market research report : online retail market in china 2014 - sample

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


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


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 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


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


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


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


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


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…


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


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


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


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


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


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



Operation*

20

SAMPLE

XX XX

XX XX

T O

W S



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


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


23

SAMPLE

XX XX

XX XX

T O

W S

Private : Domestic Company – Company B


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





Note: Data for the year 2014


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


26

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market research report : online retail market in china 2014 - sample

Business

online retail sales

easy online access

online security services

average online duration

x xnote

overall chineseonline

major online chinese

sepx x