jari makkonen, october 6th 2015 -...

China - Global giant of e-commerce in B2CFuture in B2B & cases through Chinese partner presentations

Jari Makkonen, October 6th 2015

Background

ü  E-‐commerce a very important channel covering 15.9% of retail sales in 2015 (est.) and 28.6% in 2018 (est.), according to eMarketer.com.

ü  E-‐commerce in China already considered as “m-‐

commerce” (30% of the transacHons today via mobile and about 57% by 2017).

ü  China has already over 1 billion Internet users (latest esHmate in 2015); most of them do not have a PC or a laptop.

ü  Alibaba and JD.com most important e-‐commerce plaRorms,

but there are several other developing plaRorms, which need to process big data in vast extent (O2O).

ü  Very hard to introduce new, previously unknown brands through TMall Global and JD.com unless the Introducer is ready to invest in its brand equity in China.

Source: B&B Advisors (December 29th, 2014) -‐1-‐

ü Over 20% of the world’s internet users are Chinese ü  China had 1,27 billion mobile users in 2014 and the number sHll

growing ü  Approximately 600 million mobile internet users (depending on data

source), of which majority urban, educated young adults aged 15-‐35 ü  RotaHon of Chinese consumers buying a new phone esHmated as

every 18 months, of which almost 80% using Android

China’s Internet landscape

-‐2-‐

China’s e/m-commerce landscape

From e-‐ to m-‐commerce

-‐3-‐

ü  Chinese e-‐commerce market exceeded USD 410 billion in 2014 ü Online shopping growing 4-‐6 Hmes faster than offline shopping, even

though online retail represenHng sHll only 10,7% of the total retail gross merchandise value in 2014 (while in some product categories online sales already having major share, e.g. consumer electronics with online sales share of 50%)

ü Mobile purchases winning over half of all retail sales in China by 2016

Beijing, Shanghai and Guangzhou making up of 50% of all online sales (PCs+mobile), while growth (adopHon of online consumpHon) fastest in Tier 2-‐4.

Beijing

Guangzhou

Shanghai

China’s e/m-commerce landscape

-‐4-‐

China’s mobile payment market and system

-‐5-‐

Social media landscape in China

SOME in China OAen used

OAen neglected

Offline and Online business co-ordinated (O2O)

Channel'integra,on'required'for'e2marke,ng'and'mixed2mode'buying''''

Chaffey,'2007'

Product''evalua,on'

Decision'to'purchase'

Specify''purchase'

Payment'

Fulfillment'

Product''evalua,on'

Decision'to'purchase'

Specify''purchase'

Payment'

Fulfillment''(digital)'

Offline' Online'

Mail,'fax,'phone,'person''

1'

2'

3'

4'

5'

-‐7-‐

BRAND EQUITY

AcNvity 1 AcNvity 2 AcNvity X..

AcNvity 1 AcNvity 2 AcNvity X..

Offline distribution (independent organization) •  Distributor 1 •  Distributor 2 •  Distributor X…

Online distribution (independent organization) •  Platform 1 •  Platform 2 •  Platform X…

Connections to and filtering

through social media and

O2O:

Information and stories

about brands and company

Interlinkage

CombinaNons of roles between Brand owner, online plaWorms & their importance and distributors

CombinaNons of roles between Brand owner and distributors, segments and Ners of ciNes

Brand equity: Offline and online interlinked

Long-‐term profitability

-‐8-‐

CUSTOMER NEED, PERCEPTIONS

ONLINE

Interlinkage through O2O

Brand equity: Customer view

COMPETITOR BRAND EQUITY

OFFLINE

OUR BRAND EQUITY OFFLINE

OUR BRAND EQUITY ONLINE


ONLINE


OFFLINE


OFFLINE


OFFLINE


OFFLINE


OFFLINE

OUR BRAND EQUITY OFFLINE

Brand equity units may realize independently or in a group of three or two.

-‐9-‐

Quality

Price

High end Fit-‐for-‐purpose

Low end

Price - quality positioning among competitors in China (case)

Chinese mainstream manufacturers (cheapest range) 70%

Chinese ’fit-‐for purpose’ quality manufacturers 20%

Foreign/imported high end 10%

Chinese mainstream (low quality manufacturers)

“Fit-‐for-‐purpose” manufacturers

Foreign/imported high end brands

Chinese compeNtor 1 Foreign brand 1



Korean compeNtor 4 Foreign brand 4

CN/US JV compeNtor 5 Foreign brand 5

-‐10-‐

Quality

Price

High end Fit-‐for-‐purpose

Low end

Price - quality positioning of competitors – Forecast (case)

Chinese low end manufacturers 40%

Chinese ’fit-‐for purpose’ quality manufacturers as mainstream 50%

Foreign/imported high end 10%

Chinese mainstream (fit-‐for-‐purpose manufacturers)

“Fit-‐for-‐purpose” manufacturers

Foreign/imported high end brands




Korean compeNtor 4 Foreign brand 4

CN/US JV compeNtor 5 Foreign brand 5

-‐11-‐

SOE/POE & SME Trading platforms developing (fighting corruption)

Public tenders -‐ naHonal business

Private business on naHonal level

Standard investment goods

Open to all -‐ China Toubiao Wang (hbp://www.ccgp.gov.cn/), various SOE plaWorms (closed ones)

Offline: private negoNaNon, reverse aucNoning, other. Online: BASF opening own brand shop at Taobao for SME in mid-‐2015 (access, learning aspect); Dow Corning having second brand for Taobao. Brand shops and resellers on mulNple online plaWorms.

