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For the complete report, get in touch with us at: [email protected] Abstract : Netscribes’ latest market research report titled Online Retail Market in China 2014 captures the current scenario of the online retail market in China. Currently the market is fast evolving and is expected to mature further in the ensuing years. Factors such as large presence of internet users coupled with a continued increase in purchasing power of the Chinese population is primarily pushing the market. Internet has been employed as a source of information, entertainment, communication and business, which has led to the success of the online retail market. While the population of internet users is on the rise, the population holding credit/debit cards is also rising impressively. Better online security services are encouraging people to pay for goods and services over the internet. Moreover online shopping is not limited by store timings or traffic problems facing the consumer en route to a traditional store. Chinese government has also removed various legal restrictions and has formulated new policies to attract foreign investment in its online retail sector. However, the industry also has to contend with several bottlenecks. Deluge of fake products sold online is hampering the growth of e-retail market. Despite significant developments in this market, consumers are still wary of buying goods online. Chinese consumers fear the use of credit cards for online transaction owing to the growing frauds. Psychological barrier coupled with increasing frauds also restricts the market growth. Currently Shopping through mobile device has quickly gained acceptance among Chinese digital consumers. Group buying, developing internal logistic system and use of social media are some other major trends observed so far in the market. Table of Contents : Slide 1: Executive Summary Macroeconomic Indicators Slide 2: Current Account Balance (2010 – 2015e), Exchange Rate: Half Yearly (Jan 2014 – May 2014) Slide 3: Lending Rate: Annual (2010 – 2013), Trade Balance: Annual (2009 – 2012), FDI: Net Inflow (2009-2012) Slide 4: GDP at Current Prices: Annually(2010 – 2015e), Inflation, Average Consumer Prices (2010 – 2015e) Market Overview Slide 5: Online Retailing – Market Overview, Major Online Chinese Retailers, E-Retail’s Share of Total Retail Sales (2010, 2011, 2012, 2013, H12014), Online Retail Share – Player Share (2013) Slide 6: Online Retailing – Market Overview, Online Retail Sales – Growth (2013 – 2018e) Slide 7: Online Retailing – Market Overview, Online Shopping Penetration – China (2012, 2013, 2014e, 2015e, 2016e), Online Shoppers – Growth Trend (2008-13), Mobile Online Shoppers (2012, 2013) Drivers and Challenges Slide 8: Drivers and Challenges – Summary Slide 9-15: Drivers Slide 16-18: Challenges Government Initiatives Slide 19-20: Regulations : Foreign Investment Trends Slide 21: Trends – Summary Slide 2
Citation preview
Online Retail Market – China
November 2014
2
Executive Summary
Market
Drivers & Challenges
Competition
Online retail market in China has been demonstrating rapid growth and development over the past few years
China’s online retail sales is expected to grow from USD x bn in 2013 to USD y bn by 2018, registering a CAGR of more than xy% during 2013-2018
Drivers:
- Increasing Internet Use
- Emerging Middle Class
- Extensive Usage of Plastic Money
- Enhanced e-payment services
- Rise in mobile Internet Users
- Growing social networking user base
