South-East Asia has become the latest battleground for e-commerce companies. Can China’s tech giants win by proxy?
Adidas’s Yeezy sneakers designed by rapper Kanye West have been among the world’s best-selling footwear since they were released in 2015, and a pair of Yeezy Boost 350 V2s retails for up to $1,000 on most e-commerce sites. But on Alibaba’s Taobao site, the world’s largest online marketplace, vendors offer the same pair of sneakers for as little as RMB 300 ($45). That sounds too good to be true, and it is. They are counterfeits.
Compared to other sectors, Chinese e-commerce firms are among the first batches of firms to embrace automation. China accounts for nearly half of global demand for AGVs, enabling one warehouse to process up to 100,000 orders a day with a staff of 20 human workers, work that previously would have required 300-600 people, according to Beijing-based startup Geek+, a leading domestic robot maker in logistics industry. Other tech giants, like Alibaba and JD.com, have also announced plans to invest billions of dollars to roll out next-generation technologies including totally unmanned warehouses and last-mile delivery robots and drones.
Medical spending in China is increasing every year, and people have started to buy medicine online, with nearly 3 million people buying medicine through mobile apps, among which the largest one is Yiyaowang–the”No.1 pharmacy.” Set up by Yu Gang and his partner, the founder of China’s first large online supermarket, Yihaodian, Yiyaowang is also a key part of a healthcare ecosystem that combines an online hospital, a drugstore and patients. Yu, an experienced businessman and a scholar, tells how he built the ecosystem, how it simplifies the medical process and gives patients access to cheaper drugs.
NetEase is the Chinese internet pioneer you have probably never heard of. Founded in 1997, before its bigger and better-known Chinese internet peers Baidu, Alibaba and Tencent (collectively known as BAT), it is largely unknown outside of China. NetEase is currently making big pushes into many new businesses: e-commerce, online learning, music streaming and a host of other businesses, but it still has a long way to go to climb back to the top of the China tech tree. Analysts note that NetEase lacks the breadth of its rivals’ businesses, and that will likely stymie its growth, unless it can continue to diversify successfully.
At the enormous Pacific Department Store on Shanghai’s Huaihai Road, barriers block the street entrances and windows are shuttered. The store, which was one of the largest on one of the city’s busiest shopping streets for nearly two decades, closed in January. The shell of the store now sits incongruously opposite the K11 mall, which has been thriving ever since implementing a smart re-think of the shopping mall concept a couple of years ago. The lesson of the different fates of these two shopping centers is clear—adapt or die. Retail is not declining in China, it’s just changing.
After incredible growth in recent years, e-commerce in China seems to be slowing down. One reason behind this is the high penetration rate. By 2016, 62% people in Tier 3 and 4 cities were shopping online, while the number in Tier 1 and 2 cities stood at 89%. On the other hand, consumers in China have also changed over time, now the middle class are shifting their money from cheap products to premium services and goods where experience and recognition ties take priority. So does it mean online retail will go gloomy and physical stores may return to the spotlight?
It is a good time to reflect on Singles Day, a shopping carnival initiated by Alibaba that has just yielded a record-breaking sales of $17.8 billion, exceeding that on “Black Friday” in the US. It looks like everyone benefits: vendors sell, buyers get cheap goods and Alibaba profits through advertising fees and transaction commissions. But consider: to sell more, vendors lower product prices and sacrifice per-unit margins, yet they might not be able to make up on volume, as most of the items purchased are durable goods and therefore most of the increased sales on Singles Day are probably shifting sales from earlier or later periods.
Each year Alibaba breaks a new record on Singles Day, the 24-hour online shopping extravaganza has now become a celebratory annual event. The rise of online ecommerce has transformed the way Chinese people shop. According to 2015 e-commerce stats, 46% of Chinese people buy groceries online, 30% people made impulse buys, and $ 333 billion purchase were conducted on mobile devices. The online shopping phenomenon, on one hand, is hurting retail, on the other is fostering a multi-billion dollar express delivery business. With 8,000 express companies national wide, China’s express delivery market was worth $ 42.1 billion in 2015.
China’s apparel market is now one of the fastest growing markets in the world. Euromonitor statistics show many foreign brands doing well: Uniqlo currently holds 1.6% of the market for specialist apparel; and Danish company Bestseller Fashion Group China, which operates brands like Only, Jack & Jones and Vero Moda, is holding 2.3% of the market share. Where are the local apparel brands? VANCL, a Chinese ecommerce clothes retailer, is almost a forgotten name. It used to have a 4.5% market share in 2011, but its dream of IPO lie in ashes—how did the once mighty retailer become China’s diaosi (loser) brand?