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Not many companies can say they are growing faster than the country’s expansion but Jing Dong Mall or JD.com, one of China’s most well known online retailers, is growing at almost 40% year on year. The B2C company can also add the following achievements under its belt: Fortune Global 500 member, biggest competitor to Alibaba’s Tmall and last year, acquired Wal-Mart’s Chinese division, Yihaodian.

Louis Li, the Deputy General Manager of JD Worldwide, wants to let the world know that China’s market is still maturing and open for business.

It’s hard for industry businesses to forget about China when the superpower has overtaken the US in total online spend at $752 billion in 2016, see fig below, and expected to grow 20% annually by 2020.

What are some important factors brands and retailers need to consider before selling to consumers in China’s red ocean? eIQ speaks to Louis about his views at Last Mile Fulfillment Asia.

Be the little guy

“Even if you’re big overseas, don’t assume the Chinese will know who you are and what you offer,” comments Louis.

“Be prepared to do what the smaller brands have to do to become familiar.”

This means dedicating resources to consumer education about what your business can offer and rigorous content marketing on the right platforms. This also means legwork to build a trustable name from scratch no matter how big you are elsewhere.

The channels are different

“Unlike the West, the Chinese don’t use Google, Youtube or Facebook,” comments Louis. “Companies will need to find the right tools to do marketing.”

Some of China’s most popular platforms are Mobile QQ and Tencent’s WeChat, the country’s largest chatting app that also facilitates payments, taxi-hailing, news services, food delivery and much more.

The platform boasts over 800 million users and has welcomed notable brands such as Coach, Chanel, Burberry and Apple onboard who share promotions, support followers and run sales campaigns.

JD and Tencent formed a strategic partnership in May 2016 to share big data with brands to reach more niche customers versus general sweeping TV or newspaper ads.

Source: eMarketer

Through a WeChat campaign during Chinese New Year last year, JD was able to increase Japanese skincare SK-II brand followers by 20,000.

Knowledgeable customer service reps

It’s understood that strong customer support is vital to any successful business. Louis suggests automating as much of the general inquiries as possible, for example a chatbot answering common questions such as “where can I track my package? How can I get a refund?“

A few other pointers to keep in mind when serving the Chinese consumer:

  • 73% of consumers would expand their purchases with a merchant by 10% if the merchant delivered superior customer experience
  • If they already provided their telephone number and credit card information online, they do not expect to have to provide the same information again
  • Chinese consumers like to share online and expect to be heard, the reply of the company can determine their repurchase rate
  • 86% of consumers are willing to pay more for a better customer experience

*Source: Deloitte’s “Delivering Superior Customer Experience in China”

Invest heavily or drown in the red ocean

Ecommerce in China is extremely competitive, much more than other markets, so companies should be ready to allocate resources to a team and to logistics to ensure products are delivered quickly to the end customer – especially the Chinese consumer who already has expectations.

“If you promise people to deliver same day, people will more likely buy,” says Louis. “Our people will literally cross rivers and climb mountains to get the package to the end customer.”

In 2016, JD fulfilled a total of 1.6 billion orders through its own extensive logistics network: 256 warehouses covering 5.6 million m2 and 6,906 delivery and pickup stations in China.

China’s cross-border future

By 2020, a quarter of the country’s population will be shopping either directly on foreign-based sites or through third parties. Online consumption already accounted for 13.5% of all retail spending in the country in 2016 and consumers in low-tier cities are outspending those in high-tier cities online.

The demand for goods exists. The demand for goods in Southeast Asia also exists and is strong. Not only do Chinese consumers want Thai consumer goods such as fresh fruits, the amount of trade between China and Cambodia has taken off since 2012.

Source: Bloomberg

The more online retailers, the better growth for China’s economy and its citizens is how Louis sees it.

“Ecommerce helps consumers,” says Louis. “The farmer in China’s outer provinces would never have been able to get their hands on an iPhone 7 until now.”

Forget about China? I doubt anyone will any time soon.

By: Cynthia Luo

Before you start your Wednesday evening, here’s a round up of what you should know:

 

1. Baidu sets up $3b fund to throw money at later-stage startups

Baidu Capital will focus on mid- and later-stage startups, with most rounds being in the range of US$50 to 100 million, said the firm today in an announcement. The funding will either be in US dollars or Chinese yuan. Read the rest of the story here.

 

2. Macy’s plans to launch an ecommerce site in China in 2017

 Macy’s Inc. says it will launch a Chinese e-retail site in 2017 in order to increase its digital presence in the world’s largest e-commerce market. The department store chain announced the plan in Shanghai. Alibaba says Macy’s has become one of the most popular sellers on Tmall Global where Macy’s sells 1,500 fashion products. Read the rest of the story here.

3.  Amazon and Google plan to become more involved with physical stores

Amazon is planning to set up drive-through click and collect locations. Meanwhile, Google will be opening a “Made By Google” pop-up store on New York’s Spring Street in just over a week’s time, on 20 October. Read the rest of the story here.

Zhongan Online P&C Insurance Co., with more than 400 million customers, is targeting an initial public offering in the next 12 to 18 months, reports Bloomberg.

The company is currently eyeing listing in Hong Kong, but it is also considering holding the IPO in the US, according to CFO John Bi. Zhongan is also considering holding a pre-IPO private funding round to attract global investors and provide strategic value to its insurance business.

Backed by Chinese giants Ant Financial and Tencent Holdings Ltd., Zhongan works with internet companies to provide policies for China’s younger users in the automotive, health care and online shopping sectors.

Zhongan operates in an online insurance market that is expected to reach $300 billion by 2025.

Zhongan focuses on users who are used to simple procedures when shopping online and have no patience to fill in traditional insurance application forms. This kind of method makes it perfectly suitable for younger insurance buyers.

