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Entrants to the mainland e-commerce sector advised to "go niche"

While the mainland e-commerce market is maturing, many opportunities still exist for niche players – particularly in the food and drink sector – to make an impact, particularly if they can develop their own proprietary mobile apps.

Photo: Shopping offline for online shopping.
Shopping offline for online shopping.

With the mainland's online retail market maturing, this new digital landscape is currently dominated by a number of big players – notably taobao.com, JD.com, dangdang.com and amazon.cn. Opportunities still remain, however, for new entrants to stake their claim in this hugely competitive sector. According to exhibitors at this year's International E-Business Expo in Guangzhou, smaller players need to find a distinct niche and avoid, wherever possible, going head-to-head with the industry giants.

In a timely move, this year's expo came just five days after the China e-Business Research Center released its latest report on China's e-commerce market. According to the report, by the end of 2013 (the latest period for which data is available), the transaction volume in the mainland's e-commerce market reached Rmb10.2 trillion – a 29.9% year-on-year increase.

Looking more closely at these figures, B2B e-commerce transactions represented Rmb8.2 trillion of the total, up 31.2% year-on-year. Direct to consumer e-tailing showed even more dramatic growth, rising by 42.8% to reach Rmb1.88 trillion. Nationally, Guangdong, Jiangsu, Beijing, Shanghai and Zhejiang were identified as the highest spending regions in terms of e-commerce.

Niche players

Against such dramatic growth, it is no surprise that more and more companies are entering the sector, with many of them keen to make their presence felt at this year's expo. One such company was Nahuo.com.

Developed by Yiku, a Guangzhou-based network technology company, Nahuo is fast establishing itself as a dedicated B2B portal for garment wholesalers and retailers. Xu Yamin, a senior executive with the company, said Yiku made its first venture into e-commerce in 2008 and has subsequently built a substantial user base.

According to Xu, Nahuo's website traffic and turnover both tripled in 2013. He ascribed this growth to the wider penetration of PCs and smartphones, with buyers now accustomed to making online purchases.

A similar success story came from the B2C sector, where tiantian.com, a cosmetics site, is claiming to have doubled its turnover every year. The site is operated by Beijing Huitong Tiantian E-Business Co Ltd and is now collaborating with more than 600 cosmetics brands and offering some 10,000 products.

Tiantian's President, Ju Chuanguo, remains convinced of its future market potential. He said: "The ever-growing number of mainland online shoppers will continue to create huge opportunities for e-tailers such as ourselves."

The growing maturity of the market, including more reliable and increasingly rapid delivery mechanisms, has also taken e-commerce into sectors that were previously impractical, particularly in the areas of food and drink. In March this year, yhd.com, a specialist food delivery website, launched a promotion offering a 50% discount on imported milk. Within 53 minutes, 600,000 packs of the milk had been ordered.

Another company to have taken advantage of improved cold-chain logistics facilities is 15fen.com, a fresh vegetable delivery site launched by Guangzhou 15 Minutes E-Business Co Ltd. The site offers vegetables from the Pearl River Delta Region and has built its reputation, at least in part, on the back of its stringent quality control procedures.

Moving further up the value chain, Jiuxian.com, a site operated by Beijing's Jiuxian E-Commerce Co Ltd, specialises in wine home deliveries. To date, it has worked in association with some 500 mainland wine companies and claims to have had a 50% share of China's online wine market in 2013.

International e-commerce is another sector that has grown of late. Speed-trade.com.cn is a cross-borders online trade platform launched by Jiayuefei, another Guangzhou-based network technology business. According to the company's own figures, the site attracted 4,136 and 2,951 newly-registered suppliers and buyers respectively in 2013, up 56% and 97% when compared to 2012.

Proliferation of mobile shopping apps

As in many of the developed markets, as well as the competition to win customer loyalty among the major portals, intense rivalry has emerged in the mobile sector, with many brands keen to establish their own proprietary apps. The battle will be particularly bitter across the mainland, given the size of the market on offer – of the 618 million online users in the country, some 500 million are now believed to access the internet via a mobile device.

Photos: E-commerce expansion:  fresh food (left) and payment online.
E-commerce expansion: fresh food (left) and payment online.

According to one recent report, more than 125 million mainlanders have now made a payment via their mobile devices. This means one in four mobile users have now purchased online.

Such is the growth in m-commerce, that many are now predicting it will ultimately eclipses purchases made via PCs. Tiantian's Ju, for instance, sees this as very much the way forward. He said: "We believe smartphones are set to become the main online shopping channel for consumers. In light of this, we have launched our own mobile app."

For Tiantian, some 10% of its 2013 orders came via smartphones. Ju believes that figure will grow hugely this year.

A similar convert to mobile selling was Yiku, with the company keen to promote its nahuo.com app at the expo. Visitors to its stand only had to scan a QR code to install the app. Once registered, wholesalers can then upload product photos onto the online shop any time, allowing them to immediately start interacting with retailers.

These niche apps have joined a number of established mobile platforms that are already competing for consumer's business. All of the major players in the sector – including taobao.com, JD.com, dangdang.com, yhd.com, amazon.cn, suning.cn and gome.com.cn – have already launched their own apps.

Rapid expansion of related industries

The wider uptake of online shopping has, inevitably, had a huge knock-on effect to a range of ancillary industries – most notably logistics, warehousing, payment platforms and software development. Understandably, companies from all of these sectors were well-represented at this year's exhibition.

Among the logistics companies participating was Shenzhen-based SF Express, said to be one of the mainland's leading courier companies. As well as its delivery service, the company also offers a range of warehousing and fulfillment functions.

One of its chief rivals, EMS, part of China Post, was also in attendance. Aside from its domestic capabilities, EMS was also majoring on its global reach, with its stand proclaiming it could "deliver goods to virtually every corner of the globe". Among its other strengths, it was also claiming a "140,000-strong courier team", "the number one position in delivery volume" and "low international courier costs".

Two online payment platforms – allinpay.com and Shenzhen Yinsheng e-Pay Co Ltd – also attracted keen interest at the event. Allinpay was promoting its bespoke online payment facilities, while Yinsheng was highlighting its facility to arrange payment via standard bank cards.

Photo: Expo-goers at this year’s E-Business event.
Expo-goers at this year's E-Business event.

The International E-Business Expo 2014 Guangzhou was held from 24-26 March at the Zhongzhou Centre (The Hub) in Pazhou, Guangzhou. According to the organisers, the 25,000 sqm-fair attracted some 300 exhibitors and more than 20,000 trade visitors.

Xing Ping, Special Correspondent, Guangzhou

Content provided by Picture: HKTDC Research
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