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  • Starbucks, Tencent to launch social gifting on WeChat in China

    Starbucks, Tencent to launch social gifting on WeChat in China

    Starbucks Coffee Company and Tencent Holdings Limited has partnered  to co-create a new social gifting feature on WeChat, China’s leading mobile social communications service.

    The new service, which will be rolled out early next year, will make it easy for Starbucks China customers to gift Starbucks to a friend or a family member.

    Customers will be able to select from Starbucks-branded gifts and products and add a personalized message. Recipients of these personal gifts and messages can save their gifts and memories on their WeChat accounts and redeem their gift at Starbucks stores across China.

    Users can use WeChat Pay to pay for their goods and services from their mobile devices at Starbucks retails stores. In China, more than 300 million users (as of March 2016) have linked their bank cards with WeChat or QQ, another flagship service of Tencent.

    “Just as Starbucks cards are among the most gifted around the globe, we aspire to also become the most gifted brand digitally in China,” said Belinda Wong, Starbucks China’s newly appointed CEO.

    The online social gifting platform is part of the company’s growing digital presence focused on connecting with customers through digital channels, including the Starbucks Mobile App, the My Starbucks Rewards program and social media.

    The announcement also builds on Starbucks rapidly expanding the portfolio of digital innovations in the country, which integrates the in-store experience with the digital “Fourth Place” experience.

    Earlier this year, Starbucks also launched a mobile payment system in China aimed at providing My Starbucks Rewards (MSR) members access to a fast, seamless and convenient way to pay for purchases, using their pre-loaded Starbucks Gift Card on their mobile devices.

    Wong, who was appointed from president to CEO of Starbucks China in October, has been instrumental in Starbucks unprecedented growth in country – from 400 stores in 2011 to over 2,300 stores today.

    The company said in a news release when her appointment was announced that she will oversee Starbucks plans to double its scale to operate 5,000 stores in China by 2021.

    Aside from  focusing on the company’s overall long-term growth strategy, she will be responsible for key areas, including the vast digital and e-commerce opportunities across the market.

  • Starbucks and Tencent Announce Strategic Partnership to Launch Social Gifting on WeChat

    Starbucks and Tencent Announce Strategic Partnership to Launch Social Gifting on WeChat

    Starbucks Coffee and Tencent Holdings, a leading provider of internet value-added services in China, today pioneered a strategic partnership to co-create a new social gifting feature on WeChat, China’s leading mobile social communications service, in early 2017.

    This partnership positions Starbucks as the first retail brand to combine and bring a locally-relevant social gifting and digital payment experience to life on WeChat in China. Tapping into the 846 million global monthly active user accounts (as of the third quarter of 2016), the new integrated feature will seamlessly allow customers in China to instantly and conveniently gift Starbucks to a friend or loved one. Beginning today, Starbucks customers will also be able to use WeChat Pay to make purchases at close to 2,500 Starbucks stores across Mainland China.

    “Starbucks and Tencent share similar values to enable greater human connections through our respective products and services, and I am pleased to partner with an established and respected social and mobile industry leader in China,” said Belinda Wong, ceo, Starbucks China. “This new strategic partnership will leverage the strengths of both Starbucks and WeChat to create a true online-to-offline social gifting platform that will deepen our engagement with our customers in a unique and powerful way. Just as Starbucks cards are among the most gifted around the globe, we aspire to also become the most gifted brand digitally in China.”

    “The strategic cooperation between WeChat and Starbucks enables us to bring the unique Starbucks retail experience seamlessly to hundreds of millions of WeChat users in China,” said Allen Zhang, Senior Executive Vice President of Tencent. “We are happy to be the partner of choice of Starbucks and look forward to deepening our connection to our users through the highest-quality services.”

    Starbucks is committed to innovative digital experiences that surprise, delight and deliver an elevated Starbucks Experience for its customers across China. The online social gifting platform is part of the company’s growing digital presence focused on connecting with customers through digital channels, including the Starbucks® Mobile App, the My Starbucks Rewards® program and social media.

    Jointly created by Starbucks and WeChat, the social gifting feature encourages everyday acts of kindness and appreciation among family and friends. Customers will be able to select from Starbucks-branded gifts and products and add a personalized message of love, of gratitude or to simply uplift someone’s day. Recipients of these personal and simple acts of kindness can save their gifts and memories on their WeChat accounts and redeem their gift at Starbucks stores across China to enjoy the unparalleled Starbucks Experience.

