Ecommerce Disparities: United States vs. China

Ecommerce DisparitiesGlobal Marketing 12/7/15Akilah DanielsFeng LiuTao Chengyi

Agenda PurposeEcommerce DefinedEcommerce FootprintEcommerce in USEcommerce in ChinaTop Ecommerce Sites ReviewAmazon AdvantageAmazon Disadvantage Chinese Market ImportanceSolutionsEcommerce Future

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PurposeSome companies have has success in certain markets, but that success has not translated in the Chinese market.Explore why one company is successful and why they are not as successful in the Chinese marketWhat are some key factors that help an ecommerce company flourish in China.Define the ecommerce market for the US vs. ChinaEvaluate top ecommerce sitesUnderstand Amazons advantagesUnderstand Amazons disadvantagesUnderstand Chinas impact on ecommerceProvide solutions

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Understand EcommerceActivities that relate to the buying and selling of goods and services over the Internet - Merriam -Webster Dictionary

Source: http://beta.merriam-webster.com/dictionary/e-commerce

Ecommerce TermsB2C (Business to Customer) - Business or transactions conducted directly between a company and consumers who are the end-users of its products or services. (23)

B2B (Business To Business) - A type of commerce transaction that exists between businesses, such as those involving a manufacturer and wholesaler, or a wholesaler and a retailer.

Source: http://www.investopedia.com/

B2C (Business to Customer) - Business or transactions conducted directly between a company and consumers who are the end-users of its products or services. Business to consumer as a business model differs significantly from the business to business model, which refers to commerce between two or more businesses.

B2B (Business To Business) - A type of commerce transaction that exists between businesses, such as those involving a manufacturer and wholesaler, or a wholesaler and a retailer. Business to business refers to business that is conducted between companies, rather than between a company and individual consumers. This is in contrast to business to consumer (B2C) and business to government (B2G). A typical supply chain involves multiple business to business transactions, as companies purchase components and other raw materials for use in its manufacturing processes. The finished product can then be sold to individuals via business to consumer transactions.

Why E-commerce ?To achieve their expectation with a lower priceConvenience/fast delivery

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E-Commerce FootprintEcommerce makes a small percentage of the total amount of sales per yearGrowing each year

Source: http://www.marketingcharts.com/traditional/global-retail-and-e-commerce-sales-forecast-2013-2018-49733/attachment/emarketer-global-retail-and-ecommerce-sales-forecast-2013-2018-jan2015/

Web sales totaled $304.91 billion in 2014, up 15.4% from 2013, according to Commerce Department estimates released today. Q4 sales of $95.98 billion accounted for 31.4% of full-year web sales. (8)Web sales were up 15.4% from $264.28 billion in 2013. (8)On an adjusted basis, full-year web sales were $303.94 billion. (8)This is the fifth year in a row that web sales growth has been close to or above 15%. (8)E-retailers generated 31.4% of full-year sales in the fourth quarter. Unadjusted Q4 sales were $95.98 billion, up 14.7% year over year from $83.71 billion. (8)On an annual basis, e-commerce, accounted for approximately 6.5% of total unadjusted retail sales excluding foodservicemainly restaurant and bar salesup from 5.8% in 2013When further excluding sales of autos and fuel, which dont commonly occur online, Internet Retailer calculates e-commerce accounted for 8.3% of total unadjusted retail sales during 2014, up from 7.4% in 2013.During the fourth quarter, e-commerce accounted for 7.7% of total retail sales excluding foodservice, up from 7.0% a year earlier, according to the Commerce Departments unadjusted figures. When further excluding sales of autos and fuel, Internet Retailer calculates e-commerce accounted for 9.6% of total unadjusted retail sales during Q4. (8)Adjusted for seasonal variations, holiday and trading-day differences, the Commerce Department estimates Q4 web sales reached $79.57 billion, up 14.6% from $69.43 billion a year earlier. On an adjusted basis, e-commerce accounted for 6.7% of total Q4 retail service excluding foodservice, up from 6.1% in Q4 2013.Total unadjusted retail sales excluding foodservice grew 3.8% in 2014, closing the year at $4.70 trillion.7

