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In 2016, more than 15% of the population will make purchases from abroad worth $85.76 billion and by 2020, more than a quarter of the population will shop digitally for foreign products, according to eMarketer in its first analysis of the consumer trend.

Cross-Border-Ecommerce-In-China-emarketer

The chart above in eMarketer’s brand new study represents buyers age 14 and up who have made at least one purchase from a foreign seller either directly through a foreign-based site or an intermediary at least once during the calendar year. Includes desktop/laptop, mobile and tablet purchases.

Last year’s intense growth is also attributable to Alibaba launching Tmall Global in 2014, and JD launching JD Worldwide in 2015, enabling overseas brands to sell their goods directly to digital shoppers in China. In addition, in some categories, such as infant products, consumers in China perceive overseas goods to be higher-quality and more trustworthy.

Cross-border buyers in China are expected to spend an average of $473.26 each this year on global goods, representing 4.2% of the total retail ecommerce market and will amount to a spend of $85.76 billion this year. 

 

Cross-Border-Ecommerce-In-China-emarketer change over time

The eMarketer forecasting analyst Shelleen Shum predicts shifts in platform use towards official and organized sellers.

“Furthermore, cross-border ecommerce goods sold via the business-to-consumer (B2C) channel are expected to take up a growing share of the total cross-border ecommerce market in 2016 as consumers shift to platforms that are more professional and organized. Since the merchants selling on these B2C platforms have to be authorized, they are considered more trustworthy.”

Rising  global brand.com cross-border ecommerce in China

More ‘professional and organized’ sellers? The article does not cite specifically what those disfavored platforms are (one can take a couple guesses) but with the current negative press around the proliferation of counterfeits on Alibaba, it’s probable that official brand.com webstores and non-marketplace models may see a spike in popularity as cross-border ecommerce in China booms.

Excerpts from eMarketer on June 14. Read full article here. 

By Felicia Moursalien

Alibaba is making aggressive moves to expand Alipay in Southeast Asia, expecting the payment platform that took Chinese ecommerce from the dark ages into the biggest ecommerce market in the world to sweep through the region similarly. We fully agree, and think his Lazada acquisition and the follow up planned 20% investment into Ascend Money are cunning moves to bring the trojan horse — Ant Finance (the parent group of Alipay) — into the ASEAN region. Yet despite many similarities, ecommerce in Southeast Asia is ultimately very different from China, especially when it comes to the adoption of a unifying payment system.

Cultural Revolution destroyed trust in China

Speaking at the recent Honour International Symposium 2016 in Singapore, Ma shares why Chinese culture, despite being one that traditionally valued trust and integrity, now lacks a system that enforces it. Some also argue that traditional Confucian values of trust were destroyed during the Cultural Revolution years. As a result, Alipay, a third-party escrow-based payment system similar to PayPal, was required to fill the trust gap and accelerate China’s ecommerce away from cash-on-delivery towards one that is seeing 68% of transactions from Alipay today.

But values are different in Southeast Asia

Contrast that with Southeast Asia, where for example in Thailand an estimated 33% of ecommerce gross merchandise value (GMV) is already going through small merchants on Facebook, Instagram, and Line. The transactions happening on these platforms are mainly done through the rudimentary bank transfer, with the user sending the money first and then the merchant shipping the goods after receiving the funds. Here, the essence of trust already established and critical to its continued growth and functionality.

This would be unlikely in Jack Ma’s world as he painfully reminisces why he had to built Alipay in China in the first place. Perhaps in a place like Thailand that never went through a Cultural Revolution and as a result was able to preserve traditional Confucian and Buddhist influences, Alipay may have to localize its product as people may not be that starved for an escrow service.

To watch the video of Jack Ma, a great visionary, and one that’s becoming increasingly influential in Southeast Asian ecommerce, see below.  We have also transcribed the entire video below. 

 

[ytp_video source=”n1s8I2xREZs”]

 

Note: errors and omissions may be due to translation. 

Greetings everyone!

It is a special honor to be invited to the symposium. However, due to work conflicts, I regret that I cannot attend and partake in the insightful discussions. However, I have a special interest in today’s topic and have many thoughts to share and discuss as well as to learn from you all. In this regard I would like to pay special thanks to the symposium organizers for allowing me the opportunity to show my video.

At first, I questioned both my English and Chinese language abilities as I could not precisely translate “honor” to Chinese. In the end, I was relieved when I learned many of you also had trouble translating the meaning of this word into Chinese. In fact, when you carefully consider the meaning of “honor” and the principles it embodies it has been ingrained in Chinese people for thousands of years and has also been deeply embedded in the “bones” of Chinese people around the world.