- Consumer Benefits over Traditional Retail Format
- Benefits to Sellers over Operating from Conventional
Stores
Trends
Internal logistics networks
Use of Mobile Devices
Use of Social Media
Group buying
Challenges:
- Huge online counterfeit market
- Psychological barrier and adaptive difficulty
- Security issues
- System lacks talent and information resources
Major Online Retailers
Company A CompanyB Company C
Company D Company E Company F
ONLINE RETAIL MARKET IN CHINA 2014.PPT
3 ONLINE RETAIL MARKET IN CHINA 2014.PPT
•Macro Economic Indicators
•Market Overview
•Drivers & Challenges
•Government Regulations
•Trends
•Competitive Landscape
•Mergers and Acquisition
•Strategic Recommendations
•Appendix
4
SAMPLE Economic Indicators (2/3)
Lending Rate: Annual
a8 a7 a6 a5 a4 a3 a2 a1 %
Per Annum
2013 x4
2012 x3
2011 x2
2010 x1
Trade Balance: Annual
Commercial Bank Rates: Key Lending Rates as Prescribed by RBI (All Commercial Banks including SBI) - Minimum Rate General
N.B.: 2012-13 encompasses figure for Apr – Nov 2012
FDI: Net Inflow
2009 2010 2011 2012
a5
a4
a3
a2
a1
0
USD
bn
x4
x3 x2 x1
2009 2010 2011 2012
z
y
x
0
a4 a3
a2
a1
USD bn
ONLINE RETAIL MARKET IN CHINA 2014.PPT
5
SAMPLE With increasing prosperity and easy access to the Internet, online retail sales is likely to surge in the coming years
Online Retailing – Market Overview (x/x)
• In 2013, China became the world’s largest online
retail market
• By 2015, online retail sales volume is expected to
account for over x% of China's overall consumer retail
sales
• Alibaba accounted for around x% of overall Chinese
online retail with USD xx bn transactions handled in
2013
Major Online Chinese Retailers (2014)
Site Daily Page Views per visitor*
Percent of Chinese visitors (1st Sep)
X X X
X X X
X X X
X X X
Note: Major Online Chinese Retailers: Data taken as of 1st Sep 2014, *last three months data
ONLINE RETAIL MARKET IN CHINA 2014.PPT
E-Retail’s Share of Total Retail Sales Online Retail Market Share (2013)
a5
a4
a3
a2
a1
0
%
X
H1 2014
x5
2013
x4
2012
x3
2011
x2
2010
x1
Y%
x%
Y%
X%
6
SAMPLE …regularity of online purchase, boosts the Chinese online retail market
• Competition scenario among the online shoppers have
changed over the past years
Earlier competition focus was more on vertical fields like clothes or
food, but in present times consumers are accessing a broader range
of products, providing opportunities for the players to widen their
field of competition
• Online shopping has become a part of the daily routine of
many Chinese consumers
Online Retailing – Market Overview (x/x) Online Shopping Penetration – China
0
C
B
A
AA
2016e
a5
2015e
a4
2014e
a3
2013
a2
2012
a1
%
ONLINE RETAIL MARKET IN CHINA 2014.PPT
Online Shoppers – Growth Trend Mobile Online Shoppers
a3
a4
a2
a1
0
2013
x6
2012
Users (mn)
XX x5
2011
x4
2010
x3
2009
x2
2008
x1
x3
x2
x1
0 0
a3
a2
a1
% Users (mn)
2013
y
a2
2012
x
a1
Penetration Rate
Note: Online shoppers as % of total internet users population
7
SAMPLE …stimulating growth in the online retail market
• Better internet speed and rise in rural area coverage
are all contributing to easy online access
• Increasing activities on the internet and broadband
user base contributes to the growth in the online
retail market as internet is used as the channel for
reaching the consumer base
Increasing Internet Use (x/x) Average Online Duration: Weekly (Per Internet User)
Broadband User Base
z
y
x
0
Hours
x
2013
a4
2012
a3
2011
a2
2010
a1
ONLINE RETAIL MARKET IN CHINA 2014.PPT
a3
a2
a1
0
Users (mn)
xy
2015e
y