Ecommerce StatisticsSource: http://www.statista.com/topics/871/online-shopping/Ecommerce StatisticsE-commerce WorldwideE-commerce WorldwideValuesB2C e-commerce sales worldwide$1,471bnB2C e-commerce sales per digital buyer$2,466

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Top Ecommerce MarketsSource: http://www.adweek.com/socialtimes/top-global-e-commerce-markets-and-trends-infographic/626303

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World E-Commerce DataSource: http://www.emarketer.com/Article/Worldwide-Ecommerce-Sales-Increase-Nearly-20-2014/1011039

Asia- Pacific surpasses North America in sales sharesBuyer penetration increase at a constant rate with a constant leader

North America accounts for around one-third of the dollars spent on digital purchases worldwide. (10)eMarketer now expects Asia-Pacific to become the leading region for ecommerce sales in 2015, representing 33.4% of the total, compared with 31.7% in North America and 24.6% Western Europe. These three regions combined will continue to take around 90% of the global ecommerce market throughout our forecast period. (10)The increase of ecommerce sales in Asia-Pacific is tied to a growing base of digital buyers, and as more new buyers come online, naturally sales will rise. Nearly 70% of internet users in both Western Europe and North America will purchase items on digital devices, vs. just over 50% in Asia-Pacific. (10)Buyer penetration in Asia-Pacific translates to the largest number of consumers, but the region is far more fragmented than North America and Western Europe. In the latter two regions, ecommerce continues to grow at double-digit rates and will do so for several more years. (10)China alone will make up more than half of all the regions ecommerce sales this year, and by 2018, its share will top 70%. Australia and Japan rival markets like the US, UK and Western Europe in buyer penetration and average order values. On the other hand, in less mature markets like India and Indonesia, there are large absolute numbers of digital buyers, but many are new to the market. Instead of buying high-ticket items, new digital buyers tend to wet their feet with less costly purchases, due to product availability or simply to income constraints. (10)

United StatesOnline Spending by DevicePC: 72%Tablet: 13%Smartphone: 15%191.1 million online US buyers 28% of small businesses are selling their products online.57.4% US shop online98.9 million Americans have purchased, at least once, on a mobile device.US shoppers place a strong value on the ability to check for product availability at brick-and-mortar stores near them.

U.S. E-commerceValuesB2C e-commerce volume in the U.S.$703.28bnB2B e-commerce volume in the U.S.$5,294.9bnRetail e-commerce sales in the U.S.$237bn

Mobile RetailValuesMobile retail commerce revenue in the U.S.$12bnNumber of mobile buyers in the U.S.121.7mB2C m-commerce sales in the U.S.$58.5bn

Source: http://www.remarkety.com/global-ecommerce-sales-trends-and-statistics-2015#C

$349.06B in projected eCommerce sales in 2015.Online Spending by DevicePC: 72%Tablet: 13%Smartphone: 15%Though there are 191.1 million online buyers in the US, only 28% of small businesses are selling their products online. (9)Even though only 28% of small business are selling products online, over half (57.4%) of the US public shop online.98.9 million Americans have purchased, at least once, on a mobile device.While more Americans own a smartphone than tablet, they are more likely to purchase on tablet.80% of people who shop on tablets will place an order on one. Only half of the people who actually shop on a smartphone will place an order on their phone, preferring a tablet or PC.Lastly, most US shoppers place a strong value on the ability to check for product availability at brick-and-mortar stores near them. (9)

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ChinaPopulation contribute to their top slot600 million internet usersShopping is the fastest growing online activity in China

Source: http://projects.wsj.com/alibaba/Source: http://www.statista.com/topics/1007/e-commerce-in-china/

General OverviewValuesB2C e-commerce sales worldwide$1,471 BNumber of online shoppers in China$361.42 MForecasted revenue of e-commerce in China by 2015$21.95 BProjected % of global B2C e-commerce sales of China by 201623.4%China's share of B2C e-commerce sales in the Asia Pacific Region54.73%

China is the biggest eCommerce market in the world with $562.66B in sales projected for 2015. (9)Factors like population contribute to their top slot.Case in point, China has more than 600 million internet users.Shopping is the fastest growing online activity in China. Exciting news when considering different types of marketing campaigns targeted at your Chinese customers.Email marketing is extremely lucrative.75% of surveyed Chinese consumers were willing to buy something after receiving a promotional email of some sort.The average internet user in China is 25 years old, so think about tailoring a message to that millenial demographic.Mobile Optimization is KeyFinally, more than 70% of customers will make a purchase on a smart phone so make sure your emails look good on mobile devices. (9)

