E-Commerce in China: Alibaba Is Just the Beginning

Alibaba has attracted global attention with its recent IPO, but it scratches the surface when it comes to other innovative e-commerce platforms coming out of China.

So Alibaba finally went public a few weeks ago, making it the biggest IPO in history. Most people outside of China had not heard of Alibaba or had any real clue what business it was actually in. And through the one-month ramp-up toward the IPO, the world got an inside peak into China’s e-commerce domain, which was met with mixed feelings of amazement, confusion, and slight skepticism.

For myself, having lived in Asia for more than eight years now and seeing firsthand the rapid development and urbanization of China, its adoption toward all things digital, and its embracement and behavioral acceptance of buying online, I am constantly amazed and totally bullish on its future. Here are a few reasons why.

Socially Connected Buying

WeChat, the WhatsApp for China, recently launched a new e-commerce offering called the “WeChat little store,” which allows merchants to open online stores directly on the WeChat platform, currently 400 million strong in China. This gives brands the power to sell their goods directly via the social network, with WeChat handling all the order processing, logistics, and payments. This is very much in line with Chinese consumers’ propensity for comfortably buying through socially connected platforms.

Weibo, the other massive social platform in China, has seen a surge in brands opening social storefronts on its platform, the likes of Nike, Burberry, L’Oreal, and others. In 2013, Mercedes-Benz was successful in selling 666 limited editions of its smart car on the Weibo platform. Mao Jingbo, its vice-president added that “It’s a new way to engage with consumers and is the first time that our customers will get the complete experience of using social media to do a variety of things, ranging from communications to purchasing cars.” 

E-Commerce for Everyone 

In China, it seems that the e-commerce model is really for anyone in any type of business regardless of class or position. Right now, China’s wealthy can now book a space vacation on Taobao, China’s largest online store operated by Alibaba. With a sense of adventure and at least $96,000, Chinese travelers have the chance to book their very own space journey on the e-commerce platform.

At the other end of the spectrum, we are seeing local street vendors in Beijing selling Chinese pancakes set up e-commerce storefronts catering to workers or students in the area. The students can go online and pre-order their food, while the food vendor prepares it offline at his or her stand and then has it personally picked up and delivered through local couriers. 

Logistical Amazement 

JD or Jingdong Mall, one of the largest online retailers in China, started out selling electronics, mobile phones, and computers, but later diversified into fashion apparel, books, food, and more. JD has built China’s biggest logistics network consisting of 86 warehouses, 1,620 delivery stations, and more than 24,000 delivery staff. As a result, JD is able to provide next-day delivery services to 256 cities.

This is in stark contrast to some of the more foreign-based players who use third-party delivery companies and are typically seeing three-five business day deliveries. Recently, Amazon China closed its home appliance business, shifting it to a third-party open platform instead. This exit indicates that it is losing big market share in the category to leaders like JD and Tmall, who enjoy advantages in online traffic and logistics.

As massive Chinese e-commerce companies start to go abroad, they’ll be bringing with them a massive logistics enterprise and process that will make them a strong force to compete with. 

Focus on Verticals 

In May this year, Jumei, the number one online beauty product retailer in China, went public on the NYSE. As of 2013, there were 10.5 million active users within Jumei who had made a purchase in China. Interestingly, 51 percent of these sales were coming from Chinese tier three and tier four cities – cities beyond Shanghai and Beijing.

Consumers in China have been more drawn to these vertically based e-commerce platforms that provide a real focus on a particular category, like beauty and cosmetics. In Jumei’s case, they have a very usable website and launch 50 new stock keeping units (SKU) every day and refresh all their products on a three-day cycle, hence their inventory is always fresh and exciting, which helps to draw in more interest from potential buyers.

Overall, I believe we will start to see more exciting things come out of China in terms of e-commerce. Alibaba is just the start. The innovation is happening fast and the brands in that market are starting to get more attention on the world stage. All these trends and the recent lure of Western talent to some of these Chinese tech companies, will position China as a real contender in the global e-commerce race moving forward.

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