2013
x
No. of users
Average Internet Access Speed (2013)*
Average Internet Access Speed – Top 3 cities
Ranking Cities Average Speed (MB/s)
X X X
X X X
X X X
Note: *Figures includes users accessing internet using broadband modes, including xDSL, CABLE MODEM, optical access, power line communication, Ethernet, Wireless Broadband (e.g. 3G)
8
SAMPLE Increased usage of plastic money offers immense support to Online retail market in China
• While the population of internet users is on the rise, the population holding credit/debit cards is also rising impressively Transaction done via plastic money is the primary source
of revenue generation within the online retail market
• An anticipated increase in the penetration of plastic cards will further boost the Chinese online retail market
Extensive Usage of Plastic Money Impact Bank Cards Issued in China
0
1
2
3
4
5
a1
no. in bn
A
Q1, 2014
a2
2010
Y% X%
y x
Credit Card Transaction Value Growth
0.0
0.5
1.0
1.5
2.0
2.5
USD tn
xy
2013
y
2012
x1
The transactional value accounted for x percent of the total retail sales of consumer goods
ONLINE RETAIL MARKET IN CHINA 2014.PPT
9
SAMPLE Better online security services are encouraging people to pay for goods and services over the internet
• The People’s Bank Of China mandated the licensing of non bank payment service providers for conducting third party payment transactions, under which
Companies are require to report to the Central Bank, the commission rates charged for third party transactions and are subject to periodic checks by the same
• With the arrival of Web 2.0, e-commerce sites in China have begun tracking and publishing credibility records of online sellers, reducing the risk of fraud, helping online retailers overcome its biggest psychological barrier
• Online transaction security information website, 365anfang.com, was formally launched in 2010
• Cash on delivery systems and greater regulation of e-payment platforms are slowly on the rise
Enhanced e-Payment Services Impact
Rise in E-Payment Users E-Payment Providers – Market Share (2013)
a1
a4
a3
a2
D C B A
b
a
z
y
x
0
a4
a2
a1
0
% Users (mn)
XX
2013
a3
x3
2012
a2
x2
2011
a1
x1
B A
ONLINE RETAIL MARKET IN CHINA 2014.PPT
10
SAMPLE Internet access from cellular phones is an important driver for the Chinese online retail market
• Over half of the internet users in China use mobile phones for internet access Mobile internet penetration has increased to 81% of
total internet population in 2013
• On Taobao more than abc “cell phone stores” have been set up to drive sales Increasing use of smart phones with advanced utility and
security features provides improved and convenient access to the internet, boosting the online retail market
Rise in Mobile Internet Users Impact Mobile Internet Users
B
A
0
C
B
A
0
% Users (mn)
2013
a4
x4
2012
a3
x3
2011
a2
x2
2010
a1
x1
y x
Mobile Application – Utilization Ratio*
0
20
40
60
80
100
%
y7 x7
Online Game
y6 x6
Online Video
y5
x5
Online Music
y4 x4
Mobile Search
y3 x3
Netnews
y2 x2
Instant Messaging
y1 x1
Travel Booking
y16 x16
Mobile Forum
y15
x15
Group Buying
y14
x14
Phone Banking
y13 x13
Online Payment
y12
x12
Mobile Mail
y11 x11
Online Shopping
y10
x10
Social Networking
y9
x9
Microblog
y8 x8
Online Literature
2012 2013
*Note: Utilization ratio of various mobile applications by mobile internet users
ONLINE RETAIL MARKET IN CHINA 2014.PPT
11
SAMPLE Deluge of fake products sold online hampers the growth of online retail market
Huge Online Counterfeit Market Impact
IP Infringing: By US Officials