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US vs. China

Source: http://www.adweek.com/socialtimes/top-global-e-commerce-markets-and-trends-infographic/626303

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Top Company Global Market Reach

Source: http://www.statista.com/statistics/274709/worldwide-audience-reach-of-online-retail-and-auction-sites/

Global market reach of the largest online retail and auction sites in May 2014This statistic shows the market penetration of the largest online retail and auction sites in May 2014, as measured in global internet reach. During that period of time, Chinese company Alibaba.com was ranked first with a 23.7 percent global reach. Amazon was ranked second with a 22 percent global reach. The website is also the most popular online retailer in the United States.

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AmazonFoundedFounded in 1994 by Jeff Bezos AboutFirst to sell products over internetFirst affiliate marketing program - 40% of salesDifferentiationCustomer reviewsGlobal Net Revenue20$88.99 BillionUsers20270 millionEmployees 20154,100Market Cap 17$315.60 Billion

17Source: http://www.marketwatch.com/investing/stock/amzn/profile 20Source: http://www.statista.com/topics/846/amazon/

AffiliatesAmazon sites

http://www.statista.com/topics/846/amazon/ (20) - 2014

Founded in 1994 by Jeff Bezos One of the first American ecommerce companies to sell products over the Internet (3)Currently, Amazon offers not only books but DVDs, CDs, MP3 downloads, computer software, video games, electronics, apparel, furniture, food, and toys. A unique characteristic of Amazons website is the user review feature that includes a rating scale to rate a product. Customer reviews are now considered the most effective social media tactic for driving sales. The company attracts approximately 65 million customers to its U.S. website per month and earned revenue of 34.204 billion in 2010. In 2001, Amazon.com launched its first mobile commerce site. (2)Amazon is one of the first ecommerce businesses to establish an affiliate marketing program, and nowadays the company gets about 40% of its sales from affiliates and third party sellers who list and sell goods on the web site. In 2008 Amazon penetrated into the cinema and is currently sponsoring the film "The Stolen Child" with 20th Century Fox. (3)According to the research conducted in 2008, the domain Amazon.com attracted about 615 million customers every year. Amazon.com is also well-known for its clear and user-friendly advanced search facility which enables visitors to search for keywords in the full text of many books in the database (3)

Amazon.com is an international e-commerce company offering online retail, computing services, consumer electronics, digital content as well as other local services such as daily deals and groceries. According to recent industry figures, Amazon is the leading e-retailer in the United States with more than 88.99 billion U.S. dollars in 2014 net sales. The majority of the companys revenues are generated through the sale of electronics and other products, followed by media and other activities. As of the third quarter of 2015, the e-retailer reported more than 294 million active customer accounts worldwide. Due to Amazons global scope and reach, it is also considered one of the most valuable brands worldwide.The online retailer does not only lead in terms of desktop retailing but has also taken to mobile commerce. As of January 2014, Amazon had more than 14 million mobile-only visitors aged 25 to 34 in the United States. Recent data also indicates that the e-retailer also leads the global rankings regarding mobile conversion rate as 7 percent of mobile visits result in a sale on the website.

The company also offers its own line of personal electronics, most importantly the Kindle electronics range. Originally offered as a basic e-reader, the Kindle has strongly influenced e-book sales. The current Kindle Fire tablet range has transformed into a line of devices that also enable the consumption of media within the Amazon ecosystem.