    As part of this partnership, Starbucks will introduce the use of WeChat Pay for purchases in its retail stores in a continued effort to elevate the in-store experience for customers. This cash-free digital payment experience, which allows users to pay for their goods and services from their mobile devices, is one of the most popular payment methods in China, with more than 300 million users linking their bank cards with WeChat or QQ, another flagship service of Tencent, as of March 2016.

    Today’s announcement builds on Starbucks rapidly expanding portfolio of digital innovations in China, which integrates the exceptional in-store experience with the digital Fourth Place experience. Earlier this year, Starbucks launched a mobile payment system in China aimed at providing My Starbucks Rewards® (MSR) members access to a fast, seamless and convenient way to pay for purchases, using their pre-loaded Starbucks Gift Card on their mobile devices.

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  • Tencent revenues up 13pc

    Tencent revenues up 13pc

    Third-quarter revenues grew by 13 per cent to RMB40.388 billion (US$5.951 billion) for China’s Tencent Holdings, an investment holding company whose subsidiaries provide media, entertainment, internet and mobile-phone value-added services, and online advertising.

    Tencent revenues from value-added services business increased by 9 per cent to RMB27.975 billion for the quarter, while revenues from online games revenues rose by 6 per cent to RMB18.166 billion, mainly driven by positive seasonality for PC online games and by continued contributions from new smartphone games.

    Social networks revenues went up by 15 per cent to RMB9.809 billion, reflecting growth from digital content subscription services, and to a lesser extent from virtual item sales.

    Revenues from online advertising increased by 14 per cent to RMB7.449 billion, performance-based advertising revenues grew by 18 per cent to RMB4.368 billion, and brand display advertising revenues increased by 9 per cent to RMB3.081 billion, primarily driven by higher contributions from mobile platforms such as Tencent News and the positive impact of the Rio Olympic Games.

    Profit attributable to equity holders of the company eased by 1 per cent to RMB10.646 billion for the quarter.

    Strategy continues

    Tencent Holdings continued its “Connection” strategy during the quarter by strengthening its social platforms and leveraging social traffic. More interactive social and performance advertising formats were added to drive user engagement, while advertiser tools were sharpened to improve performance measurement and deliver deeper data insight.

    For digital content, the company’s CMC (China Music Corporation) and QQ Music management teams were integrated, and there was “aggressive” investment in content for its video platform, resulting in a substantial growth in subscriptions. Partly because of a healthier copyright control environment, more users paid for content on the company’s digital literature platform.

    For payment-related services, the company says it made significant progress in driving merchant adoption. Nearly 700,000 merchants participated in its Weixin Pay “Cash-free Day” promotion in August – an increase of more than seven times year-on-year. A Weixin Checkout feature was introduced for merchants to simplify onboarding procedures and minimise payment integration work.

    Cloud services revenue more than tripled year-on-year as more enterprise accounts were opened and use by key accounts increased, particularly in sectors such as online games, online video and O2O services.

    During the year the company strengthened its mobile security in such areas as virus scanning, phony base-station detection, anti-fraudulent phone-number library, phone memory optimisation and speed boosting.

    More users

    For its key platforms, the company says monthly active users (MAU) for QQ increased by 1 per cent to 647 million, with new features including SMshow, offering animated personal avatars.

    During the Rio Olympics, more than 100 million QQ users participated in a virtual torch relay campaign by building augmented reality into phone-to-phone interactions.

    For Qzone, smart-device MAU also grew by 1 per cent, to 584 million. For WeChat and Weixin together, MAU reached 846 million, representing year-on-year growth of 30 per cent.

    Revenue growth was strong for the company’s social networks business through more game-related virtual items being generated, plus digital content sales.

    There was an 87 per cent leap in revenue from smartphone games, to about RMB9.9 billion. This was mainly driven by portfolio expansion and strong performance by major titles. At the end of September, Honour of Kings surpassed  a record 40 million daily active users.

    Advertising saw robust expansion, with Weixin and the mobile news app being the key contributors to year-on-year growth. Initiatives featuring the Rio Olympics attracted about 700 million unique visitors across the news and video platforms.

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  • Alibaba Group now Asia’s richest company

    Alibaba Group now Asia’s richest company

    Alibaba Group Holding has surpassed Tencent Holdings and China Mobile in market capitalisation to become Asia’s richest company.

    Alibaba’s market value rose to US$261 billion in New York last week, overtaking Tencent’s US$255.98 billion capitalisation in Hong Kong on Thursday during a trading week shortened by a public holiday.