x
y
y x
XXXXXX
• China has become the biggest online retailing market in terms of revenue and counterfeit products and sales on e-commerce sites is an increasing trend nowadays
• Many e-commerce platforms are shutting down their third party online retail stores
• Amazon and Dangdang shut down their third-party online stores in March 2014 after the shops were found to be selling fake skin-care products
• Availability of cheaper fake products will put pressure on brands to lower their own prices and it can also drive up a brand’s marketing costs because sellers of phony goods often bid up paid search terms for online transactions
ONLINE RETAIL MARKET IN CHINA 2014.PPT
12
SAMPLE Regulations : Foreign Investment (x/x)
Note: MIIT refers to Ministry of Industry and Information Technology
• AAA
AA
• AAA
AA
• AAA
AA
• AAA
AA
• AAA
• XX
Government of China has removed various legal restrictions and has formulated…
ONLINE RETAIL MARKET IN CHINA 2014.PPT
13
SAMPLE Shopping through mobile device has quickly gained acceptance among Chinese digital consumers
Use of Mobile Devices
• XX
• XX
• XX
• XX
• XX
• XX
• XX
• XX
Smartphone Usage (2013) *
Note: * Use of Smartphones for searching price comparisons and Product review
D
C
B
A
0
%
Singapore
a3
India
a2
China
a1
Smartphone Usage: Online shopping (2013)
D
C
B
A
0
%
US
x2
China
x1
Mobile Shopping Apps – Monthly Estimates
Application Name Active Accounts (mn) Average Usage Times
X X X
X X X
X X X
X X X
X X X
Online shopping through mobiles is
getting more attention
ONLINE RETAIL MARKET IN CHINA 2014.PPT
14
SAMPLE Porter’s Five Forces Analysis
Bargaining Power of Buyers • XX
Impact High
E-COMMERCE MARKET IN INDIA 2014.PPT
Threat of New Entrants
XX
Impact High
Bargaining Power of Suppliers • XX
Impact Low
Threat of Substitutes • XX
Impact Medium
Competitive Rivalry • XX
Impact High
15
SAMPLE Competitive Benchmarking (X/X)
Public Trading Comparable (FY 2013)
Company A Company B Company C Company D Company E Company F
Market Capitalization (USD mn)
X X X X X X
Share Price (USD) X X X X X X
EV/EBITDA (x) X X X X X X
EV/Revenue (x) X X X X X X
PE Ratio X X X X X X
Note: Market Capitalization is as on 16/09/2014, Share Price is as on 15/09/2014 and PE ratio is as on 16/09/2014
ONLINE RETAIL MARKET IN CHINA 2014.PPT
16
SAMPLE Key Ratios of Top 3 Companies – Operational Basis (FY 2013) (3/3)
Competitive Benchmarking (x/x)
• XX
• XX
• XX
• XX
0
200
400
600
%
Vipshop Holdings Ltd.
z2
z1
JD.com,Inc.
y2
y1
Alibaba Group Holdings Ltd.
x2
x1
XX YY
ONLINE RETAIL MARKET IN CHINA 2014.PPT
17
SAMPLE Public : Domestic Company – Company A
Key People
Products and Services
Company Information Locations – China
Corporate Address
XX
Tel No. XX
Fax No. XX
Website XX
Year of Incorporation XX
Ticker Symbol XX
Stock Exchange XX
Category Products/Services
Cosmetic Products
XX
Others XX
Name Designation
XX XX
XX XX
XX XX
XX XX
Headquarters
ONLINE RETAIL MARKET IN CHINA 2014.PPT
18
SAMPLE Financial Snapshot Key Ratios
Financial Summary
• The company earned a net profit of USD 25 mn in FY 2013, as compared to net profit of USD 8.1 mn in FY 2012
• The company reported total Income of USD 483.9 mn in FY 2013 registering an increase of 107 per cent over FY 2012
• The company earned an operating margin of 14.15 per cent in FY 2013 as compared to 4.34 per cent in FY 2012
Financial Summary
Profit / Loss Total Income
233.4483.9
25.0
8.1-4.0
0
200
400
600
-20
0
20
40
2012 2011
21.8
2013
Profit USD mn
Total Income USD mn
Indicators Value (16/09/2014)
Market Capitalization (USD) 3,741.4 mn