Amazon also offers Amazon Prime, an annually paid membership offering free two-day shipping in the United States as well as discounted one-day shipping rates, which current users regard as the key reason for subscribing to the service. Amazon Prime has since opened to other countries and has also expanded to offer instant streaming of selected movies and television shows through Amazon Instant Video and more recently, music. The average online expenditure of Amazon Prime members in the United States amounts to 58 U.S. dollars per transaction, compared to 41 U.S. dollars of a non-Prime member. (20) - 2014

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EbayFoundedOnline in September 1995About13Grown by trial and error. DifferentiationTrust between strangersSource of amusementGlobal Net Revenue21$17.9 billionUsers135 million users worldwide Employees1836,500Market Cap18$34.94 billion

21Source: http://www.marketwatch.com/investing/stock/ebay 18Source: http://www.statista.com/topics/2181/ebay/13Source:

AffiliatesEbay sites

http://www.statista.com/topics/2181/ebay/EBay seems to be largely an accidental company, started and grown by trial and error. [13] The first version of what would become eBay went online in September 1995. It had $3.3 billion in revenue in 2004, getting to that mark faster than Dell, Microsoft or Cisco Systems. It has 135 million users worldwide a cyber nation-state about as populated as Germany and France combined.EBay's market capitalization is about four times that of Amazon.com's and 25% more than Yahoos.It has fostered the idea that trust between strangers can be established over the Internet. It has been a source of amusement, whether about the grilled-cheese sandwich with the image of the Holy Mother that sold for $28,000 or the man who auctioned his forehead for advertising space for $37,375.

Founded in 1995, eBay is a multinational e-commerce company that provides C2C online sales services. eBays core business is its auction platform and shopping website through which people and businesses can buy and sell a large variety of products and services worldwide. The companys operations also include Buy It Now shopping services as well as enterprise services, online classified advertisements, online event ticket trading via StubHub.com as well as online payment provider PayPal, one of the leading online payment platforms worldwide. In September 2014, eBay announced plans to spin-off PayPal into an independent company. The split was completed in July 2015. (2014 - 21)

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AlibabaFoundedApril 4, 1999AboutAlibaba is the leading international Chinese Internet company. 24/7 meeting platform for suppliers and buyers around the world.DifferentiationPairs buyer with sellers where buyers are free and sellers payGlobal Net Revenue19$12.30 billionUsers4.4 million usersEmployees1934, 985Market Cap19204.46 billion

22Source: http://www.statista.com/topics/2187/alibaba-group/ 19Source: http://www.marketwatch.com/investing/Stock/BABA/profile?CountryCode=US

Affiliates?

AffiliatesTaobao Taobao Product ListingTaobao HomepageTmallTmall Product Detail

http://www.statista.com/topics/2187/alibaba-group/ (22)Alibaba is the leading international Chinese Internet company. The initial business model of Alibaba was a 24/7 meeting platform for suppliers and buyers around the world., where buyers use the site for free and sellers pay, Alibaba functions as a matchmaker and provides a cheap and efficient platform where sellers from all over the world in practise mostly China can find appropriate foreign buyers and visa versa From the start Alibaba did not just connect Chinese suppliers with international buyers, but it had the goal of connecting all importers and exporters around the world to each other. Alibabas international marketplace has over 4.4 million registered users from over 200 countries and territories. Its English language B2B website is accessed by suppliers and buyers from anywhere across the globe. Its membership base has always been communicating in English even before Alibaba arrived on the scene, so its non-English members were already used to communicating in a different language. In April 2008 Alibaba started a multi-year strategic partnership with Infomedia India Limited, a leading media company particularly strong in offline Yellow Pages and physical media.Mid May 2008 it announced a joint venture company: Alibaba.com Japan. The formation was made together with Softbank, a large and diverse Japanese telecommunications and media corporation. (11}

Although other B2B websites have always said You can not have a global company out of China, it makes no sense.

From the very beginning Alibaba was the first global Internet company emerging from China. says Porter. In 2000 Alibaba almost went bankrupt because they were too early and eager with rolling out their global strategy. A painful underestimation of the impact of cultural differences resulted in the decision to focus on the domestic Chinese market rather than going international.In order to succeed internationally Alibaba first needed to succeed domestically. Alibaba would not have survived without the domestic scale they could count on. Alibaba heavily relied on its suppliers in China.

In the fiscal year ending March 31, 2015, the Alibaba Groups annual revenue amounted to 76.2 billion yuan(approximately 12.3 billion U.S. dollars) with a net income of 24.32 billion yuan (3.73 billion U.S. dollars). The majority of group revenues are generated through its various e-commerce ventures with local e-commerce accounting for 83 percent of Alibabas income in 2014. As of the third quarter of 2015, the group generated an online shopping gross merchandise volume of 713 billion yuan through its online shopping properties Taobao Marketplace, Tmall and Juhuasuan; with the cumulative number of active online buyers across these properties amounting to 386 million.