    China Mobile was the region’s third-largest company, valued at $249.38 billion.

    Alibaba’s shares have risen 28.8 per cent this year to $104.64, making the owner of Taobao.com and Tmall eCommerce platforms the world’s 10th-largest company by value, according to Bloomberg data. The world’s five most valuable companies now gain their revenue from technology or the internet – Apple, Alphabet, Microsoft Corp, Facebook and Amazon.com.

    In Asia, technology and internet-related businesses have displaced oil refineries, manufacturers and banks in the top three spots.

    Samsung Electronics of South Korea is the other technology company among Asia’s 10 most-valuable corporations, valued at $191.76 billion.

    As well as eCommerce, Alibaba has businesses in internet finance, cloud computing, film investment and logistics. The Hangzhou-based company’s second-quarter revenue rose 59 per cent, the strongest since its 2014 initial public offering in New York.

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  • How brands are using VR to improve customer experience in China

    How brands are using VR to improve customer experience in China

    Tech-enhanced customer experiences have always had a very receptive audience in China, and as a result, VR technologies are being widely embraced by both brands and platforms.

    China has the world’s biggest ecommerce market and by 2020, it will dominate the retail sector also, according to PwC. The sheer size of the country’s retail consumer market is one reason why the rest of the world sits up and takes notice when China adopts new technologies in this sector.

    And while the rest of us have been dipping our toes in the VR pool, trying out Oculus Rift headsets at trade shows and testing the low-tech, low-cost Google Cardboard on the relatively limited VR apps available via smartphone, China has been forging ahead with this new technology, putting it to practical use and building a market for virtual retail experiences.

    It’s no coincidence that China’s big three Internet platforms (Alibaba, Tencent and Baidu) have all invested significantly in VR, in what is expected to become a market worth $8.5 billion by 2020. these figures suggest that VR is no mere novelty to the businesses that shape the country’s economy.

    Alibaba

    Alibaba’s Buy+, launched last month, is a virtual reality shopping programme, which allows users to choose clothes and accessories via the headset, assisted by a virtual shopping assistant. It will give Alibaba’s 400 million users access to a VR shopping experience with 3D renderings for hundreds of products, and will eventually allow retailers to create their own VR stores.

    China_VR_Alibaba_Buy+_Alizila_600

    *Source: Alizila

    While it’s still in concept mode, Alibaba anticipates that the technology will become as central to the shopping experience as smartphones are today, picking up on and exploiting consumers’ appetite for ever-evolving and exciting experiences.

    Tencent

    Tencent has taken a different approach in its quest to dominate the VR market by launching its own operating system (Tencent OS) and VR console project – the miniStation. Tencent is focused on China’s gaming community to kick start user interest, and plans to integrate all of its services and apps into the platform, including WeChat and QQ. This will undoubtedly open up all kinds of opportunities for retailers to engage with customers in entirely new ways.

    China_VR_Tencent_miniStation_600

    *Source: Tencent’s miniStation for QQ and WeChat.

    As these ecommerce giants lay the foundations for a vibrant and viable VR market, physical retailers also have their sights set on the growing interest in this technology and how it can work for them.

    Suning + Gome

    For example, Chinese electronic retailers Suning Commerce Group and Gome Electrical Appliances Holding Ltd have done a deal with HTC to set up around 10,000 VR experience sites across China by the end of this year, including virtual rollercoasters and other adventurous in-store experiences.

    OnePlus

    Another example is smartphone manufacturer OnePlus. It developed a VR space station to launch its latest handset. As part of the campaign, 60,000 people were ‘beamed up’ to the space station where they learnt about the phone and its features. Within six hours, the conversion rate was an impressive 30%, giving a very promising return on investment.

    Takeaways

    What these pioneering retailers and retail platforms have learned is that VR has a number of advantages as an experience mechanism:

    • It allows them to showcase multiple products in a very cost-effective way – around 80% of the cost of building a traditional, brick-and-mortar showroom

    • There’s no physical limit to what VR can do – it’s possible to develop truly innovative and extraordinary experiences which would usually be out of reach. Going into space, on a rollercoaster, under the sea or any one of an almost endless list of scenarios can be developed and delivered to customers

    • There’s a huge appetite for VR experiences in China – according to industry analysts Canalys, the country will account for 40% of all VR headset shipments this year, and people are queuing up to try out local offerings from DeePoon, Pico, Pimax, Idealens and, most recently, Xiaomi.

    China_VR_DeePoon_600

    *Source: DeePoon homepage.

