of the shared resources such as basic infrastructure, payment platform, security platform and management platform to operate their business activities in a more efficient and low cost manner.

- Shopping website user loss: Refer to users stop using a specific website, that they used 6 months ago, in the past 6 months

- Shopping website churn rate = user loss in the past 6 months / total user volume 6 months ago

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China eCommerce Market Analysis Report

Chapter TwoCharacteristics and evolution of China eCommerce users

END

Stay tuned for

Chapter ThreeStrategies and Solutions for Chinese Online Shopping Practitioners

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china ecommerce landscape - chapter 2

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