Suning- Successful eCommerce sample in China

One of the biggest "3C" (Computer, communication and consumer-electronics) retailers in China, Suning Applicances operates more than 1,700 chain stores, with one seemingly on every street corner of Mainland China. In recent survey, Suning was named as one of the top three private enterprises in China (the others being steelmaker Jiangsu Shagang and Huawei Technologies). With Continued expansion into overseas markets and further acquisition, Suning is poised to become China's answer to Best Buy, the well-known US consumer electronics retailer.

With e-commerce booming in China, Suning has been working to dramatically expand its business-to-consumer (B2C) online store, and the move has given Suning a boost both in terms of its market positioning and also its financial results.

With the brand of “Suning E-go” online store, bulk purchase, and brand advantages, Suning Appliance shares the network of entity stores, logistics and distribution, as well as after-sales service. It accelerates building a high-level online purchasing platform and creates the largest and most professional platform for 3C and consumer online purchasing, thus providing current 200 million Chinese online consumers with the most satisfactory shopping experience of 3C, consumer electronics, Office Automatic, Internet applications, home appliances, major appliances, books and general merchandise commodities.

Situation of E-Commerce in China

With the rapid development of the Internet, Ecommerce attracts more and more attention and becomes a focus as a business body engaged in the production and operation mode. Although the specific conditions of different countries based on the forecast of world economic development, governments are all paying more attention to the development of E-commerce. Ecommerce has become a new driving force for economic growth.

Businesses of all sizes in all sectors are using the Internet in many different ways - to work with partners and suppliers, for procurement, for internal activities such as knowledge sharing and new product development, and much more. E-commerce in general can be divided into Business-to-Business and Business to-Consumer. Besides, there is also Consumer-to Consumer, which is a fast developing pattern.

In recent years, China has set off an upsurge of Ecommerce, our daily time more or less have the relations with it. According to CNNIC (China Internet Network

Information Center) report, as of June 30, 2006, the number of Internet users in China reached 123 million, ranks second in the world. The number of shopping on the Internet has reached to 30 million, and the proportion of paying on the net has been increasing annually. Experts believe that the risen trends of the number of the Internet users and the people shopping on the net will make the Internet Shopping Mall into a new round of business battleground. Since 2000, the domestic Ecommerce transactions on the site once reached 100. As it is known, there are eBay, Yabuy, Coolbid, and so on. But with the bursting of the bubble economy, most sites have been eliminated. Through constantly enriching its contents and services, Taobao gradually makes itself a well-known E-commerce website and becomes the leader who exceeded eBay in one short year’s time.

Chinese eCommerce- DangDang

Dangdang was established as an online book retailer in 1999 and has gradually evolved into one of the biggest B2C e-commerce companies in China. Dangdang was co-founded by the entrepreneur couple Ms Peggy Yu Yu and Mr Guoqing Li, who is a serial entrepreneur and a veteran in China’s publishing industry. Both co-founders have 10-plus years dedicated experience in the publishing industry and strong entrepreneurship. Dangdang is a leading pure-play B2C e-commerce company in China with an approximate market share of 9%, according to iResearch. We expect that Dangdang is the largest Chinese language online book retailer, in terms of online book sales revenue, and offers 590,000 plus book titles. In 2009, Dangdang had 6 mn active customers and 1.24 mn average daily UV on dangdang.com with 100,000 plus orders (warehouse capacity of 160,000) per day. In the book business, Dangdang has an exclusive partnership with >1,000 suppliers and rights to pre-sell bestsellers.

Apart from media and books, Dangdang is also one of the biggest online malls in China offering general merchandise products and a marketplace for merchants. It has proven self-built fulfilment and third-party delivery capabilities with nationwide coverage.

Key company milestones:

■ November 1999 – Dangdang.com was established

■ February 2000 – First round of venture capital funding

■ June 2001 – Launched online media store

■ February 2004 – Second round of VC funding, including US$11 mn from Tiger Global

■ April 2004 – Started offering GM products

■ July 2004 – Refused merger request from Amazon

■ July 2006 – Third round of VC funding, including US$27 mn from DCM, Walden

International and Alto Global

■ September 2006 – Rolled out mobile payment service

■ June 2008 – Starts new membership loyalty program

■ October 2008 – New homepage to promote general shopping platform image

■ September 2009 – Become the first e-commerce company providing mobile purchase services

Although the China e-commerce market remains a small portion of the overall retail market, its explosive growth power and behavioral-changing impact on the vast numbers of Chinese consumers allow no negligence.