Chinese have long understood that in order to do things completely you must complete certain tasks first. As a first step, China took to thoroughly considering and understanding the meaning of compassion, justice, courtesy and wisdom before realizing the past two thousand years of glory, politics, culture, art, and economics. Each of these areas have been great achievements for China.

Over the past 800 years the rise in China’s GDP ranked first in the world. “The Analects of Confucius” is only 11,000 characters long, only taking the space of one page of a newspaper today, but this important literary work has influenced and guided China for 2,000 years. Similarly, today’s symposium represents a topic of equal importance because the next 2,000 years of human development also needs our influence and guidance.

I believe that Singapore has set an example for the Chinese-speaking world and I fully agree with the beliefs of the Singapore government.

This includes the level of development that it has achieved today and its international status but the most important factor is its steadfast commitment to “honor” and everything that it includes: respect, righteousness, integrity, responsibility, etc.

When I first started doing business, I asked my wife if she would rather have a husband that is rich or one that has values and is well respected? She replied, of course have values and be respected. Because at that time, most people did not believe I could make money.

…most people did not believe I could make money.”

In the past, I did not look highly on businessmen. Furthermore, I believed the societal value created by businessmen was very limited. However, after I had my own business, I realized that if you want to last long and be successful your daily considerations and analyses should have nothing to do with money. Decisions that are made related to money are not strategic. Instead, the decisions that aren’t made based on profit and instead made based on values are actually the truly strategic ones. Hence, I have always believed that a good finance director would not make a good chairman because a good finance director is always thinking about money. People that have money fully occupying their mind have difficulties in doing good things and have difficulty in being good friends.

I realized that if you want to last long and be successful your daily considerations and analyses should have nothing to do with money.

When Alibaba was founded, we were in a very difficult situation. We had nothing. Nobody believed in what we did. Everyone said we were crazy people or cheaters but what actually allowed us to survive? Was it money? In fact, we had no money. Was it resources? We had no resources. Was it human talent? In fact, our human talent all ran away when they saw our situation. In fact, what we had were our values. Our values included: customers first, team spirit, and integrity. And when you look at these areas they appear empty and worthless. When Alibaba first started, we were really poor. But we believed in the future development of the internet. We had a dream of creating a future. We had our own values for doing business.

We started out by helping Chinese foreign trade companies with their overseas orders, charging them annual fees. But after a year had passed, these companies’ transaction value did not even exceed their annual fees to us. Our staff felt heart broken and felt like they let their clients down. During the end of year’s visit, our staff spoke to them with honesty: Ecommerce will have a great future but results may not be instant. Perhaps you can get a refund and not sign up next year.’ What resulted instead was that our clients encouraged our young employees. “It takes time and training for foreign clients to migrate online. Your considerations of our business have earned our belief and trust.” There have been many similar companies and even from over ten years ago until now they remain Alibaba’s clients.

After ten plus years of building businesses, my most profound thought is that, as a businessman, the most important decision to determine a company’s destiny has nothing to do with money. Many people have asked me, “Jack why are you so capable Jack?” I said, in fact I’m not very capable, it’s just that we are lucky. Other people have said, “Jack, you are so lucky and succeed every time.” I don’t feel like this is the case. In fact, our success was due to right choices we made. Alibaba has grown to this point today because we made a few critical choices.

..my most profound thought is that, as a businessman, the most important decision to determine a company’s destiny has nothing to do with money.

The first case was in 2002 when the internet bubble burst, Alibaba had to survive. During that time the company was in a difficult situation but we set a goal of making $1 profit. At that time if we didn’t make any profit we would die and the most painful issue was in order to win website design business we had to offer bribes. So we held an all day meeting in Hangzhou. We understood that if we offered bribes we could survive but if we didn’t our company would likely die. I remember that day we met until 4pm and finally decided we would never offer bribes. We would rather close down the company. We would not operate without integrity. We would rather together find new jobs and continue to maintain integrity.

In 2002, because we maintained our integrity, we started to make a profit. After we started to make profit we discovered during our end of year review that two employees accounted for over 60% of the entire group’s sales. And we discovered these two employees were giving kickbacks, commissions, and bribes. So what should we do? If we fire them immediately, the company will not have profit. If we do not kick these two employees out then what does this say about us? It would imply that our words are empty so in the end we decided to let these two employees go. “Do not bribe”, this rule is written into Alibaba’s employee code of conduct. Employees that violate this rule are immediately expelled.

After Alibaba became a large company, bribes started to flow the other way around. We set new rules that forbid employees to take bribes. We have billions worth of procurement contracts every year. In our contracts we include this sentence: “Thank you for doing business with us. We hope that in our future business interactions our employees cannot ask for bribes and you will not offer us bribes. If we discover any such related problems, our group will never do business with you.” This is written in our contracts.

