Get a demo Do I subscribe? News sign-up
Print

Chinese e-commerce shifts tack

News, 23 December 2015

HONG KONG: Chinese e-commerce platforms are moving away from being pure online players to invest in bricks and mortar while also becoming more brand-friendly in their approach.

Figures from consulting firm McKinsey & Company indicate that 80% of the value of online retail sales in China in 2014 were made through sites which offer brands no control – such as dealer stores on JD.com and Tmall – although this was down from 95% in 2009.

Brand stores on JD.com and Taobao, which offer a high degree of control, made up just 8% of sales while brand-owned sites added another 6%.

The remaining 6% was accounted for by sites such as Suning which allow a limited degree of control.

But as people become more wealthy and brand conscious, so the platform giants are changing the way they serve them.

McKinsey noted an increased focus on high-end products, "for which brand authenticity matters", and a greater willingness to avoid discounting and instead emphasise delivery and customer service.

Further, it said that e-commerce platforms were also "showing more openness to sharing selected consumer insights with leading brands".

It advised brands to invest in shaping consumer behaviour and in boosting traffic on both their own sites and those others where they have more control.

The other notable shift taking place has been the investment in physical retailers by leading e-commerce platforms as they pursue an online-to-offline (O2O) strategy.

In all the media coverage of events like Singles Day, it can sometimes be forgotten that online retail makes up just 11% of all retail sales.

"I think of O2O as tapping into the other 90% of retail sales that is not served via online shopping," explained Chi Tsang, head of Asia internet equity research at HSBC.

"Nine hundred million people have computers – smartphones – in their pockets so they are already enabled," he told the South China Morning Post. It only remained to supply them with services and payment options.

Data sourced from McKinsey & Company, South China Morning Post; additional content by Warc staff