    As the market continues to develop, industry insiders say VR in China is reaching a game-changing tipping point. Yang Tao, general manager of Beijing-based VR startup SweetTech, told the China Daily in March: “The market feels like it did on the eve of the first iPhone when it was unveiled in 2007”. Given what happened to the smartphone market in the years since then, this is something retailers can’t afford to ignore.

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  • Tencent Holdings rakes in $15 billion

    Tencent Holdings rakes in $15 billion

    Chinese eCommerce giant Tencent Holdings increased its revenues last year by 30 per to RMB101.9 billion ($US15.7 billion).

    Excluding its eCommerce business, the revenue increase was 38 per cent, to RMB102.2 billion.

    Tencent’s subsidiaries provide media, entertainment, internet and mobile-phone value-added services, and provide online advertising services in China.

    Chairman and founder Ma Huateng says its online game business had healthy revenue growth, mainly driven by smartphones, key PC titles and new client games launched during the year. The company’s social network revenues also grew, from increased digital content subscription services, QQ membership subscription services and virtual item sales.

    Revenues from online advertising shot up 110 per cent to RMB17.5 billion.

    Hong Kong- and Singapore-listed Tencent continued its traffic leadership in multiple online media categories such as video, sports, music, news and literature through partnering with premium content providers including the NBA, HBO, Paramount, Sony Music and Warner Music, and investing in original content.

    “During the year, we further executed our ‘connection’ strategy, bringing our own and our partners’ products and services to our consumers through cultivating an ecosystem around our core communication and social platforms,” says Ma in his chairman’s statement.

    Key initiatives for the group’s “internet-plus” ecosystem included:

    * Enriching products and services available within its platforms, such as introducing personal micro-loan products and municipal services like visa applications

    * Promoting online payment services

    * Growing mobile utility services, including security, a browser, an application store and strengthened infrastructural supports

    * Investing in equity stakes in leading companies in related internet verticals, such as Internet Plus Holdings.

    Industry trends

    Ma also noted a range of industry trends…

    “Messaging and social networking continued to rank as the highest time spent and widest penetration activities on smartphones, and evolved into increasingly relevant content-discovery media. Search queries moved primarily to mobile, and search remained an important content-discovery tool, along with application stores.

    “Online shopping became increasingly widespread, especially in lower-tier cities, and eCommerce transaction volumes sustained healthy growth rates.

    “Online advertising activity shifted decisively from PC to mobile, with particular growth in areas such as performance advertising on social networks, pre-roll advertising in video services, and in-feed advertising in news services.

    “Users proved increasingly willing to pay for digital content such as movies, TV series and music.

    “Mid/hard-core smartphone games, including PC game franchises moving to smartphones, boosted game-industry revenue.”

    Ma says China’s internet companies in sectors such as ride-hailing, classified listings, group buying, and online travel services competed with heightened intensity last year, leading to rapid user growth but reduced or negative profitability. “Consequently, several leading companies in these sectors consolidated with competitors, creating a wave of merger and acquisition activities.”

    There were more offline-to-online transactions last year which, together with the emergence of person-to-person payment transactions, contributed to substantial growth in online payments.

    Key platforms

    On Tencent’s key platforms, the QQ Wallet payment service gained popularity, with about 6 billion red envelopes exchanged within six days during the Lunar New Year holidays early this year.

    Qzone user activity benefited from enhanced features in areas such as sticker sharing and photo-album editing.

    There was year-on-year growth of 39 per cent for Weixin and WeChat together, with official accounts becoming a leading platform to connect users to content creators, merchants and advertisers.

    Weixin Pay also increased in popularity, with more than 32 billion red envelopes being exchanged within the six-day Lunar New Year holidays – growing by nine times year-on-year.

    Ma says the group’s social networks experienced 30 per cent revenue growth last year as digital content subscription services, QQ membership subscription services and virtual item sales were improved.

    “Our cloud service achieved more than 100 per cent year-on-year revenue growth as we promoted our services to key enterprise customers from a range of verticals such as eCommerce, O2O services, online games, online video and internet finance.”

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  • Alipay, WeChat drive China Jo-Jo sales

    Alipay, WeChat drive China Jo-Jo sales

    China Jo-Jo Drugstores, the US listed, China-based multichannel pharmaceutical and healthcare retailer, says customers are embracing Tencent’s WeChat and Alibaba’s Alipay to buy its goods from mobile phones.