Today, Alibaba employees are well respected in the community. This isn’t because our business has grown large but rather the result of the many codes of conduct our employees follow. In many places, our employees are warmly welcomed. But our employees are not allowed to accept free car rides or meals. Small gifts, even a piece of candy is sent back. Otherwise the employee’s value score will be very low, and even be subject to penalties.

There was one time when I sat in a salesperson training session. The training instructor was speaking about how to sell hair combs to monks. After listening for five minutes, I got extremely angry and expelled the instructor. I thought the instructor was a cheater because monks do not need combs in the first place. So to sell a product to a client that doesn’t need it is deceptive and not skill-based sales. This practice was a significant challenge to our values.

Enter Alipay in China

The second choice we made at Alibaba was Alipay. As soon as we launched Taobao it quickly became very popular. However, many users communicated online without transactions actually occurring due to the lack of trust between strangers.

People were not willing to provide payment in advance and no one was willing to ship merchandise first. Our biggest problem was to solve this transaction problem.

That year I participated in the World Economic Forum meetings in Davos with the intent to find a solution to this problem. Instead, I discovered that all the businessmen were discussing corporate social responsibility. During my time at Davos, I suddenly realized that if we wanted to develop e-commerce in China, we needed to do something that had true value, something that would promote societal development. Without it we will never succeed. To do something like this requires tremendous responsibility. Without it, we will not be able to get anything done.

The lack of development in China’s eccommerce was due to one missing piece—a mechanism that could facilitate trust between people.

I believe that Alipay is the mechanism that can fulfill this gap. That same night at Davos, I called my friends and colleagues. I said, “Immediately, right now. Let’s create this product, let’s launch Alipay.” I understand the regulatory risks associated with creating Alipay in China, and if someone needs to go to jail for this product, I will go.

China is a country that has valued credibility and integrity. Confucius has said, “every day, I self-reflect on three issues.” During ancient times people self-reflected on three issues a day, two of these three issues are related to sincerity and honesty: did I try my best in helping others and did I keep my word when engaging with friends. Chinese value credibility but lacks a system of trust. If Alipay wants to have value in China it must establish a trust system.

Today, Alibaba has built a trust system in China: users provide reviews, Alipay facilities transactions, and all the actions taken on our platform is data which helps inform credibility and credit ratings.

Only with this system, would it be possible for users to send strangers money and merchandise solely based on a picture and a few sentences posted online.

Today, we have millions of daily visitors on our site. Sometimes an order can represent a diamond worth several hundred thousands or a car worth millions. A few days ago, we sold 100 Mercedes-Benz in only 25 seconds. As a result, without this trust system, these transactions would be nearly impossible. What makes us most proud today is not how many products we sold but rather the trust system Alibaba has built. We proved to everyone in a commercial manner how much trust is worth. We built a system of trust. We are also a beneficiary of the system. This system provides the foundation for Alibaba to achieve $500 billion in sales during our fiscal year. The power of honor is tremendous.

If the past 30 years of China’s development relied on its advantage in population size and the relatively low price of labor. Then in the coming years China should not look to rely on having cheaper products but instead rely on the trust or honor between people. If there is a significant human potential that has not been realized I believe mutual trust and credibility is the biggest undiscovered fortune. Only when we pay attention and care about “honor” will we “honor” ourselves. I believe it is only then that we can earn other people’s “honor.”

Many thanks to the symposium organizers for inviting me, and I am very sorry that I was not able to be here personally for the meetings. Congratulations to everyone here. Thank you all!

By Sheji Ho

Please share your feedback to @ecomIQ and @sheji_acommerce

supply chain challenges in Southeast Asia reached a turning point

Source: Reuters, Ralph D. Freso

The supply chain challenges in Southeast Asia have reached a turning point owing to the scarcity of supply chain professionals, increased consumer diversity and fragmented supply chains. Transforming supply chains to reach market potential is a mammoth task but it can become a source of competitive advantage and drive global growth for businesses.

The many layers of suppliers, localized delivery and route to consumer practices, and lack of transparency and consistency in information flows make it incredibly difficult for businesses to achieve the next wave of global growth but also positions global businesses to capitalize on growing demand in these markets. For most companies the potential is clear; the challenge is how to address it.

As companies move their factories from China to Southeast Asia due to rising labor costs and the move away from an export-based economy, they should grasp the opportunity to carry out a full supply chain review to identify how they should configure their supply chains better.

Accelerate the supply chain transformation with best practice

Bringing best practice into the strategy from elsewhere can accelerate the transformation. Labor remain a big challenge for this relatively young region for the manufacturing industry meaning there is limited supply chain knowledge and a lack of experienced professionals and high staff turnover as employees are quick to leave for even marginally higher wages.