-‐ pure raw materials and standard components

Mass-‐standardized industrial goods

China Toubiao Wang (open to all); various SOE plaWorms (closed ones)

Offline: private negoNaNon, reverse aucNoning, other. Online: brand shops and resellers on mulNple online plaWorms. Online plaWorm JD.com claimed to cover 40% of China's smart hardware market (July 2015). Baidu, Alibaba (Alink) and others to study market and cover B2C and B2B

-‐ e.g. hand-‐tools, other machinery

Tailor-‐made investment goods

China Toubiao Wang (open to all); various SOE plaWorms (closed ones)

Offline: new equipment: private negoNaNon, reverse aucNoning. Online: life cycle management -‐related (mostly spare parts -‐type). IoT: who will we partner with: Google, Amazon, eBay, Alibaba, Tencent, Baidu… Alibaba Ali Ding Ding entering to enterprise market: CRM, ERP, dropbox, other

-‐ new equipment business -‐ life-‐cycle management

-‐ IoT

-‐12-‐

Web companies asked to support 'digital Silk Road'Chinese tech firms are being urged to expand e-commerce, industrial networks and Internet banking abroad to help

build a “digital Silk Road”

By Zhao Huanxin 11:56PM BST 27 Jul 2015 More Chinese news and features at telegraph.co.uk/chinawatch Internet-‐based businesses and media have been asked to acNvely engage in the Belt and Road IniNaNve by building a “digital Silk Road” and helping to upgrade tradiNonal industries within and beyond China’s borders. The country should expand e-‐commerce, industrial networks and Internet banking abroad, a senior official said. This would enable it to serve more than a billion Internet users, businesses and investors along the Silk Road Economic Belt and the 21st Century MariNme Silk Road.

-‐13-‐

B2C value chain and stakeholders – Case: TMall GlobalApplication programming interface

Enterprise resource planning

Warehouse management system

-‐14-‐

Our Team

•  M. Sc Engineering and Industrial Economics •  10+ years China experience •  Interim Management and Industrial,

MariNme sectors •  MulNnaNonal Business AdministraNon,

Financing, Branding and markeNng, Supply chains

•  M.Sc. (Econ.) •  CerNfied Management Consultant •  Manufacturing industry, industrial services, wholesale trade, management consulNng •  Turnarounds, management of operaNng companies abroad •  Member of Finnish Management

Consultants

•  MBA •  FMCG, Industrial manufacturing •  MarkeNng and Sales, DistribuNon

related, Supply Chain management •  Start-‐ups and China market entry •  E-‐commence and social media •  Market research

•  MBA •  FMCG, Luxury, AutomoNve,

Professional services •  MarkeNng communicaNons, PR,

Branding, Government relaNons •  CerNfied ExecuNve Coach

•  M.Sc. (Econ.) •  20+ years of China experience •  Interim Management, China Business

Audit, ExecuNve Coaching •  Change Management, Turnarounds •  Professional Services, Supply Chain

Management, Industrial Manufacturing

Tero Kosonen, Senior Advisor, PartnerKent Björklund, Managing Partner

Jari Makkonen, Senior Adviser, Partner

Cathy Wen, Senior Advisor

Maggie Li, Advisor

•  M.Sc. (Econ.) •  Macro/Micro Analysis, CompeNtor/

Customer PosiNoning, ForecasNng •  Sectorial Scenarios, Digital

PlaWorms •  Industrial Services, Manufacturing

(Marine), Retail, Paper & Packaging

Riikka Koponen, Head of Research, Partner

-‐15-‐

We can start on Monday.

www.bietbi.com / [email protected]

Appendix. Sample cases ü  New market entry to China / Consumer goods / 8 months

•  Branding, distributor search and agreements•  Implementation: New legal entity, recruitments, start of operations

ü  Technology transfer and build-up of the new B2B business area in China / 16 months•  China product range definition, branding and market positioning•  Technology transfer coordination between HQ and China subsidiary•  Distribution strategies and legal framework

ü  China JV partner search and setup / Marine industry / 9 months•  Business case review and partner profile•  Search of partner and guidance through deal negotiations, coordination of

legal work•  Case connection continues through Permanent Board membership

ü  China Master Plan development / Packaging industry / 3 months•  Developing of an extensive re-structuring and expansion plan for a

publicly listed company with existing multi-location presence in China•  External and internal analysis with clear action plan and recommendations

for an effective implementation

ü  Spin off of non-core and sell-out of core business / Maritime sector / 6 months•  Entrepreneur’s exit plan design and scenario evaluation•  Investor search, vision alignment, deal structuring and

documentation•  Swedish, Finnish and Chinese investments into the company

and buying out founder

These, and other direct reference contacts available on request

jari makkonen, october 6th 2015 -...

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