    In the third quarter, Alipay mobile transactions with China Jo-Jo grew 84 per cent quarter on quarter, while sequential traditional payment transactions such as City Health Insurance payment transactions grew 27 per cent.

    According to research firm Analysys, Alipay and WeChat currently dominate mobile payment in China with 45 per cent and 19 per cent of the market respectively.

    “Integrating these mobile payment platforms is an important growth initiative for China Jo-Jo as consumers in China, especially the young and growing middle-class, have been keen to actively adopt mobile payment as the method of choice for their integrated mobile and physical retail store shopping experience,” the pharmacist said in a statement.

    “Providing customers this convenient and familiar mobile payment platform is helping to drive overall transaction growth in both our retail and online pharmacies.”

    Since launching Alipay’s mobile payment service in November 2014, China Jo-Jo has been initiating novel marketing campaigns including in-store sales and bonus promotions in order to attract and customers while promoting premium branded products. Payment transactions and marketing initiatives under WeChat Payment which launched in July 2015 have also been successful in growing China Jo-Jo’s customer base and overall transactions.

    Chairman and CEO Lei Liu says mobile payment platforms have had immense success in China providing consumers with a fast, secure and novel means of paying for both online and offline pharmacy goods and services that is becoming the standard method for paying for goods and services in China.

    “Mobile payment platforms now account for more and more of China Jo-Jo’s online payment transactions and is playing an integral role in the push to drive adoption of China Jo-Jo’s business model.”

    As of December 31, China Jo-Jo had 59 retail pharmacies in Zhejiang Province, China.

  • Ele.me may go to Alibaba

    Ele.me may go to Alibaba

    As more people start using their smartphones or the internet to order food, China’s eCommerce leaders are in a battle for supremacy.

    Now a food-delivery startup backed by Tencent Holdings, Ele.me, is planning a fast funding round of at least $1.25 billion, in a deal led by competitor Alibaba Group Holding, reports Deal Street Asia. It is aiming to close the round next month.

    If it goes ahead, Alibaba will become Ele.me’s controlling shareholder. It values the service at about $4.5 billion, and the deal could be announced before the Lunar New Year holiday starting on February 8, according to an insider.

    Earlier merger talks between Ele.me and group-buying site Meituan.com fell through, and Caixinpreviously reported that Ele.me was in discussions with Alibaba to raise funds.

    Meanwhile, Tencent and Alibaba are battling with China’s largest search company Baidu for front position as the local-services industry gains traction with more people going online or using mobile technology to order food, schedule beauty treatments or hire domestic helpers. Users of these services are predicted to rise 29 per cent to 400 million by next year, with sales expected to reach 7.28 trillion yuan ($1.1 trillion).

    Chinese internet companies have been the subject of $91.6 billion in acquisitions and investments over the past 12 months, according to Bloomberg data. Meanwhile, Tencent shares have fallen 1.7 per cent in Hong Kong to HK$133.10 ($17.08) – the lowest in almost four months.

    Alibaba and its financial affiliate, Zhejiang Ant Small & Micro Financial Services Group, have formed a joint venture called Koubei, in which each has agreed to invest three billion yuan to help the company expand into neighbourhood services.

    Baidu last year said it would invest $3.2 billion over three years in its own provider of local services,Nuomi.

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  • JD.com posts huge GMV sales increase

    JD.com posts huge GMV sales increase

    JD.com, China’s second largest eCommerce player, has reported a 76 per cent increase in core GMV sales in the third quarter to RMB111.0 billion (US$17.5 billion).

    Excluding Paipai.com – which the company is closing down by the end of this year – unique customers, annual active customer accounts increased by 62 per cent to 126.9 million year on year.

    Net revenues for the quarter RMB44.1 billion (US$6.9 billion), an increase of 52 per cent from the third quarter of 2014.

    The company fulfilled 329.7 million orders during the quarter, an increase of 85 per cent from the 178.2 million of the same period in 2014.

    But JD.com still fininshed the three months with a loss of RMB530.8 million (US$83.5 million) and a net margin of negative 1.2 per cent.

    “This was another quarter of strong growth, as JD.com increasingly becomes China’s source for fast, worry-free shopping online,” said Richard Liu, founder and CEO.

    “Our partnership with Tencent’s dominant Weixin and Mobile QQ platforms puts JD.com at the fingertips of virtually every Chinese mobile online consumer, and continues to drive rapid user growth. Looking ahead, we will stay focused on enhancing user experience, deepening ties with leading brands and working to further expand JD.com’s leadership in mobile eCommerce.”

