Industry Report: Alibaba on the Rise While Google and Amazon Wage War at Home
Export Now | Industry Report
Anyone wondering about the future of E-commerce in China doesn’t need to look far to see emerging trends, and massive market growth. Die-hard followers of news in the export industry will already be aware Alibaba.com is China’s largest eCommerce portal. What they might not be aware of yet is the fact that Alibaba.com’s sales are set to outstrip both Amazon and eBay this year. Amazon and eBay combined, that is.
While eCommerce wars rage at home between giants Google and Amazon, massive online markets continue to develop and mature in China.
Trying to stave off the competition from Amazon, Google has recently changed Google Shopping to require e-commerce companies to pay to be included in shopping results, so product listings are now ads. Inclusion used to be free. If a company does not pay to be listed, consumers will not see what they have to offer.
ChannelAdvisor, a marketing firm for e-commerce companies, said that among the hundreds of retailers it manages, 63 percent have begun paying. For those sites, revenue per click on a product listing has tripled. One, ToolKing.com, an online hardware store, said traffic from Google and the number of people who make purchases had both risen more than 50 percent.
Will this ruffle feathers over at Amazon? You bet it will. If paid listings on Google get results like this for online vendors, you can bet Amazon will be firing back with a response of their own in short order. Media and PR firms will be on the story like their lives depend on it, market shares will shift around, but the size of the market will remain the same. Guess where the size of the market is continuing to balloon?
That’s right. Over in China.
Zeng Ming, the chief strategy officer of the Alibaba Group, China’s largest e-commerce company, told reporters this weekend that the firm’s sales this year will be greater than Amazon (AMZN) and eBay (EBAY) combined.
Ming also said that the company is aiming for 3 trillion yuan ($473 billion) in annual transaction value from its Taobao e-commerce units on average over the next five to seven years. The Taobao unit’s sales for 2012 are expected to hit 1 trillion yuan this year, company founder Jack Ma said last year. Alibaba does not how much Taobao contributes to the top line, but Taobao is the main retail brand of Alibaba Group.
So if you want to give paid listings in Google a shot, or wait to see how Amazon responds, go for it. Maybe you’ll see your revenues go up like the source quoted in the FT article above. However, if you are a long term thinker and have a macro level perspective on the industry, you’ll see Alibaba as the new gold standard. As the bread and butter of the future of online commerce.
As the legacy online giants in the US go to war over market shares and try to exclude each other from the search engine rankings, lesser known and grander opportunities abroad become more and more appealing.
If you and your company have been considering expanding into into the Chinese eCommerce space, feel free to check out additional informational posts on our blog, or drop us a line and speak to one of our Export Now specialists.
Chinese Advertisers Follow Audiences Online
As readers demonstrate a clear preference for online media over print, news organizations are putting more resources into digital platforms, e-commerce is growing and advertisers, too, are spending money where they know they can find the audiences they need — online.
In China, this shift has led to explosive growth for e-commerce platforms, including the largest online shopping site, Tmall.
It has also meant substantial growth in online advertising in China. Data collected by iResearch, shows that from 2002 to 2012 Internet advertising rose from a negligible amount to about 79.1 billion Yuan — about a third of the more than 200 billion Yuan spent on advertising in total and second only to TV advertising (which accounts for 86.1 billion Yuan).
The report found that in 2011, for the first time in China, advertisers spent more on online ads than they did on print ads.
Another report, from Companies and Markets, pointed to these factors:
The rising number of tech savvy population and introduction of new technologies made online shopping safer and user-friendly and all these factors support online advertising demand in the country.
Advertisers are putting their money where the audiences are. In China, as in the rest of the world, that means online.
China’s Online Ad Spend Tops Print
The Quiet Driver of Economic Growth: Exports
China's first e-commerce service report, released at the first China E-business Service Conference on Dec. 15 in Shanghai, said the market size of China's e-business is taking a leap.
According to the report, by the end of 2011, the number of China's e-business service companies will break 150,000, and the whole e-business service industry will take in a combined annual income of 120 billion yuan.
Alipay, China's leading third-party online payment platform and a subsidiary of the Alibaba Group, has spinned off its reward points service as a wholly-owned subsidiary to tap the country's booming e-commerce market.
Jifen Bao, the relaunched reward points platform, will be based in the eastern city of Nanjing, Jiangsu province, with an initial capital of 10 million yuan (1.57 million U.S. dollars). The service enables clients to redeem points to make small purchases on Alibaba's e-commerce subsidiaries, such as Taobao, and to pay utility bills, company officials said Tuesday.
Top Chinese sports brand Li-Ning is making a second pass at the U.S. market and for now their strategy is branded e-commerce.
"The biggest brand you've never heard of ... now available here," proclaims the greeting on a bold red background on www.Li-Ning.com, which officially launches Monday. The company's first English-language consumer website has already picked up some popular U.S. e-commerce tactics, like free holiday shipping and a Facebook page.
The company's founder, former Chinese Olympic gymnast Li Ning, has ambitious plans to challenge rivals like Nike on their home turf with his namesake brand.
The explosive growth of China's online shopping market is attracting more and more international brands.
Benefit, LVMH Moet Hennessy (LVMH)'s well-known cosmetics brand, has officially opened a flagship store on Taobao Mall to attract China's young cosmetics consumer group by using online sales.
Analysts believe that Benefit, the fourth largest global sales make-up product, should target young Chinese people as its main consumer group. In addition, online shopping has no geographical limit, which can help international brands to quickly cover second and third line cities in China.
L'Oreal, Olay, Neutrogena, Davidoff and other international cosmetics brands have already opened stores on Taobao Mall to test the market.
"Shoppers are more cautious this year with their spending. Even if they said they were spending more, they were doing so mainly to keep up with the rising cost of products," Paul Jung, Visa's head of eCommerce for Asia-Pacific, Central Europe, Middle East and Africa, said in a statement.
"The exception was China where respondents said it was because they wanted to buy more expensive items," he added.
President Obama’s National Export Initiative, which calls for a doubling of the nation's exports to support creating two million jobs in the next five years, was launched to encourage small businesses to grow through exporting. And while the idea of expanding into foreign markets can seem daunting for small and midsize businesses, the launch of Export Now (www.exportnow.com) is looking to change this with a first-of-its-kind, e-commerce solution to help businesses efficiently and inexpensively export to China.
• Allows U.S. companies of any size to grow revenue and compete in foreign markets through exporting.
• Eliminates the biggest challenges of doing business abroad by bridging the cultural and financial gaps of complex foreign markets.
• Distributes goods via its exclusive store on Tmall.com, while simultaneously listing them on Taobao.com, the largest B2C platform in the world (last year more than 370 million people used Taobao.com, spending over $60 billion on China’s largest, fastest-growing e-commerce marketplace).
The Export Now launch event will include an introduction about growth opportunities through exporting and new technologies to make exporting easier, as well as an Export Now product demonstration and discussion on the importance and ease of exporting for U.S. businesses from Export Now founder Frank Lavin.
E-Commerce China Dangdang Inc. reported a loss in its third quarter, weighed down by declining gross margin and higher operating expenses.
The online retailer, which went public in December, said Wednesday that it lost 73.4 million yuan ($11.5 million), or 15 U.S. cents per American depositary share. That compares with a profit of 32.7 million yuan in the prior-year period.
The new US Commerce Secretary, John Bryson, is travelling to China along with US Trade Representative Ron Kirk for a meeting of the US-China Joint Commission on Commerce and Trade (JCCT), an official announcement said on Tuesday.
Chinese Vice Premier Wang Qishan would represent his country at the 22nd session of this annual meeting, the last of which was held in Washington.