E-Commerce Drives Transformation & Upgrading of Business Ecosystem In Textile & Apparel Industry. Alibaba Group Jianhang Jin Oct

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1 E-Commerce Drives Transformation & Upgrading of Business Ecosystem In Textile & Apparel Industry Alibaba Group Jianhang Jin Oct Beijing

2 China became the world s biggest online retail market in 2013 From 2006 to 2012, compound annual growth rate of online retail market in China has been increased up to 99%. China ranked third globally surpassing the UK in 2010 and became the No. 2 exceeding the Japan in 2011; In 2013,China surpassing the U.S. became the world s biggest online retail market. China became the world s biggest online retailing market in 2013 CAGR Yr Yr2012 Billion $ 350 Figure 3 Online retailing market scale of China, U.S., Japan, & UK 99% % % % e Data Source Ministry of Commerce of the People s Republic of China iresearch Analysys\ U.S. Census Bureau\ Forrester Research\ METI Ali-Research Center

3 Apparel has become the most popular product category of E-commerce. Many traditional brands have had to resorting to Go Online China s clothing online shopping market was approximately at 429 billion in2013 which took up a quarter of all categories online shopping. Penetration rate of clothing online retailing is about 20%. (For every 100 clothes, there are 20 pieces sold via online); home textile took up 15%. About 95% clothing brands have already transformed their business model to expand to online. Data source iresearch

4 Data Analysis Country town has higher online purchasing power than metropolis s Overall transaction volume of country town is well below the 1 st tier & 2 nd tier cities ; But online shopping frequency per capita (54:39) and transaction value ( 5, 600 vs. 4,800) in country town are much higher than metropolis s. Many Chinese traditional brands are very popular & well known in countrytown, such as 3 rd tier & 4 th tier cities are emerging markets Year 2012 data from Taobao

5 E-commerce helps tradition clothing brands to establish online distribution channels inexpensively and fast. Establishment of traditional offline distribution channels: high cost on geographical coverage, manpower, capital and many other resources Establishment of online distribution/selling channels: low cost, high efficiency, no geographical boundary Manufacturer Manufacturer Root/1 st Distributer Online Retailers/Merchants Secondary Distributer The 3 rd Distributer Retailer Market information Delivery Model & workflow Information Delivery model & workflow Consumer Consumer

6 Customers Classification become very easy to classify customers by analysis of their online clothes shopping behaviors Characteristic Dressing Style Consumers in transition period Mainstream Culture & Fashion Follower Young women getting started for her first job Due to environmental & role changes, they are eager to get well along with new environment as quickly as possible Variety of ages Students or office worker Dress appropriately and suitable for new working and social environment Some one is self-motivated for the changes; but some on has to be influenced by others Follow the mainstream fashion trend and not in pursuit of self-identified & uniqueness/stylish Sub-Culture Follower Middle level of income Post 90 s students Stable income and lifestyle Middle Class/ White Collar class Have their own hobbies and fill themselves into the subculture group Chase the fashion trend of subculture community Enjoy life and open to try different types of life style Self-identified Consumer Base in the 1 st tier city Working for over 3 years High income and Well educated Classic Focus on brand spirit with high brand loyalty Self-identification Both themselves & their friends have overseas educational background or overseas travelling experience

7 E-Commerce provides innovative & effective ways for brand building Traditional brand promoting model= Massive TV ads+ Celebrity Endorsement According To Statistics, Jinjiang city, Fujian province has more than 100 companies that had invited over 1,100 celebrities endorsing their brands. Anta paid 10 million to invite Kong Linhui, an athlete star, for brand promoting when its revenue reached 50 million. Brand building on Internet = Consumer Interaction+ Iterative Regeneration +SNS

8 Case Study -transforming business from mainly exportation & B2B(wholesale) to online retailing & B2C 20% 30% 50% Nov. 11, Daily Sales : 120 millions RMB Group Sales n 2013 : over 1 billion RMB 外 贸 代 工 批 发 零 售 电 子 商 务 OEM: 50% Wholesale & offline Retail: 30% Online retail: 20% OEM: 10% Wholesale & offline Retail: 20% Online retail: 70% Online retail: 100% 2010 年 Just get started Ecommerce to expand business, Foreign trade and wholesale are in the most prosperous period. Core Style: Art life for linen & cotton Outsourcing factories and logistics Business operation is more flexible & concentrated Offline sales channels became the lifesaving straw in boosting sales revenue over to billions for these online brands

9 Big Data gives apparel brands tremendous power to keep balance between production& marketing Big Data can help brands grasp precisely in product planning,advertising and supply-chain, etc. The figure show the popularity of many apparel sub-categories via mobile access during a specific period of time : big colored dots shows that Dresses, Socks & Hosiery, Low Boots, Casual Pants were the most popular categories searched by users at that time.

10 E-commerce promotes the business model innovation Pre-Order : last year on Nov.11 single sales day, 罗兰家纺 generated sales revenue 11.5 Million (yuan) by group-order + pre-order. Cross-border marketing: consumers tend to be younger, so can blend into more elements the young people like.

11 Business Model Innovation: TV to Online (T2O) Watching Fashion TV Show and Shopping Online 女神的新衣 TV show Fashion Designers Stars 24 hours countdown producing professional buying agents bidding high pricing for copyright of design + audiences directly go shopping at Tmall via mobile access TV to Online: buyer can place orders online directly to buy the most trendy clothes shown on TV rather than just watching fashion TV show and looking for where can buy. Result T2O model drives massive page views to online shops, and transaction volume has been dramatically increased as well; it does not only continually increase online sales of the best seller clothes, but also improve online shop s sales performance on the daily basis.

12 Conclusion Five main changes brought by E-Commerce to textile & apparel enterprises Changes Tradtional Business Model E-Commerce Production Massive Volume & Low Cost Small Order Variety of product categories Quick response Sales/Distribution Channel Manufacturers->Distributors- >Consumers Manufacturers->Consumers Inventory Control High Volume of Inventory Zero Inventory may possible Promotion/Advertising Unspecified Specified & Customized to Targeted Audience By word of mouth/reputation Management Management Simulation Data-driven Management

13 The trilogy of E-business transformation for traditional clothing enterprise Strategy Running by small steps & Learning while doing l Integration of production and marketing operations l Flexible Production C2B l Build Brand Awareness l Refined management l Minimize inventory (increase inventory turnover even to zero inventory) l Establish domestic distribution channels De-stocking Branding

14 Thank You!

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