    Sidney Huang, JD.com’s CFO, said third quarter results were “very healthy, with encouraging user growth and robust performance across all of our product categories”.

    “As China’s direct B2C eCommerce leader, JD.com is benefitting from the industry-wide shift to direct-sales eCommerce as we continue to invest strategically in our core business and high-growth initiatives,” he said.

    As at September 30, JD.com had approximately 90,000 merchants on its online marketplace and a total of 94,615 full-time employees.

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  • Paipai.com axed to fight counterfeiting

    Paipai.com axed to fight counterfeiting

    China’s number 2 eCommerce player JD.com has axed its consumer to consumer online storePaipai.com in a bid, it says, to cut sales of counterfeit goods.

    The store will be closed by December 31 and after a transitional period of three months, the company will completely close down the website of Paipai.com.

    “The shutdown of the C2C platform is in line with the company’s policy to combat the marketing and sale of counterfeit products and the company will make persistent efforts to protect the interests of consumers and brands,” JD.com said in a statement.

    Paipai.com, along with another site Wanggou, were acquired from WeChat parent Tencent in March 2014. The combined businesses have a goodwill and intangible asset value of US$400 million, making it a very expensive gesture in the war against counterfeit goods in Mainland China.

    The company says it has yet to calculate the book value of the loss given the two websites are accounted for in the books as a combined entity and Wanggou will continue to operate.

    While JD.com is amputating a limb, Alibaba is undergoing a high profile battle in the US courts with French luxury brand owner Kering which alleges Alibaba has failed to take sufficient steps to counter the trading of counterfeit goods on its various websites, as reported by Inside Retail Asia last week.

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  • Tie-up between Alibaba and Tencent a wake-up call for ‘bricks and mortar’ retailers

    Tie-up between Alibaba and Tencent a wake-up call for ‘bricks and mortar’ retailers

    Last week’s proposed merger between two of China’s leading consumer lifestyle sites was a wake-up call for firms that have yet to start an e-commerce platform in an economy where online transactions are tipped to total half of all consumer sales within seven years , experts say.

    Consolidation is raising barriers to entry in China’s highly competitive and rapidly growing online-to-offline (O2O) sector, where cab-hailing mobile application Uber and other firms try to draw customers to physical services via the internet. That means new entrants better have deep pockets and a smart business plan.

    Unless you have something special to offer, “a bricks and mortar strategy is basically dead in China”, said Shaun Rein, the Shanghai-based founder of China Market Research Group. And even then, O2O companies were still in cash-burning mode, “building market share but not generating revenues”, by subsidising services like a restaurant meal or cinema ticket to attract hits, Rein said.

    Last Thursday’s deal was a case in point. Valued at US$15 billion or more, the tie-up unites Alibaba-backed Meituan.com with Tencent-funded Dianping.com to create a dominant O2O player in services such as finding online deals, as well as in the group buying of coupons and accessing of ratings.

    The combined firm will now overshadow the sector’s third major player, the Baidu-owned Nuomi, which itself only recently unveiled plans to invest US$3.2 billion over the next three years, as it bids for a slice of an e-commerce market expected to grow from US$672 billion this year to US$1.97 trillion by 2019, according to eMarketer.

    Unfavourable demographics and competition from e-commerce create worse than expected headwinds to conventional consumer bands/products and distribution channels

    Jefferies analysts

    The speed at which China’s e-commerce market has grown has not surprised onlookers who say consumers savour the convenience of online shopping and home delivery rather than having to deal with gridlocked streets and polluted air.

    Chinese consumers bought 12.4 per cent of their retail products online last year. That number should rise to 33.6 per cent in 2019, forecasts eMarketer, and Rein predicts it may hit 50 per cent by 2022. By comparison, online retails sales in the United States, where retail space per capita is four times higher than in China, are expected to total just 9.8 per cent of total sales by 2019, barely budging from 6.5 per cent last year, eMarketer data shows.

    Those numbers are translating into a lot of deal making. There have been US$58.4 billion of internet deals involving Chinese companies this year, already almost double the amount for the whole of last year, Bloomberg data shows.

    China’s offline retailers have “to embrace e-commerce or fade away”, said Duncan Clark, chairman of BDA, a Beijing-based tech sector consultancy, while adding that managers must be mindful of the costs involved.

    Referencing the recent tie-up, Clark said: “Alibaba and Tencent are pragmatic when it comes to combining their proxies if it means ending ‘subsidy wars’ which get out of control. Its okay to toss in a few tens of millions of dollars into supporting a proxy, perhaps even a few hundred million, but beyond that logic kicks in and the temptation of combining forces to create a dominant player is too hard to resist.”

