Chinese e-commerce business opportunities for Finnish companies

Transcription

1 Chinese e-commerce business opportunities for Finnish companies

2 Food from Finland pre-study Interviews with 25 Finnish Food companies Studied and compared ordinary e-commerce to cross-border e-commerce. Interviewed e-commerce service providers (TPs) to learn about the business model, pricing structure and service fees. Studied how and what other western countries are selling through cross-border. Researched what Finnish products would be suitable for cross-border e- commerce.

3 Market Overview Market Dynamics Despite a macroeconomic slowdown in China, online consumer spending is growing at close to 50 per cent a year, particularly in fast-growing second and third-tier cities. E-commerce is believed to account for just over 40% of the world s retail e- commerce sales this year. China has around 332 million online consumers. The Chinese Government is supportive of e- commerce as it s in line with their long-held policy aim of driving domestic consumption to reduce reliance on investment and exports. Source: Billion USD Retail ecommerce sales in China ,00% $1 568,39 50,00% $1 208,31 40,00% $911,25 30,00% Retail ecommerce Sales $672,01 % Change $472,91 20,00% % of total retail sales 10,00% 0,00% Y 2014 Y 2015 Y 2016 Y 2017 Y 2018 Year

4 Trends in the Chinese e-commerce industry

5 Market Overview She-commerce According to Nielsen research, the typical online buyer of imported products in China is female, younger than 30 and with an income of more than RMB 11,000 (approx 1600) per month. Frequently cited reasons for shopping online include: Accessibility. Convenience. Low prices. Greater assortment. Detailed product information & customer reviews. Confidence: consumers place higher levels of trust in the authenticity of purchases made on major B2C platforms such as Tmall, JD.comand Yihaodian.

6 Market Overview Consumer behavior Chinese customers are disloyal to brands, as they like to switch between product providers, and often try new brands and products. Some 40% of all online sales are believed to be assisted sales. Also, they often leave reviews. Individuality is becoming increasingly important to them, as the Chinese customers are progressively targeting purchases which reflect their individual identity, which leads to development of brand awareness and diversification of tastes.

7 Market Overview Growing Demand for Imported Food 40% of Chinese consumers buy food online, in contrast to just 10% of the US consumers The food currently offered online is dominated by dry packaged or canned food. The product categories of imported fruit and other types of fresh food are among the fastest growing categories in urban areas. Chinese consumers are looking for quality & safe imported food products. The demand for health food and supplements is also growing. Domestic food scandals and concern for food safety are some of the key drivers of the demand.

8 Market Overview Growing Demand for Imported Food Apparel is the most popular product category for online purchases, however, however, the most frequent online purchases are packaged and fresh food (34 times a year vs. 22 times for apparel)

9 Market Overview The Main Marketplace B2C Players B2C e-commerce in China is dominated by marketplaces, such as Tmalland JD. Almost all large B2C shopping platforms largely consist of products which are offered by a third party brand owner, wholesaler, distributor etc. Retail ecommerce Sales Share in China, by Site, 2014 Tmall (multi) JD.com (multi) Suning (Electronics) vip.com (Flash sales) Gome (Electrical Appliance) Yihaodian (Groceries) Dangdang (Electronics) Amazon.cn Yixun (Electronics) Jumei (Beauty) Other 0% 10% 20% 30% 40% 50% 60% 70% Source:

10 Market Overview The Main Marketplace B2C Players Marketplace store (Tmall, JD) 90% of all sales 50% of the brand s SKUs (mainly bestsellers) Heavy marketing Needs a perfect quality of service (chat function, etc) Sales are public Volume driven Enclosed world the marketplace owns the customers and the data Vague search results on Baidu Brand store (.cn store) 10% of all sales (some brands have less than 1% sale on their own website) Full assortment of SKUs Branding History Values E-magazine Shop locator OmniChannel ecrm

11 Search engines: Baiduis not google. In China, the top 3 search engines are Baidu, 360 and Sogou. Google, Bing and Yahoo, together with other small Chinese search engines only total to of 2.03% of the entire search engine market. Baiduis often compared with googlebut actually operates differently.

12 Cross-border e-commerce

13 What is cross-border e-commerce? International e-commerce is called cross-border ecommerce. Cross-border retail ecommerce has grown in recent years as the number of channels, payment methods and offerings has improved. China already has 18 million cross-border shoppers. The primary advantages of cross-border sales are reduced import taxes and simpler quarantine and inspection procedures. Examples: healthcare products are not required to carry China s mandatory Blue Hat certification. Companies with no presence in China qualify for crossborder e-commerce.

14 What is cross-border e-commerce? China s leading e-commerce marketplaces Tmalland JD have both launched cross-border sites TmallGlobal and JD Worldwide. Cross-border online shoppers top shopping destinations: US (84 %), Hong Kong (58 %), Japan(52 %), UK(43 %), Australia(39 %). Top-selling international product categories include baby and maternity products, apparel; cosmetics; electronics and home appliances; health and nutrition; grocery and fresh foods such as Washington State apples, California wine, and seafood from Ireland has also seen the arrival of bricks-andmortar stores set up by cross-border e- commerce operators, and this 020 trend is expected to carry on.