Based on the CS China strategist team’s forecast (please refer to the China in 2015 report dated 1 January 2011), China’s private consumption will reach Rmb31,400 bn by 2015 (US$5,924 bn), which would be larger than any single country except the US. Different from developed markets, China’s consumer market is huge in volume terms whereas overall market size is capped due to much lower ASPs. However, this is, in fact, greatly beneficial to the emergence and fast growth of the e-commerce sector and online shopper community, as competitive pricing, unbeatable width and depth of product offerings and unique deliver-to-your-door logistics services are intrinsic features of the business segment. Meanwhile, it’s difficult for incumbent traditional retailers to catch up with these aspects, partly due to distinct business backend infrastructure and partly the nature of the business model, e.g., limited in-store product stocking and displays for traditional retailers.

By 2010, we estimate the total gross merchandise value (GMV) for the B2C e-commerce market will reach US$73.5 bn and could shoot up to US$253 bn by 2015, potentially larger than that of the US. Currently, only 13% of the gross merchandise value (GMV) generated is from B2C transactions while the majority still comes from C2C. We expect ecommerce (excluding B2B sales) to rise from 3% of retail sales now to 7% by 2015E. Also, we estimate e-commerce users will grow from 170 mn to 426 mn by 2015E, with ~50% of which being B2C online shoppers and penetrating one third of netizens.

As in the US, books are one of the earliest and well-recognised product categories in

e-commerce due to a standardised product format and simple logistic requirement. From a

survey by iResearch, the book and media category has the second-most frequently bought

products online, after apparel. While apparel takes a predominant 36% of market share as

the biggest category, books and media contribute 15% to overall e-commerce market

transactions in 2009 in China.

Chinese eCommerce Success-Tmall

Tmall.com is the primary choice of Chinese online consumers becomes an all-in-one and full-featured ecommerce platform. China’s strongest leader Tmall operates it’s services in China, Hong Kong, Maccau , Taiwan by Alibaba Group. It is a major platform for local Chinese and international businesses to sell 100% genuine goods, premium quality & brand, high-Speed delivery , Product assurance and guarantee of returns to consumers in mainland China. The Giant online shopping platform “Tmall” made record with 2.85 Million transactions per minute in 2014 has been documented 3 times growth than last year. Total sales on No 11, 2014 was 57.11 billion RMB ( among which 24.33 billion RMB is from mobile end).

Tmall is appropriately named, a vast collection of individual stores in one place and empower the vendor in building loyalty, and providing full transparency to it’s consumer as well as brand premiumness. Tmall make an ever-more compelling case for China online sales than a stand-alone website.

Tmall Store Format

Tmall has 3 different store format :

Why Tmall?

From Merchants point of view

-Tmall allows local merchants or retailers to present products

-Brands have opportunities to promote their products through largest online platform where 80% of Chinese buyers buy products

-Merchants get opportunity to promote their products in Tmall official promotional campaigns, double 11 etc.

-Merchants will have access to transaction management, promotional management, logistics tools, products released, shop decoration and management, customer service management etc.

-Highly satisfied store will get competitive store rates from shoppers depending on the product quality, delivery speed, efficiency of store or customer service etc.

Customer’s experience on Tmall

-Tmall gives facility to it’s buyers to ship orders within 72 hrs after placing orders.

-Buyers will have full opportunity to return the product & get refund within 7 days of receiving products

-Shoppers can search products and get competitive result related to the search

-Users can have complete information of products in the detail page and can communicate with Tmall customer team

-Buyers get facilities to pay through their own Alipay account

CHINESE E-COMMERCE MARKET WITHOUT LEGAL RED TAPE

At the end of last year, the Alibaba Group launched its new platform: Tmall Global that enables foreign businesses to directly sell goods to Chinese online shoppers. Allowing them to save some time and money by avoiding legal regulations difficulties since foreign merchants doesn’t have to have a real presence in China.

The Tmall Global is the international version of Tmall part of Alibaba’s International B2C Department. The new website ensures Chinese online shoppers that they are purchasing internal goods which quality is guaranteed and from foreign companies only, with facilities of domestic return.

As Tmall in mainland China takes a 2% to 5% commission per transaction, Tmall Global will apply a 3% to 6% charge on each sale. The fee applied for consumer protection on Tmall Global will be 25,000USD, a lot more expensive than the one required fot the mainland China Tmallthat is between 30,000rmb to 150,000rmb, however this fee is applied just once. As for the yearly technical maintenance fee it will also be more expensive for overseas merchants on Tmall Global than for domestic merchants on Tmall with 5,000USD or 10,000USD for the first one and 30,000rmb to 150,000rmb for the second one.  Foreign merchants therefore have to support more charges than the domestic ones. However this balances with the fact that they will save time and money not having to register their brand in mainland China.

Alibaba found the perfect compromise between the growing demand of Chinese online shoppers to buy quality international goods and the will of overseas businesses to sell directly to the huge Chinese consumers without having to register in China. Since the opening of Tmall Global, More than 140 foreign companies already opened an online shop on the platform.

