E-COMMERCE IN CHINA

Trends & How to Participate

23rd of April 2021

EAC | E-Commerce in China | 23rd April 2021

 CHINA E-COMMERCE IN PERSPECTIVE
China is leading the world both in e-commerce volume and penetration, but still has growth potential

CHINA:
~1,500
U.S.:
billion EUR
~600
GERMANY: billion EUR
~100
billion EUR

1,250 USD 1,050 USD 1,550 USD

per capita per capita per capita

~20% ~25% ~22%

Penetration Rate Penetration Rate Penetration Rate

Source: EAC research, Internet Retailing, Ecommerce News DACH, Statista

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EAC | E-Commerce in China | 23rd April 2021
 GROWTH OF CHINA E-COMMERCE
China’s online retail sales continue to grow at a double-digit CAGR from 2016 to 2020

CHINA ONLINE RETAIL SALES DEVELOPMENT (2016-2020)

Unit: billion EUR

CAGR 23% 1,527.3

1,377.2
1,168.8
943.4
669.6

2016 2017 2018 2019 2020

➢ Double 11 shopping festival, the rise of livestreaming, and further penetration

of the lower-tier cities contributed to the significant growth
➢ The epidemic has increased the penetration of the online shopping market, and
online has become one of the main channels for consumer goods

Source: National Bureau of Statistics

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EAC | E-Commerce in China | 23rd April 2021
 E-COMMERCE EVENTS
Large number of e-Commerce events are complemented by store activities and promotions

European e-Commerce Aug/Sep Nov-29 Before Dec-23

Events Back to School Black Friday Christmas

Feb 14 Oct 30 Dec

Valentine’s Day Halloween Cyber Monday

Largest e-commerce
shopping day (Chinese
Chinese e-Commerce Events
Black Friday)
Apr-05
Jan-01 May-20 Jun-18 Sep-10 Nov-11 Dec-25
Tomb
New Year Wo Ai Ni Dragon Boat Teacher’s Day Single’s Day Christmas
Sweeping

Aug-17
Feb May-01 Jun-01 Oct-01 Dec-12
Valentine’s
Chinese NY Labor Day Children’s Day National Day Double Twelve
Day

Source: EAC research

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EAC | E-Commerce in China | 23rd April 2021
 CHANNEL OVERVIEW
Holistic e-commerce channels most important, while both social ecommerce & CBEC are growing fast

CROSS-BORDER E-COMMERCE DOMESTIC E-COMMERCE

CBEC Platforms Holistic Platforms Social Commerce

Pinduoduo
Vertical specialty platforms

GMV 20’: 54 bln EUR GMV 20’: 1,156 bln EUR GMV 20’: 171 bln EUR

CAGR 16’-20’: 27% CAGR 16’-20’: 22% CAGR 16’-20’: 288%

Source: EAC research

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EAC | E-Commerce in China | 23rd April 2021
 CROSS-BORDER E-COMMERCE
CBEC is a convenient channel if brands has registration or certificate issues…

MARKET SHARE OF CBEC PLATFORMS 2020

Others
Xiaohongshu 11% Advantages
5%
+ No legal entity in China required
VIP.com
11% + Novelties, product testing and brand
introduction
57% Tmall + Kaola
+ Avoid registration/ certificates (e.g.,
18%
JD Worldwide animal testing, CCC)
+ Less capital required

TMALL Global Operation Models Shortcomings:

 Flagship store model (via TP) ‒ Longer lead-time
‒ Higher costs (logistics/ warehousing)
 TMALL Direct Import Model (TDI)
‒ Returns are difficult to handle
 TMALL Overseas Fulfillment Model (TOF) ‒ Consumer access is limited

Source: Tmall Global, EAC research

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EAC | E-Commerce in China | 23rd April 2021
 HOLISTIC PLATFORMS
Chinese e-commerce still largely dominated by Alibaba and JD, but new players are rising up

HOLISTIC E-COMMERCE MARKET SHARES 2020

53.5%
Alibaba and JD –
the “Big Two”:
27.8% ~80% of market
share
7.8% Pinduoduo: The “Rising Star”

3.5%

2.2%

0.4%
Tmall and JD Store options:
0.3% • Flagship store (Tmall + JD)
• JD Self Operated/ Direct Sales
0.3% • Tmall supermarket

