Although eCommerce is going gangbusters in China – Tmall sales grew 90% last year – one of its key challenges is logistics. According to GLP, it costs twice as much to deliver a parcel in China as in the USA, even with China’s lower wages.
Delivering packages to consumers in China’s biggest cities may be a speedy and cost effective service, but that’s not the case for thousands of other municipalities, including many of China’s 114 cities with more people than New Zealand.
Whilst they earn less, consumers in China’s smaller cities actually spend more online than those in China’s larger cities – a cheaper cost of living coupled with fewer high street stores drives small-town folk to Taobao. Last year, the average consumer in Tier 4 cities spent a third more shopping online than in those in Tier 1 & 2 cities.
Alibaba’s founder Jack Ma wanted to do something about China’s logistics issue. In October last year, he announced that he was spearheading a ¥100 billion ($16 billion) 8-year project that would enable online purchases to be delivered anywhere in China within 24-hours.
Well, late last month it looks like Mr. Ma may have achieved his dream 7 years ahead of schedule, inking a logistics partnership with China Post to deliver parcels anywhere in China within 24-hours, and potentially opening up the world through China Post’s global networks.
Whilst many postal businesses around the world are struggling, the deal with China Post will be good for both parties. Last year, 5 billion parcels – almost four for every woman, man and child in China – were delivered from Taobao and Tmall’s stores. Prior to the China Post deal, 950,000 staff were employed by Alibaba’s 14 logistics partners alone.
With the China Post agreement, and general investment in China’s warehouses and distribution centres soaring 38.8% last year, it’s likely that eCommerce in China will continue to grow from strength to strength – something to consider. We hope you enjoy this week’s Skinny.
Something Is Making Chinese Consumers Want to Save More and Spend Less: Just 18% of Chinese consumers were up for spending more in the second quarter of this year, versus the first 3-months. Probably not helped by slowing property sales, which account for 67% of the average middle class family’s wealth.
What Are Chinese Consumers Thinking?: High level overview into the changing Chinese consumer: luxury goods still equals prestige for many consumers; rising health concerns grip consumers’ minds; and the importance of smartphones and social media.
Alibaba, China Post to Cooperate on Logistics: Alibaba and China Post have signed a deal to deliver online purchases anywhere in China within 24 hours. The deal will allow the companies to share warehouses, processing centres and delivery resources.
Alibaba Issues New IPO Filing, Reveals People Spent $272 Billion on Taobao and Tmall in Past Year: Tmall sales were up 90.1% in the past year, while Taobao grew 32.3%, although it still accounts for 70% of Alibaba’s retail sales.
Baidu: Search Share Loss; Mobile, Video Strengthen: Baidu’s share of China’s search market in Q2 dropped to 59.8% of page views from 60.6% in the previous quarter. Qihoo’s climb continued to 25.6%, up from 24.8%
Starbucks to Replicate US Strategy Successes in China: Starbucks is planning to open stores in close proximity to one another in Chinese cities and opening in suburbs as it does in the US. It is also planning more cafes in 2nd tier cities. Last year the chain opened 206 new outlets and 111 franchise stores in China, contributing to 27.1% growth in revenue for Asia Pacific region at $917 million. Sales should top a billion in the region this year.
Women’s Health App Meet You Nets Another US$30M in Funding: The Chinese app that originated as a menstruation tracker that since evolved into a social network for “all-things-ladylike” has netted more cash to grow its 3.5 million active user base.
Chinese Outbound Trips May Exceed 115 Million This Years: Following an 18.8% increase in international Chinese tourists for the first five months of this year, more than 115 million Chinese are expected to travel abroad this year, up from 98.2 million in 2013.
More Chinese Opting for Summer Sea Cruises: Cruise bookings on Ctrip have doubled in June compared to a year ago, on the back of travellers shying away from SE Asian destinations. China’s cruise ship visitors are forecast to surpass 4.5 million by 2020, making it the largest cruise market in the Asia Pacific region.
Skyscanner Aims to Challenge Baidu in the Chinese Travel Market: Edinburgh-based Skyscanner is planning to take on the big boys through its acquisition of local travel price comparison startup Youbibi. With Chinese travellers expected to spend $75 billion online in 2017, there’s a lot to play for.
How Baidu, Alibaba, and Tencent Will Dominate China’s Movie Industry in 3 Years: China’s domestic film market and spinoffs are estimated to be as much as ¥100 billion ($16 billion) a year, and the big Internet companies are all over it. Crowdfunding, movie ticket sales, media group acquisitions, networking, movie funding are all examples of them closing in. Chinese movies accounted for seven of the top ten grossing movies last year.
For a Century, the Mansion Sat Above Sydney Harbour. Then China’s Nouveau Riche Arrived.: Credit Suisse estimates that 18% of all new houses and apartments in Sydney, and 14% in Melbourne, are bought by Chinese citizens. That portion is expected to rise.
Chinese Consumers Switch Gears from Cash to Credit for Car Buys: 85% of Chinese car buyers still pay with cash, but the country’s auto financing industry is forecast to double to ¥525 billion ($84.55 billion) by 2025, driven by the younger demographics. Buyers currently require a 20% deposit on cars in China.
Chinese Luxury Consumers Named Their Favourite Brands: Giorgio Armani, Chanel, Rolls Royce, Singapore Airlines and Australia come out tops for China’s uber rich.
Beijing From Above, Aka The Story Of How I Was Detained By The Police Because Of My DJI Quadcopter: Lucky to get out with his footage – some great shots of China’s capital filmed from above using a drone.
That’s The Skinny for the week! We’d love to discuss how we could help with your marketing, online initiatives or research to take advantage of China’s opportunities. Just email us at firstname.lastname@example.org or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.
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