Chinese eCommerce Success- VANCL

VANCL is a leading Chinese internet-based apparel retailer. Though a market leader in China, VANCL remains largely unknown in the outside world. There are several reasons for digital marketers and other eCommerce observers to take note of VANCL: VANCL will receive a multi-billion dollar IPO on the NASDAQ within the next 24 months. VANCL currently ships to over 80 countries globally and is likely to emerge as a global apparel and internet competitor over the next two to five years• VANCL’s product and marketing strategies are highly innovative and provide valuable case studies for other e-retailers. To date, much of what is written about VANCL is in Chinese, and much of this material omits important aspects of VANCL’s business model and operations. The following presentation draws together public research and comment to provide the English language reader with an “advanced primer” on VANCL and the Chinese market. It should be of use to digital marketers, electronic retailers and financial analysts beginning coverage of the firm.

•VANCL is the 5th largest online B2C retailer in China

•VANCL took advantage of China’s unusual combination of high internet penetration and low concentration in the retail industry to reach a large customer base and grow rapidly

•Launching in 2007, VANCL grew sales to RMB 6 billion (~US$900) in 2011

•Initially offering low cost T-shirts and men’s shirts, VANCL rapidly expanded its product range to cover most aspects of men’s and women’s wear, competing in a niche similar to global brands such as H&M and GAP

•VANCL’s marketing is large scale, innovative and sometimes controversial

- VANCL invested ~$158M in marketing in 2011; equivalent to >15% of net sales (versus 3.5% typical of most apparel retailers)

- VANCL has achieved wide-spread awareness using innovative digital campaigns combining celebrity, viral seeding and social “curation”

- In 2011, VANCL also became a leader in the emerging field of “social commerce” by enlisting fans to act as micro-store managers as part of the “VANCL Star” campaign

- However, using the images of political leaders in their marketing and associating the brand with a foreign “adult video” actress has given the brand some degree of infamy

•VANCL’s profitability remains unclear

- Rumours persist that the business has been loss

-making since launch

- Logistical errors in 2011 caused inventories to grow out of control

- Several additional tranches of VC funding has been required and a planned 2011 IPO has been postponed VANCL could yet be either another “Boo.com”

- or an apparel-based “Amazon”

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To create a marketplace as soon as possible, Chen Nian spares no effort and even doesn’t bother with getting in complimentary products. Instead he encourages his staff to compete head on with other brands. ‘You can’t get competitiveness behind closed doors, for those Vancl products that can’t survive after (we) introduced outside brands, then your products should die.’ Chen said.

Vancl also channel its traffic to 3rd party brands.

June 18 is the anniversary of JD, China’s No. 2 B2C e-commerce platform but has become a regular promo date for e-commerce marketplaces since 2011. Suning, Dangdang, 51buy and TMall all joined the price war last year but Vancl has been too busy looking after itself to participate. However for this year, Vancl moved ahead of all other parties by starting off its largest promotion in June 5. On Vancl site, both its own brand and 3rd party brands are given the same prominence, a layout that can bring 1/3 of total traffic to 3rd party brands.

Later on, Vancl masterminded Huang Xiaoming’s (actor) ‘Hold-on style’, Li Yuchun’s (singer) ‘Born in 1984’ and Han Han’s ‘Spring style’, all become sensational overnight through word of mouth, viral marketing and spokesperson marketing.

Chen once famously said in an interview that he owes his success in a red ocean market to achieving a balance with brand, product and distribution channel. The question is, by switching to marketplace model and subsequently diluting the brand and product line, will he find another secret formula for success? For many, opening up the site to 3rd party brands will damage Vancl’s self-made image as ‘people’s fashion’ and kill its biggest advantage.

However if Vancl succeeds in turning itself around, we will have another e-commerce marketplace to choose from to set up online store in China.

Chinese eCommerce Success-JingDong

JingDong is one of the largest comprehensive online retailer in China. Its products cover 12 main categories with tens of thousands of brands, main products including home electronic appliances, digital/communications, computer, household articles, clothing, maternal and baby care products, books, food and tourism products.

eCommerce is almost all about emarketplaces in China . JD.com dominates the Home Appliance & Consumer Electronics categories in China. 70% of JD’s business revolve around them buying products from brands and selling it themselves on their platform. Purchasing by JD.com is done on a case by case basis.

JingDong(JD) is like an E “Walmart” supermarket. JD has been distinguished themselves providing best user experience, fast delivery, better customer service & after sales service to the merchants and leverage consumers with convenient shopping experience.

But it is reported that Jingdong’s information management system was developed by the company itself in 2008. The system’s handling capacity is capped at 100,000 orders every day. Now Jingdong Mall has a daily order record of 260,000. Its IT system is facing severe challenges. In addition,  Jingdong Mall has no ability to provide cloud services.

It is questionable that Jingdong Mall, like Amazon, will continuously expand its business and introduce electronic reader, digital shop, stream media and other services. It was reported that Jingdong Mall has plans to develop its own product. But it will not be hardware, but crops like rice (Jingdong Rice).