    The competition would only increase, Clark said, given improvement in logistics allowing same-day delivery of even refrigerated items.

    The lack of an e-commerce strategy is already weighing on investor sentiment, with a recent Chinese consumer report by investment bank Jefferies ranking a swathe of retailer and department store stocks “neutral” in part because of competition from online platforms.

    “Unfavourable demographics and competition from e-commerce create worse than expected headwinds to conventional consumer bands/products and distribution channels,” Jefferies analysts wrote.

    Challenges still exist for established retailers wanting to make the switch.

    “A lot of executives used to bricks and mortar can’t make the transition,” Rein said.

    Understanding the product range and service level expected by digital consumers was tough for people used to doing business in a different way, he said.

    “The competition is fierce and a lot will go out of business,” Rein said.

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  • China luxury spend offshore will double

    China luxury spend offshore will double

    The Chinese already account for 27 per cent of the world’s total luxury spending – and a staggering 80 per cent of that is spent outside the Mainland.

    China luxury spending outside China will double by 202 according to a report by China Luxury Advisors, presented to last week’s Luxury Retail Summit: Holiday Focus 2015.

    “What we’re really seeing is that [the Chinese slowdown is] just really not changing the amount of travel, it’s just changing the nature of it,” said Avery Booker, partner at China Luxury Advisors in a presentation reported in detail here by Luxury Daily.

    “We’re seeing fewer long haul trips among the middle class, and more people going to places like Japan and Korea to do shopping,” he said. “The purse shopper spending will remain strong even though average spend is going to decrease, and of course that’s just a volume issue.”

    Booker said the devaluation of the Chinese currency was so far having no perceptible effect.

    Chinese shoppers spend US$229 billion a year outside the mainland – which China Luxury Advisors predicts will double by 2020, based on the theory the $8000 per year per capita GDP is “the tipping point” at which outbound tourism booms. China has just reached that level.

    The Luxury Retail Summit was organised by Luxury Daily.

    In reaching its estimates China Luxury Advisors surveyed 1000 Chinese consumers 18 years and older, with a variety of incomes.

    Their most common destination outside the mainland is still Hong Kong, mainly due to its nearness and visa-free travel.

    China Luxury Advisors urged retailers to make their stores “Chinese consumer-friendly” to make the most of the booming trend. Mandarin speaking associates, Chinese dining options and accepting Alipay, Tencent or China Union Pay can make them feel at ease.

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  • Apple to launch online payment in China

    Apple to launch online payment in China

    Apple will launch an online payment service in China, as the tech giant seeks to expand in its largest market outside of the US despite fierce competition from local rivals.

    An Apple Company offering online payment has launched in the Shanghai Free Trade Zone (FTZ), an area set up as a testbed for financial reforms, China News Service reported late Thursday.

    Apple didn’t give a date for the launch, but the company told AFP that CEO Tim Cook hopes to set-up Apple Pay in China “as quickly as possible”.

    Cook previously said that he expects China one day to surpass the United States to become Apple’s largest market.

    But China’s e-commerce giant Alibaba dominates the country’s online payment sector, with the Paypal-like Alipay taking around 80 percent of the market.

    Internet firm Tencent is also catching up with a similar service provided via its popular messaging application WeChat.

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  • Ffan: Wanda’s online store goes live

    Ffan: Wanda’s online store goes live

    Nearly a year after three giant Chinese companies teamed up to take on Alibaba, the newly-mintedeCommerce store finally and quietly launched this week.

    The site, Ffan, is the result of a billion-dollar joint venture between Tencent, Baidu, and Wanda Group, a conglomerate best known for its chain of movie theatres and malls.

    The joint venture started with US$814 million in its pocket in August 2014, with Wanda holding a 70 per cent stake, and Tencent and Baidu splitting the remainder evenly. In January, it secured venture capital funding to the tune of US$161 million.

    Local commerce

    The new estore is designed to take on Alibaba’s eCommerce dominance, with a focus on helping people buy local products and services. That’s why visitors to Ffan can choose their city to see local deals.

    Baidu declined to comment on today’s launch and Tencent has yet to reply to Tech in Asia’s inquiry.

    At first glance, Ffan looks odd and rather bare. The only two product categories on the top navigation bar are “food” and “movie tickets.” Browsing through the city-specific food section reveals that most of the products are from retailers at Wanda’s shopping malls across the country. Indeed, users can browse through the Ffan site or accompanying mobile app according to their nearest mall.