Ant Financial, formally known as Zhejiang Ant Small & Micro Financial Services Group, is Zhongan’s largest shareholder with a 16% stake. Tencent and Ping An each hold 12% stakes.

Zhongan’s flagship product is one that allow merchants who sell on Alibaba Group Holding Ltd. cover shipping losses when customers return goods, ranging anywhere from 10 to 100 yuan, depending on the performance history of the seller.

 A version of this appeared in Bloomberg on August 29. Read the full version here

Tencent, China’s biggest online entertainment and social network company, has reported a 47% jump in second-quarter profits, reports The Wall Street Journal. Tencent is best known globally for WeChat, the messaging app that dominates the local Chinese market.

Net income for the quarter stood at $1.6 billion (10.9 billion yuan), which beat analysts’ expectations. Revenue for Tencent grew at its fastest rate in more than three years.

The company’s revenue from mobile games more than doubled, contributing to a large boost in revenue growth.

Tencent is in the midst of completing its acquisition of Finlanad’s Supercell Oy, the maker of the popular ‘Clash of Clans’ mobile game, with the goal of increasing the company’s presence in the global market.

In June, Tencent announced that the deal with Supercell is structured in a way that Supercell wouldn’t be consolidated in Tencent’s earnings. The Chinese company would instead reap any financial gains as a stakeholder through the consortium that owns Supercell.

Tencent Q2 Report Highlights 

Tencent generates roughly half its revenue from games distributed through its two major social platforms and its own app store. Tencent’s revenue from smartphone games also more than doubled. 80% revenue was generated on a mobile platform in the Chinese market where Tencent dominates.

  • Capital expenditure was RMB1,505 million, down 47% YoY
  • Free cash flow was RMB9,748 million, up 80% YoY
  • Share-based compensation was RMB862 million, up 31% YoY

Out of China’s three internet titans, the online gaming and social media company Tencent is the biggest, but also the least known in the West. However, it has not attracted the same global attention as Jack Ma’s Alibaba, and Baidu, the Chinese equivalent of Google.

A version of this appeared in The Wall Street Journal on August 17. Read the full version here or download the Q2 results here

JD.com, Alibaba’s ecommerce rival in China, is targeting profitability after reporting its Q2 2016 earnings, reports Tech Crunch. The earnings were on target with expectations, but saw revenue growth continue to flatten.

JD.com was made a Fortune 500 company in June, and is posting rising revenues. According to Tech Crunch, JD.com’s growth rate is slowing in line with recent media headlines that suggests China’s economy is slowing down.

 The company’s rate of growth is slowing in line with reports in the media that Chinese consumers are spending less as the economy slows, but more consumers are moving online.

This is impacting companies across the board and placing a larger emphasis on overseas growth. JD.com is currently courting global brands with intentions to reach Chinese consumers through its online platform.

JD.com announced net revenue of $9.8 bn for the three-month period, down to 42% y-o-y from 47.3% last quarter.

The company is predicting that the next quarter will continue to see slowing growth.

JD.com, which has over 100,000 merchants on its platform, and a 79% order rate from mobile, has stated that it was making a push to become profitable. It posted a net loss of $19.9 million for Q2, which is a big improvement from the $76.8 million loss in the previous year.

GMV, the total amount of sales on its platform grew 47% to reach $24.1 bn in Q2 2016.

JD Q2 Earnings, JD.com Q2 Report 2016

Source: JD.com

Although up from $19 billion in the previous quarter, the rate of growth is slowing. GMV in Q1 was up 55% annually, compared to the reported 47% growth for this quarter.

“With our reputation for high-quality online shopping and same-day delivery already cemented with Chinese consumers, we are taking steps to further extend that advantage through efforts like our new strategic alliance with Walmart and Chinese online supermarket Yihaodian,” said Richard Liu, JD.com CEO.

JD.com’s move to acquire Yihaodian (Walmart’s Chinese ecommerce business) in June will boost the company’s grocery and delivery business.

A version of this appeared in Tech Crunch on Aug 10. Read the full version here or find the official JD report here.

JD.com holds annual sale

JD’s record breaking sales Source: gbtimes.com

JD.com, one of the largest Chinese online retailers and Alibaba competitor, announced that the company generated 100 million orders on its annual one-day sale in  June, according to Internet Retailer. This marked a 60% increase compared to the same sale last year.

12x Spike in Foreign Brands in Chinese Ecommerce Sale

Foreign brands contributed to this surge, as sales within JD.com’s section for foreign-brand items were 12 times greater than last year’s sale. Sales on Apple smartphones, Lenovo laptops, Beats headphones,and Nestle food products were all comparatively greater than China-based brands in their respective categories. This stems from Chinese consumers’ growing desire for foreign-made goods amid concerns about quality and safety standards. 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. More than 60% of Chinese consumers would pay more for products made in the U.S. rather than China, according to The Boston Consulting Group.

Sales on Apple, Lenovo, Beats and Nestle food products were all greater than its Chinese counterparts. This stems from Chinese consumers’ growing desire for foreign-made goods amid concerns about quality and safety standards.

Sales days to generate online retail business during off season.

Online retailers around the world are offering one-day summer sales in order to generate business during the off season. Companies such as JD.com and Amazon note their highest sales during the winter holiday season. Amazon had its first Prime Day in July 2015 and generated 18% more sales than it did on Black Friday in 2014, reports Fortune.

This is also happening in Southeast Asia. More than 130 ecommerce sites in Indonesia are joining forces to hold the three-days promotions called Harbolnas (National Online Shopping Day) where the transactions recorded is up to $158 million (Rp 2.1 billion).

More online retailers could host these types of one-day promotions in order to generate off-season sales and increase brand awareness before the winter holiday season.

By Rara Kinasih