The current digital buying penetration rate among internet users in China is 55.2 percent. The increasing usage of mobile internet has opened up the possibilities of mobile shopping for both consumers and e-tailers. Alibaba has seen a rapid growth of mobile usage on its online shopping properties with a 62 percent mobile share of gross merchandise volume, up from 36 percent in the previous year. The overall share of mobile shopping revenues was 61 percent as of the third quarter of 2015 with a 2.39 percent mobile conversion rate.

Alibaba also owns Chinas most popular online payment platform Alipay. According to 2013 industry figures, Alipay accounted for 48.7 percent of the local online payment market.

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JD.com FoundedOnline in September 1995About (12)Largest online direct sales company in China DifferentiationStrong supplier relationshipsGlobal Net Revenue1718.64 billionUser47.4 million active customer accounts (2013)Employees68,109Market Capitalization1740.86 billion

Source: http://www.marketwatch.com/investing/stock/ebay 21Source: http://www.marketwatch.com/investing/stock/jd/profile 1712Source:

Affiliates360 Buy Corp

JD.com is the the largest online direct sales company in China in terms of transaction volume with a market share in China of 54.3% in the second quarter of 2014, according to iResearch, a third-party market research firm.It has a nationwide fulfillment infrastructure and last-mile delivery network, staffed by their own employees, which supports both their online direct sales and their online marketplace businesses.JD.com has established strong relationships with their suppliers as they develop their online direct sales business. Leveraging their strengths, they launched their online marketplace business in 2010, which has allowed us to significantly expand our selection of products and services.The number of products they offer through their online direct sales and marketplace has grown from approximately 1.5 million stock keeping units, or SKUs, as of December 31, 2011 to approximately 7.2 million SKUs as of December 31, 2012 to approximately 25.7 million as of December 31, 2013. They had 12.5 million, 29.3 million and 47.4 million active customer accounts and fulfilled approximately 65.9 million, 193.8 million and 323.3 million orders in 2011, 2012 and 2013, respectively.As of June 30, 2014, JD.com operated 97 warehouses with an aggregate gross floor area of approximately 1.8 million square meters and 1,808 delivery stations and 715 pickup stations. As of June 30, 2014, their self-operated delivery network covered 1,780 counties and districts and their 211 program and next-day delivery program covered 111 and 622 counties and districts, respectively, across China. JD.com has 62,061 full-time employees as of July 31, 2014.

JD.com believes they provide consumers an enjoyable online retail experience. Through their content-rich and user-friendly website www.JD.com and mobile applications, JD.com offers a wide selection of authentic products at competitive prices which are delivered in a speedy and reliable manner. JD.com also offer convenient online and in-person payment options and comprehensive customer services. In order to have better control over fulfillment and to ensure customer satisfaction,

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Amazon AdvantageHow Amazon Earns Money in USThe main income is earned through:Fulfillment by Amazon productsAnnual fee (customers)RBC Mark Mahaney estimated that Prime membership was around $40 to $50 million. In 2016 it will be $85 millionOrder processing feePackage feeWeighing feeStorage Fees

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Amazon AdvantageHow Amazon Earns Money in USPrices differ based on volume and season \Prices differ based on the time storedStorage fee will increase at end of each year during Thanks giving or Christmas

Time Based Fees:

Season/Volume:

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Amazon Advantage

Amazon loses money on the cost of shipping

Amazon Shipping Costs

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Amazon AdvantageHow Amazon Achieves 2 Day Shipping173 large distribution center world wideIn 2012, Amazon bought Kiva systems which product intelligence robotsAmazon owns more than 30k kiva intelligence robots Called Amazon Robotics

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Amazon AdvantageAdaptation Strategy in ChinaOverseas online shopping platformsUsed the short and easy to remember domain name Z.cnOffer more categories and products to Chinese market in home pageFree shipping with a certain purchase amount No annual feeFast delivery usually 1-2 days to main cities

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Amazon AdvantageAmazons Advantages in ChinaAuthorized products No counterfeit items if sold by AmazonExperienced in logistical industryGood supply chain managementStrong brand reputation and awareness

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Amazon DisadvantageAmazon Marketing Problem in ChinaToo many competitors in China Taobao, JD.com, and other strong E-business companiesLack of government supportLimit products categories to satisfy all customer needsLess promotions in marketFree and fast shipping is not uniqueShipping cost is low in ChinaPrice is not competitive

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1700 RMB$270 DollarTaobao China

$299 DollarsAmazonUS

2680 RMB$425 Dollars AmazonChina

Amazon Disadvantage

Amazon Price Difference

Bose Quiet Comfort That is a difference of $155!