Source: Statista, EAC analysis

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EAC | E-Commerce in China | 23rd April 2021
 SOCIAL COMMERCE
Highly dynamic with many new formats and players – Social Marketing is the key
Content Sharing
Social Commerce
Xiaohongshu
Douyin
WeChat Weibo
Users or KOLs share
product reviews to
attract community
groups to buy
Source: IiMedia Research, EAC Research
Business Model
Membership Social Group Buying Social
Commerce Commerce
pinduoduo
Yunji Beidian Suning Pingou
New business models continue to emerge
Jingdong Pingou
Global Daling Jia ▪ Short video platforms combine content
Scanner marketing with in-app shopping to gain a
Paid members can share large share of e-commerce market
product information to Allows group buying
other customers and get with relatively favorable ▪ WeChat Mini-programs could benefit
commission after price; mostly used in from the WeChat ecosystem for better
successful transaction Tier 3/ 4 cities customer acquisition that connect official
accounts, Moments of Friends, and
WeChat group within one-stop
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EAC | E-Commerce in China | 23rd April 2021
 BOOMING LIVESTREAMING
Livestream ecommerce as a business model is rapidly gaining popularity in China

LIVESTREAMING FEATURES

Integrated into Mimics in-store shopping experiences Highly interactive, social, Often reliant on
various platforms by showing products in context & playful with gamification scarcity & urgency

CHINA E-COMMERCE BREAKDOWN (2019) CUSTOMER CONVERSION RATES (2019)

General eCom
21%
Livestreaming
18%
CBEC
Livestream 13%
9% 5% 11%
WeChat
eCommerce 14% 7%
6% 6%
72%
1%
eCommerce
Platforms Beauty Female Male Electronics
Fashion Fashion

Source: Agency China, EAC

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EAC | E-Commerce in China | 23rd April 2021
 E-COMMERCE OPERATION MODELS
Online operation model can be divided into three approaches based on involvement of brand

Operation Commodity Customer After-sales

Marketing Logistics
Process Management Service Service

1 WORK WITH TRADE PARTNERS 2 SELF-OPERATION

TP AS DISTRIBUTOR TP AS SERVICE PROVIDER

 Brand has own e-commerce
 Online store operation is  TP provides online services team, operates entire process
managed by distributors including full-fledged services or without 3rd-party involvement
 Sales data need to be modular services  Data transparency: sales data
provided by DP  Brand can access sales data and CRM can be controlled and
 DP management need to  Profit model: TP charges service conducted by brand
be conducted to maintain fee and commission  Professional e-commerce team
online price system  Appropriate TP selection essential directly influence online sales

Brand Involvement Brand Involvement Brand Involvement

L H L H L H

Source: EAC
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EAC | E-Commerce in China | 23rd April 2021
EAC – EXPERTISE IN EMERGING MARKETS
More than 25 years of international consulting in Asia and other key emerging markets

> 100 EXPERTS IN OUR OFFICES IN… FUNCTIONAL COMPETENCIES

 Munich  Strategy
 Shanghai  M&A
 Mumbai  Operational Excellence
 Moscow  Digitalization
 Sustainability

EXPERTISE IN EMERGING MARKETS INDUSTRY COMPETENCIES

 China  Mobility
 India  Industrials & Technology
 Southeast Asia  Building & Construction
 Northeast Asia  Energy & Environment
 Russia  Pharma & Healthcare
 CEE  Chemicals
 Consumer Goods
 Exhibition

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EAC | E-Commerce in China | 23rd April 2021
EAC SUPPORTS GERMAN BRANDS IN CHINA

EAC CONSUMER GOODS REFERENCES

How EAC supports German

brands in CN with e-commerce

▪ Holistic eCommerce/ online go-

to-market strategy

▪ Platform comparison and

suitability

▪ Trade Partner Assessment,

Prioritization and Management

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EAC | E-Commerce in China | 23rd April 2021
 THANK YOU FOR
YOUR ATTENTION!

Feel free to contact me for further in-depth

discussions!

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RAPHAEL EDER
MANAGING CONSULTANT

Raphael.Eder@eac-consulting.de
https://www.eac-consulting.de/

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EAC | E-Commerce in China | 23rd April 2021