To capture the full potential in Southeast Asia, it is best to establish a physical presence and subsequently localize knowledge and skills.

This can be done by setting up R&D centers or developing region specific leadership and training programs. Coupled with a long-term focus on developing local supply chain knowledge and people capabilities, it can ensure a successful transformation.

A version of this appeared in Supply Chain Digital on June 20. Read the full article here.

Baidu expands mapping service

Source: theworldofchinese.com

Baidu officially launched its travel mapping app, Baidu Map, for outbound Chinese tourists. Baidu Map is available in Mandarin Chinese and Thai. It offers maps of Thailand’s tourist attractions, restaurants and hotels for a combined 17,000 places.

“Thailand is a strategic country as it is the most popular for Chinese travelers,” said Richard Lee, Director of the International Business Development department at Baidu Inc. TAT governor Yuthasak Supasorn comments,

The number of Chinese tourists visiting Thailand is expected to reach 10 million this year, an increase from 8 million in 2015 generating 509 billion baht in revenue, up 35%

Following the surge in mobile internet usage in Southeast Asia, Baidu is adapting its expansion strategy shifting from PC-based to mobile-based services. Using Chinese tourists in Thailand as leverage, Baidu is stepping into Southeast Asia’s promising market.

Baidu Map has more than 500 million active users around the world and global searches on Baidu, the most popular search engine in China, number 10 billion a day.

Mr Lee said Baidu has 7 million monthly active users in Thailand after its inception four years ago and the company has already introduced six local mobile apps in Thailand.

In the longer term, Baidu plans to roll out its mapping service in 18 countries in Asia Pacific by tapping into the growing mapping demand from Chinese tourists traveling overseas.

A version of this appeared in Bangkok Post on June 14. Read the full article here

One Belt One Road

Map of One Belt One Road. Source: Chinainvestmentresearch.org

HSBC’s Asia Pacific Chief Executive, Peter WongTung-shun has stated that the ‘One Belt One Road’ trade initiative will require the banking sector in the region to raise up to US$6 trillion of funding over the next 15 years. This is because no single government is able to raise a large sum of money without help from the banking sector.

The ‘One Belt One Road’ project was announced in Beijing in 2013, and aims to establish linkage between mainland China to India, the Middle East and Southeast Asia to promote cross-border trade.

The project leads have already visited Thailand and Malaysia in May to explore opportunities, and plans to visit Indonesia and Singapore next month to analyze the market potential there. The aim of the project is to serve governments, international firms and SMEs and boost logistics for these businesses. The new infrastructure should also provide trade linkages between the countries, which could then lead to the internationalization of the yuan currency.

One Belt One Road Ecommerce Potential

Alibaba founder, Jack Ma has expressed his interest in following the One Belt One Road initiative announcing that the most important regions for his company were countries involved. This aligns with Ma’s aspirations for SMEs to have access to global markets, but are held back by complex regulations, poor global access and lack of access to financing.

The potential for an inter-connected e-road will boost SMEs and potentially fix one of Southeast Asia’s biggest ecommerce bottlenecks; logistics and infrastructure weaknesses. Countries in the One Belt One Road path have large populations, but they are not utilizing their trade potential, and Ma has slowly been penetrating needy markets such as Thailand, investing in online payments and acquiring Lazada. If One Belt One Road receives the funding it requires to fully enable trade along the regions, then it could create even more opportunities for The Alibaba Group, ultimately enabling ecommerce as a whole.

A version of this appeared in South China Morning Post on June 19. Read the full article here.

WeChat is struggling in countries beyond China. Despite global ambitions since 2013, investing in big scale marketing strategies such as signing up soccer star Lionel Messi and infiltrating India, and differentiating themselves from Whatsapp, the global push has not amounted to much.

“The network effects of chat apps like WhatsApp and WeChat is what drives adoption; if your friends are users of a particular chat client, you’re more likely to use that client to stay in touch with them,” says Sarah Matthews, associate content marketing manager at US-based Jana, makers of an Android app store aimed at emerging markets.

This means that in Thailand, the majority of people use LINE and Whatsapp, and BBM one of the most popular chat apps in Indonesia. What also hinders Wechat’s growth is ‘The Facebook Trifecta’, consisting of Whatsapp, Facebook and Facebook Messenger. This applies to India, as they are the top picks for communication methods right now. Wechat is also trailing behind The Facebook Trifecta in Hong Kong, Singapore, Philippines and Mexico, all the countries Wechat was aiming at.

They have to go back to the drawing board to figure out the next step for global expansion, if the trifecta can be beaten, that is.

Read the full article from Techinasia here