Daily Digital Pulse of China: Alibaba, Baidu & E-Commerce in China
The Online Shopping Landscape in China Drives New Challenges For Companies
It is not a secret to anyone that Chinese consumers are searching to buy quality goods at higher prices and use social media to gather product information. According to a new report by The American Chamber of Commerce in Shanghai (AmCham Shanghai), in Tier-1 and Tier-2 cities, an increasing number of consumers are relying on consistency and integrity in their purchasing choices, a large change from a previously price driven market. This change signals greatly required alterations by both Chinese and International consumer brands with regard to the marketing channels they use and most importantly the content they drive in China. As a result of this the report details that with the increased usage of e-commerce and social media, the second most significant trend detailed in the report stated that both multinational and Chinese companies recognize the importance of developing digital marketing and sales channels. However, most companies declared that they are yet to be adequately prepared to convert growing online interactions to a sales advantage. The report, however, noted that leaders in this area demonstrate the benefits of strategic use of data derived from online viewing and purchasing habits and from this have displayed desirable results through alignment of digital activities with their corporate strategies and across organizational functions. For many large companies in their current situation this gives them the opportunity to build products and brands that can deliver great value. Experts are confident that this trend will increase brand loyalty among consumers focused on value which means that they will pay higher prices for quality products and services. Still to get to the sales conversion point consumer companies face large challenges in online retailing in this dynamic market.
Source: Retail In Asia
So What Gives? In One Word, E-commerce
The rumors are true! After much speculation Baidu has announced its investment in Renren’s group buy subsidiary Nuomi worth CNY 160 Million. What speculators did not anticipate was the level of control Baidu desired, now made clear as the CNY 160 Million gains them a dominant 59 percent of the Nuomi company. So the key question now is why Nuomi? In lesser words, E-commerce. It seems that Baidu is scared of getting left behind as key competitors Alibaba and Tencent are well established (prior) and begin to make tracks in the area of e-commerce (latter). Although Baidu has its own group buy platform it does not hold a strong position, again leading us to another reason the giant acquired Nuomi. The platform holds a much greater share than Baidu’s group buy subsidiary, ranked number 5 by market share in China. Looking at the top five group-buy companies we can see a picture unfold and Baidu’s plans become clear. Although Baidu was hoping to invest in Diangping, reports suggest the offer was rebuffed making this impossible, leaving Baidu to consider alternative ways to get their foot in to e-commerce. Number one and two ranked group buy sites are now owned or invested in by Alibaba leaving only three viable options that would put Baidu in the competitive position they want, and it seems Nuomi, ranked fifth, won out against numbers 3 and 4 due to a lower price and only a small difference in performance. Finally you may ask why group buy and not a traditional e-commerce company? For now one can assume location data to be a large pull-factor for Baidu as Noumi has local operations across China offering a lot of information that may be integrated in to say, Baidu Maps. However it is unlikely that this is the full extent, Baidu has big plans in the pipelines so we will have to wait and see.
Source: Tech In Asia
Alibaba’s Virtual Credit Card
E-commerce giant Alibaba is aggressively conducting testing for the ‘virtual credit card’ system they plan to launch that will bring them in to the consumer finance market, as well as make purchasing even easier for consumers on Alibaba platforms. The virtual credit card system will be made available on Alipay, Alibaba’s third party payment system. Through this new offering consumers will be able access a CNY 5000 overdraft with 38 days interest free attached to their Alipay account, thus making this service very much like a credit card. Although Alibaba states that the service is still being internally tested and the offering may change prior to launch, the group also said that this is different from other credit consumption systems as it is for online purchasing activities only and relies upon advanced funds from co-operative banks, this has sparked action from many banks already. Hu Xiaoming, president of the Alibaba Banking Group, said Alibaba will take a 1% service fee from consumers using the payment system on the Taobao platform and that Alibaba will run its own risk evaluation operations. Misuse by users will result in the closure of their Alibaba and Alipay accounts, it is very impressive that this punishment alone is likely to prevent individuals from defaulting payments. It is likely that other large E-commerce groups such as Jingdong and Suning will soon follow in Alibaba’s footsteps and enter the consumer finance industry before long, once again innovating China’s consumption habits.
Source: Want China Times