US price: $299Chinese official website or retail price : 2680 around 425Taobaos average price: 1800 around $285Taobao sellers usually buy products from a lower price country and then sell it to Chinese market to get huge price advantage.

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Amazon DisadvantageWhy Prices Are High in ChinaThe same product has different price in the world (Price Adaptation)Taobao sellers usually buy products at a lower price direct Sell it to the Chinese market at a discountAvoids taxes to Chinese government (Tax?Amazon does not have the same relationshipForced to list products the same price as the official priceAdditional government taxes and fees are imposed on product

Confirm

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Amazon DisadvantageAdditional Taxes and FeesDuty is around 10%Person purchase tax 17% Retail rent fee and other promotional fees Products sell more than 50% of original US price in ChinaAmazon is forced to sell products the same price as the official list price

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SolutionsPossible Solutions to Increase Amazon CompetitivenessMore freedom to third party to sell products on AmazonBuild better relationship to hot products (like Xiaomi phone)Increase the global shopping channel to increase products categoriesneed better handle and public relationship to customMore holiday promotions Single dayNew year

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Chinese Market ImportanceThe peak shopping day: Single day (China) VS Black Friday (US)Taobao sales was $14.25 Billion on Singles Day 2015Top 100 US retails sales was $4.47 Billion in Black FridayRetail store sales was $12.1 Billion on Thursday and Friday 2015Chinese is a huge potential market, and the number of E-commercial customers are still increasing

Source: http://www.reuters.com/article/2015/11/28/us-usa-holidayshopping-idUSKBN0TH0R020151128

Singles Day

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SolutionsHow to Increase Competitiveness in China A vast selection of products at competitive pricesHigh-quality international brands and exclusive productsFast delivery, convenient service

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Ecommerce FutureFuture Vision of E-marketingGoing mobile all the wayAppsLess good moves in the supply chainCentral price websiteCreate more base stations

Source: http://www.smartinsights.com/mobile-marketing/mobile-marketing-analytics/mobile-marketing-statistics/

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Questions?

Sources

Sources:1213http://www.smartinsights.com/mobile-marketing/mobile-marketing-analytics/mobile-marketing-statistics/http://www.reuters.com/article/2015/11/28/us-usa-holidayshopping-idUSKBN0TH0R020151128http://www.marketwatch.com/investing/stock/amzn/profile http://www.marketwatch.com/investing/stock/jd/profile http://www.statista.com/topics/2181/ebay/ http://www.marketwatch.com/investing/Stock/BABA/profile?CountryCode=US http://www.statista.com/topics/846/amazon/ http://www.marketwatch.com/investing/stock/ebay http://www.statista.com/topics/2187/alibaba-group/ http://beta.merriam-webster.com/dictionary/e-commerce

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Sources:http://www.miva.com/blog/the-history-of-ecommerce-how-did-it-all-beginhttp://www.ecommerce-land.com/history_ecommerce.htmlSource: http://www.statista.com/topics/871/online-shopping/Source: http://www.statista.com/topics/1007/e-commerce-in-china/Source: http://www.adweek.com/socialtimes/top-global-e-commerce-markets-and-trends-infographic/626303Source: http://projects.wsj.com/alibaba/Source: http://www.adweek.com/socialtimes/top-global-e-commerce-markets-and-trends-infographic/626303Source: http://www.statista.com/statistics/274709/worldwide-audience-reach-of-online-retail-and-auction-sites/http://www.remarkety.com/global-ecommerce-sales-trends-and-statistics-2015#Chttp://www.emarketer.com/Article/Worldwide-Ecommerce-Sales-Increase-Nearly-20-2014/1011039Source: http://www.reuters.com/article/2015/11/28/us-usa-holidayshopping-idUSKBN0TH0R020151128

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