Total Enterprise Value (USD) 3,164.1 mn
EPS (USD) 0.21
PE Ratio (Absolute) 122.15
Particulars y-o-y
change (2013-12)
2013 2012 2011 2010
Profitability Ratios
Operating Margin 9.80 14.15% 4.34% -20.19% N.A
Net Margin 1.70 5.17% 3.47% -18.35% N.A
Profit Before Tax Margin 3.73 8.12% 4.39% -20.65% N.A
Return on Equity -13.01 33.05% 46.06% -43.52% N.A
Return on Capital Employed 34.88 90.49% 55.61% -42.54% N.A
Return on Working Capital 21.69 108.27% 86.58% -80.22% N.A
Return on Assets 20.81 35.05% 14.24% -23.28% N.A
Return on Fixed Assets 766.14 1269.26% 503.13% -962.80% N.A
Cost Ratios
Operating costs (% of Sales) -9.83 85.83% 95.65% 120.01% N.A
Administration costs (% of Sales) -4.98 25.09% 30.07% 103.82% N.A
Interest costs (% of Sales) 0.00 0.00% 0.00% 0.00% N.A
Liquidity Ratios
Current Ratio 25.17% 1.53 1.22 1.64 N.A
Cash Ratio 50.62% 0.97 0.64 1.06 N.A
Leverage Ratios
Debt to Equity Ratio N.A. N.A N.A N.A N.A
Debt to Capital Ratio N.A N.A N.A N.A N.A
Interest Coverage Ratio N.A N.A N.A N.A N.A
Efficiency Ratios
Fixed Asset Turnover -22.64% 89.54 115.74 47.68 N.A
Asset Turnover -24.52% 2.47 3.28 1.15 N.A
Current Asset Turnover -26.77% 2.64 3.61 1.55 N.A
Working Capital Turnover -61.65% 7.64 19.92 3.97 N.A
Capital Employed Turnover -51.84% 6.38 13.25 2.37 N.A
Improved Decline
ONLINE RETAIL MARKET IN CHINA 2014.PPT
Public : Domestic Company – Company A
19
SAMPLE Key Business Segments Key Geographic Segments
Business Highlights
Description News
Overview XX
Recent
Developments XX
New
Development XX
100%
50%
0%
2013
100.0% 100%
50%
0%
2013
100%
People’s Republic of China (PRC)
The company’s geographic reportable segment is
‘Peoples Republic of China’
Note: * Operation to Sell or to Facilitate Third Party Merchants to Sell Beauty Products, Apparel and Other Lifestyle Products
The company operates through single reportable segment
namely, Operation to Sell or to Facilitate Third Party Merchants
to Sell Beauty Products, Apparel and Other Lifestyle
Products
ONLINE RETAIL MARKET IN CHINA 2014.PPT
Public : Domestic Company – Company A
Operation*
20
SAMPLE
XX XX
XX XX
T O
W S
ONLINE RETAIL MARKET IN CHINA 2014.PPT
Public : Domestic Company – Company A
21
SAMPLE Private : Domestic Company – Company B
Key People
Products and Services
Company Information Locations – China
Corporate Address
XX
Tel No. XX
Fax No. XX
Website XX
Year of Incorporation XX
Category Products/Services
Products XX
Name Designation
XX XX
XX XX
Headquarters
ONLINE RETAIL MARKET IN CHINA 2014.PPT
Headquarters
22
SAMPLE Business Highlights
Description News
Overview XX
Some of the Current and Pending Investors
XX
Current and Pending Subsidiaries / Investments
XX
Private : Domestic Company – Company B
ONLINE RETAIL MARKET IN CHINA 2014.PPT
23
SAMPLE
XX XX
XX XX
T O
W S
Private : Domestic Company – Company B
ONLINE RETAIL MARKET IN CHINA 2014.PPT
24
SAMPLE Mergers & Acquisitions (M&A)/Private Placement (x/x)
Announced Date Closed Date Transaction Type Target Buyer/Investors Sellers Deal Size (USD mn)
XX XX XX XX XX XX XX
XX XX XX XX XX XX XX
XX XX XX XX XX XX XX
XX XX XX XX XX XX XX
XX XX XX XX XX XX XX
Note: Data for the year 2014
ONLINE RETAIL MARKET IN CHINA 2014.PPT
25
SAMPLE Strategic Recommendations (x/x)
• XX
• XX
• XX
• XX
• XX
• XX
Track down the indirect indicators that shape up consumer behavior across tier II and III cities in China
XX
XX
ONLINE RETAIL MARKET IN CHINA 2014.PPT
26
Thank you for the attention
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ONLINE RETAIL MARKET IN CHINA 2014.PPT