    Wanda – a private company which boasted assets of RMB 534.1 billion yuan (US$85.6 billion) in 2014 – has reportedly been plotting a leap from offline retail to ecommerce for several years, but today’s launch doesn’t reveal much that should worry Alibaba or arch-rival JD right now. It’s not a general ecommerce store like Alibaba’s Tmall or JD, and the offerings are slim.

    Sill, Wanda has the reach – across malls, cinemas, hotels, resorts, theme parks, and several other areas – to challenge Alibaba in terms of the fast-growing interest on the web for local, on-demand products and services.

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  • Using WeChat to Grow Your Business in China

    Using WeChat to Grow Your Business in China

    In the world of mobile commerce, all eyes are on China.

    Even as China’s economy and overall retail sales growth drops, business-to-consumer (B2C) online sales are growing by 25 per cent each year. Data gathered from iResearch in a March 2015 report states that China’s gross merchandise volume (GMV) of the mobile shopping market reached 929.71 billion RMB in 2014, increasing by 239.3 per cent from the previous year.

    The growth was significantly larger than that of the overall GMV of the online shopping market. China has the world’s largest digital marketplace, and is predicted to grow three times faster than overall retail. The industry is primed for growth not only in the first-tier cities, but also in the third-tier and lower cities with an estimated half of total online sales coming from the lower tier cities by 2018.

    When considering the mobile commerce industry in China, one name stands out: Tencent’s WeChat has long been impacting the lives of Chinese consumers, and with its move to digital payment systems it now has the ability to revolutionise the mobile commerce industry in China.

    WeChat has a massive scale, with over 468 million monthly active global users and 25 per cent of users checking WeChat over 30 times a day. Last year, users spent US$15.3 billion on mobile data using WeChat.  As the fastest growing social media platform in the world, and the primary source of interaction between brands and Chinese consumers, foreign investors looking to be successful in China should take note. Chinese consumers actively embrace mobile commerce due to its easy to use, cost-effective payment and delivery system.

    There is huge potential for foreign investors to take advantage of WeChat payment systems for their Chinese consumers and to maximise their profits. WeChat allows foreign investors to interact with their consumers in a way that has not reached the same scale in the Western world.

    Fewer than 20 per cent of internet users in the US have used their mobile phones to pay for services and goods while more than half of users in China have done so. Multiple incentives exist for Chinese consumers to make their purchases through WeChat; enabling businesses to use these schemes to generate profit. Loyalty cards, membership schemes and discounts for paying online all compel cost-effective shoppers to make a purchase.

    In addition to this, due to the convenience of paying through WeChat, there is a higher chance of impulse purchases. However, this ease does not simply apply to the consumer. Brands are able to bridge the gap between attracting new consumers and engaging with paying consumers, which has already begun to change the face of shopping and retailing worldwide. Businesses utilising WeChat payment systems are already experiencing huge profits, and Tencent has stated that several official accounts are now making over US$1 million.

    Not only can consumers purchase items, but can also purchase services inside WeChat. Businesses with service accounts can take advantage of WeChat’s online-to-offline (O2O) business model. Both online and offline purchases are available to consumers. Customers can either pay for services or items by scanning the QR codes of products provided by offline retailers, or pay on web pages inside the app.

    All vendors, from big name brands to small and medium-sized enterprises are able to create service accounts in WeChat. Big name companies like McDonalds, Starbucks, Xiaomi, Watsons, and Pacific Coffee have all created service accounts. WeChat allows all vendors the potential for success and the ability for SMEs to create accounts is an important aspect for foreign investors to capitalise on.

    Certain industries, such as food, beverage and retail, tend to generate more profit as they are more primed for mobile commerce. That being said, taxi companies, airlines, newspapers, government organisations, and pharmaceutical companies are all using WeChat payments to their advantage.

    Tencent has now enabled users to pay their utility bills through WeChat, and more and more businesses are finding a way to use WeChat mobile payments to grow their business and attain a competitive advantage.

    It is crucial for foreign businesses entering a new market to take advantage of domestic trends in order to be competitive in that marketplace. Mobile commerce in China is constantly evolving and businesses like WeChat are revolutionising how business is conducted. WeChat allows both big name brands and SMEs to compete in the same market space which has the ability to change the entire industry. Entering the Chinese market has its difficulties, but applications like WeChat make it easier for foreign investors to communicate effectively with their Chinese consumers.

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