15 Cross-border e-commerce Consumer Guaranteed product quality is the prime reason behind cross-border purchases made by Chinese consumers. Lower prices, improved product range and access to brands and products that are not available from domestic sources are other motivating factors. Major Reasons for Cross-border Online Shopping in ,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 80,0% Assured product quality Cheaper 67,8% 65,5% Brand preference Scarcity of products: not available on domestic sites Diversified products 46,7% 53,0% 52,0% Bought the product when traveling overseas and willing to buy it again 39,6% Others 0,4% Source:

16 Cross-border e-commerce Logistic/Fulfillment model Direct shipping from Finland Through Bonded Warehouse at FTZ Inventory kept at Bonded Warehouse (FTZ)

17 Cross-border e-commerce Tax rates (compared to ordinary trade) Each order under 500 yuan (approx 70 ) is duty-free, and each order from 500 to 1,000 yuan incurs a 10- percent tariff, compared with ordinary imported goods being taxed around 40 percent on average. Food, Beverage Textile & Manufactured Goods Cross-Border e- Commerce Trade Ordinary Trade Personal Postal Articles Customs tariff rate VAT Tax Rate Food 10% -35% 17% 10% Beverage 10% - 65% 17% Liquor 50% 40% - 65% 17% Tobacco 50% 40% - 65% 17% Clothing 9% -36% 17% Accessory 9% - 36% 17% 20% Home Textile 9% - 36% 17% Others 9% -36% 17% Leather Wear & Accessory 10% 25% 17% Lugagge 25% -35% 17% Luggage & Boot Satchel, Packsack, Handbag 25% -35% 17% 10% Wallet, Key Case 25% - 35% 17% Others 10% 17% Source: JD (JingDong)) Boot 25% 17%

18 Nation Branding and crossborder e-commerce

19 Nation Branding and cross-border e-commerce TmallGlobal scountry pavilions/country malls In June, 2015, Tmallannounced the launch of 12 "country pavilions" at TmallGlobal, aimed to organize foreign brands country-by-country. JD followed by launching country malls. Authenticity has become a key factor for Chinese consumers hence the importance of country branding. Tmallis soon to expand the number of country pavilions from 12 to 39. A pavilion is not a physical shop, but rather a collection of country branded shops/products.

20 Nation Branding and cross-border e-commerce United Kingdom s presence Royal Mail Tmall Global store Sainsbury s TmallGlobal store Holland & Barrett House of Fraser

21 Nation Branding and cross-border e-commerce Australia s presence Australia Post Store: sells bath & spa treatment, beauty & personal care, food, baby products, vitamins and supplements In the pipeline: Canadian Post, Polish Post, French Post amongst many others.

22 Nation Branding and cross-border e-commerce Holland s joint effort Holland launched the Holland Pavilion on TmallGlobal in late October, during a visiting Dutch delegation trip to China, including Dutch King Willem-Alexander. Built in partnership with the Dutch Consulate, the Holland pavilion on TmallGlobal will feature popular Dutch brands such as Nutrilon, Hero Baby, Philips and Friso. Albert Heijn, Holland s largest supermarket chain, has also opened an online flagship store on TmallGlobal. Alibaba stravel website, Alitrip, announced agreements with KLM and the Netherlands Board of Tourism & Conventions. KLM agreed to launch an Alitrip.comflagship store selling airline tickets and other services to Chinese travelers.

23 Swedish brands selling through a holding company based in Karlstad Migyston(MFS store)

24 Selling through a Holding company Sweden: Migyston(MFS store) Holding company based in Karlstad, Sweden. Sells food and healthcare products Logistics by ocean, air and train cargo. Direct parcel services from Karlstad to Chinese households (via Swedish Post) Warehousing and distribution in Karlstad. Storage, distribution & custom clearance by own company in Zhengzhou Using several resellers and agents to get volume, also working with store chains in Hong Kong and Taobao(C2C) No exclusive deals with the brands/companies Bestselling brands: Semper and ICA muesli Turnover: 13 MSEK 2014 (forecast: 35 MSEK 2015)

25 Norway s bilberry juice brand Ritni is selling well through a multi-brand store, shipping from HK

26 Finnish Offering

27 Finnish Offering Interviews with Finnish F&B companies Around 25 Finnish F&B companies have been interviewed for this Pre-study. 10 companies have singled out a product they would like to try and sell online. Premium or super premium segment. China is important exciting and intimidating. Difficult market, lack of knowledge of the market/e-com, lack of resources. No brand awareness for Finnish food in China. Companies positive towards selling together with other Finnish F&B brands in China under a Food from Finland umbrella on an e-commerce platform in China. Collected efforts speed things up. Join forces when it comes to brand building and marketing.

28 Branding the Food from Finland shop -suggested communication platform

29 Finnish food products suitable for cross-border For cross-border e-commerce, packaged or canned goods are the most suitable product categories for the time being. Famous brands, health supplement, and/or baby milk formula are needed as so called hero products to build traffic and sales volume.

30 Execution Plan This execution can be applied to opening the first Food from Finland store on for instance TmallGlobal.

31 Execution Plan Offering meets Demand Market demand Finnish offering Sales channel

32 Next steps

33 Execution Plan TP Service Scope

34 Execution Suggested TP workflow structure

35 Thank You! In other countries, e-commerce is a way to shop; in China it s a lifestyle This is just the beginning!