Lecture 11. e-Commerce and Strategies in China

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Lecture 11. e
-
Commerce and
Strategies in China


Development of Internet in China


1987: 1
st

email


1994: allowed to enter Internet


1995: Chinese people began


to use Internet


2007:


Internet users: 137 million


Computers: 59.4 million


Chinese websites: 849 thousand



©2009 Pearson
Education, Inc.
Publishing as
Prentice Hall

Top Ten Internet Usage Countries

3

4
-
9

Growing Number of Internet Users in
China

0
50
100
150
200
250
300
2005
2006
2007
2008
# Internet User
(mil)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
2005
2006
2008
% Pen.
253 million

comparing to 230 mil in US

Internet Penetration Rate across the
Globe

19.1%
21.1%
85.4%
71.9%
68.7%
71.2%
20.8%
5.3%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
China
Global
Average
Iceland
USA
Japan
Korea
Russia
India
Penetration Rate %
Internet users in China will reach 953 million with similar pen. rate of USA

People’s Republic of China



Internet access and use has been growing rapidly + projected to
continue:


China has the biggest Internet population in Asia.



A few years ago, Internet users = younger (18
-
35), better
-
educated
males.



Now:


The Internet becomes mainstream, especially among urban
residents,


Female Internet users = 40% of the overall Internet population,


Internet users with college degrees = only 30% of total users.



Age Distribution of China Internet Users

<18yr
19%
25-30yr
19%
31-35yr
11%
36-40yr
9%
41-50yr
8%
>50yr
4%
18-24yr
30%
<18yr
18-24yr
25-30yr
31-35yr
36-40yr
41-50yr
>50yr
Education level

5.9%
23.8%
39.0%
15.9%
14.1%
12.0%
Elememtary
School or under
Junior High
School
Senior High
School
College
University
Graduate School
or higher
People’s Republic of China



Internet access from:


Home (61%),


Net café (15%),


Work
-
related access (25%).


The top 2 objectives for using the Internet:


“Information” (46%),


“Entertainment” (31%).


Web
-
Culture in China


Top internet applications:

1.
Online Music (84.5%)


2.
Online News (81.5%)


3.
Instant Message (77.2%)


4.
Online Video (71.0%)


5.
Search Engine (69.2%)

6.
E
-
mail (62.6%)


7.
Online Game (58.3%)


8.
Blog (42.3%)


9.
Forum (38.8%)


10.
Shopping (25%)

Basic Internet Application in China


Email


6
th

in China, 1
st

in USA


Popular instant message in China has effect
on email usage


Instant message


3
rd

in China with usage rate of 77.2%


39% in USA, 47.8% in Korea


Integrated services including online streaming
video, blog, and file sharing


Some Unique Trends


China Internet Network Information Center (CNNIC),
found out that China had 298 million Internet users by
2008, 25 percent of which were online shoppers. For
comparison it should be stated that 71 percent of
Internet users in the US are online shoppers.


China e
-
commerce sales up 22% in 2010:


There were 25,000 e
-
commerce websites at the end of
2010, compared with 20,700 at the end of June
--

no
figure for 2009 was provided.


Highlighting the growing appeal of the country's
Internet
market
, which has more than 450 million users, foreign
companies such as Adidas, Gap and Wal
-
Mart have been
opening online stores in
China
.


Some Unique Trends and Concerns


ARPU (Average Revenue Per User) of China's C2C
market had raised from 520 yuan in 2007 to 760 yuan in
2008.


Internet sales in the country hit 4.5 trillion yuan ($684
billion) in 2010,


Cheaper prices and growing confidence in online
payment security attracted more people to the Internet,
with the number of shoppers reaching 158 million last
year compared with 121 million in 2009


Internet shopping offers users lower prices and
convenience amid high inflation.


Users' confidence in and reliance on online shopping
have strengthened as companies improved their services
and product quality



Payment & Transport Methods

-
Common Payment Methods:


Cash on delivery


Remittance from post office


Bank payment


Visa card

-
Transport Methods


Rely on official agencies


Home delivery is typical

Back


Types of EC Products & Services


Products:


books, music and video products, gifts
and toys, telecom products, sporting
goods, office supplies, apparel, &
cosmetics.


consumer electronics, food & health
products.





Types of EC Products & Services


Services:


-
Online traveling services


-
Employment placement & job market


-
Real estate, insurance & stock


trading online


-
Banking & personal finance online


-
Online delivery of digital products,


entertainment, & media


-
E
-
knowledge


-
Online intermediary agency


-
E
-
government


Back


Mobile EC

-
Cell phones development


-
455 million people own at least one
cell phone


-
97.8% of people live in cities have
at least one cell phone

-
Cell phones EC


-

Download digital products


-

Order useful messages


-

Charged from cell phone fees



Basic Internet Application in China


Search engine


5
th

in China with usage rate of 69.2%


2
nd

in USA, with usage rate of 91%


Baidu.com


Google.com




Internet Media


Internet News


2
nd

in China with a rate of 81.5%


Higher than 71% in USA, 67.1% in Korea



Online Music, Video, and Game


Usage rate 84%, 71%, and 58.3%


Important form of entertainment


Internet popularity poses serious challenges
for government



China

Internet
Online Marketing



E
-
commerce websites


Pop
-
up advertising


Search Engine Marketing


Email



Product reviews and ratings


Recommendation agents


Shopbots: aggregators by price


Airfare: 51766.com

Popular Web Sites in China

4
-
21

Top 10 Sites in China

1.
Baidu.com

(Search engine)

2.
QQ.COM

(Portal / network)

3.
sina.com.cn

(Portal)

4.
Google.cn


5.
Taobao.com

(Auction / shopping)

6.
163.com

(Web
-
mail)

7.
Google.com


8.
Yahoo.com


9.
Sohu.com

(Search / portal)

10.
Youku.com

(Video)

Baidu.com


World

s largest
Chinese website


China

s largest
search engine


63% market
share (Google
has 26%)


Revenue $239M
USD in 2007
(NASDAQ:
BIDU)

Baidu.com

QQ.com


QQ.com


Tencent: stock market value of $15B


First Chinese version instant message


Penguin trademark was a big hit





Value
-
added services targeting high school
students (QQ Show, QQ currency)


QQ.com


2008 1
st

Half
-
Year Revenue: $444M USD

QQ.com


Chat room window
with applications

QQ Show

Taobao
(淘宝
)

Dangdang (
当当)

ctrip

Alibaba.com


B2B e
-
Commerce Website


36 million registered users (28.7M in
China)


From over 240 countries and regions


Q3 2008 revenue: $114.2M USD






$70.9M Intl., $43.3M China

Alibaba.com


Eguo.com (online supermarket to groupon)

Bally’s Chinese digital flagship, launched
in collaboration with Yoox in May 2011

Conclusion


China is the biggest internet market in terms of number
of users with no doubt


Future growth will concentrate on several
underdeveloped areas


E
-
Commerce: only popular in big cities now


Online education


Online banking



Other developing infrastructure and business activities
will foster internet growth


Government regulations and incumbent players continue
to play important roles

China: A View of the Future

4
-
37


China is expected to be the largest
economy in the world by 2015, and already
the largest internet user population.


China represents both the promise and
challenge of e
-
marketing in emerging
market economies.


70% of all Chinese internet users are under the age
of 30.


China’s vibrant, growing online market requires
adaption to success.

Ethics and Regulatory Issues


Internet has a become a powerful for
consumers: bad news travel fast, Guo
Meimei and the Red Cross


Privacy and political sensitivity


The trouble of Google in China


Censorship and filtering is common.


Restrictions in certain areas after political
unrest