E-commerce Market – China November 2014
Executive Summary Market
Drivers & Challenges
Trends
Government Initiatives
E-Commerce market in China has been demonstrating rapid growth and development over the past few years GMV of China’s E-Commerce market is expected to grow from USD x tn in 2013 to USD y tn by 2018, registering a CAGR of more than xy% over 2013-2018
Drivers: - Increasing Internet Use - Emerging Middle Class - Rise in Online Shopping - Extensive Usage of Plastic Money - Enhanced e-payment services - Rise in mobile Internet Users - Growing social networking user base
Challenges:
Use of Mobile Devices Group buying Initiatives by players
Internal logistics networks Use of Social Media Rising popularity of e-books
- Huge online counterfeit market - Psychological barrier and adaptive difficulty - Security issues
- System lacks talent and information resources
12th Five-Year Plan of China (2011-2015) Regulations : Foreign Investment E-Commerce Tax: China
Major E-Commerce Vendors
Competition
Player A
Player B
Player C
Player D
Player E
Player F
Player G
Player H
E-COMMERCE MARKET IN CHINA 2014.PPT
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•Macro-Economic Indicators •Introduction •Market Overview •E-Commerce Technology •Demand and Supply Perspective •Drivers & Challenges •Government Initiatives •Trends •Mergers and Acquisitions •Competitive Landscape •Strategic Recommendations •Appendix E-COMMERCE MARKET IN CHINA 2014.PPT
3
SAMPLE
Economic Indicators (1/3) Current Account Balance USD bn
O
D C
X
B
Y
Z
M
2011
2012
2013e
N
A 0 2010
2014e
2015e
Exchange Rate: Half Yearly USD/CNY
Period Average
Period High
a10
x6
a9
a11
x5
a12
x4 x3 x2 x1
Period Low
a8
a6 a5 a4 a1
1/1/14
a3
a13 a14
a15
a7
a2
2/1/14
3/1/14
E-COMMERCE MARKET IN CHINA 2014.PPT
4/1/14
5/1/14
4
e-Commerce in China is fast evolving and is expected to mature further in the ensuing years E-Commerce Market – China Overview • GMV of China’s E-Commerce market is projected to reach USD x tn by 2018 from an estimated USD y tn in 2013, by registering a CAGR of more than xy% over 2013-2018 • Currently, the domestic market is dominated by a and b with payments facilitated by aa
• 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
E-Commerce Revenue – Online Retail Share
GMV of China’s E-Commerce Market USD tn a6
x5 X
x4
a5 a4
x3
x2
y
China's E-Commerce revenue in 2013 surpassed USD x tn, including USD xx bn from online retailing
a3 a1
a2 y
x1
x
x
0
2013
2014e
2015e
2016e
2017e
2018e
Note: Gross merchandise volume(GMV) refers to total sales dollar value for merchandise sold through an online based marketpl ace over a certain time frame.
E-COMMERCE MARKET IN CHINA 2014.PPT
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E-Commerce Market China (1/x) – Online Retail Overview Online Retailing
Major Online Chinese Retailers
• Point a
Site
Daily Page Views per visitor*
Percent of Chinese visitors (xx Sep)
X
X
X
X
X
X
X
X
X
X
X
X
• Point b • Point c
• Point d • Point e
E-Retail’s Share of Total Retail Sales % E
XX
D
x5
x3
C B
x4
x2 x1
A
0 2010 Note: Major Online Chinese Retailers: Data taken as of
2011 1st Sep
2012
2013
H1 2014
2014, *last three months data
E-COMMERCE MARKET IN CHINA 2014.PPT
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E-Commerce Market China (2/x) – Online Advertisement Overview Online Advertisement
Major Online Chinese Publishers
• Point 1
China’s Online Advertising Revenue Share
Online Publishers
• Point 2
• Point 3
X
X
• Point 4
X
X
• Point 5
X
X
X
X
X
X
Online Ad – Spent Share
Online Ad – Spent: Asia Pacific Region A
B
C
D
E
F
G
A
B
USD bn
D 2013
A
a2 a1
B
a3
C
a4
D
a5
E
A
C
C
D
E
c1
d1
e1
B
A a1
B b1
A
a2
b2
c2
d2
e2
2013
2014e
2015e
2016e
2017e
0
Note: Online ad spent refers to digital ad spent E-COMMERCE MARKET IN CHINA 2014.PPT
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E-Commerce Market China (5/x) – Online Gaming Overview (2/x) Online Gaming
Rise in Revenue – Online Gaming
• Point 1
USD bn
• Point 2
E
• Point 3
D
• Point 4
C
• Point 5
B
• Point 6
A
X x1
x3
x2
x4
0 2013
2014e
2015e
2016e
Online Games Segment – Wise: Share %
Large Client Games
Web Games
Platform Games
Social Games
Around x-y% revenue was generated by games developed within China
F
E x%-y%
D C
a1
b1
c1
d1 a%-b%
B A 0
a2 a3 a4 2013
b2 b4
b3
2014e
c2 c4
c3
2015e
d2 d4
d3
A
B
2016e E-COMMERCE MARKET IN CHINA 2014.PPT
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Internet popularity assumes massive scales to provide huge consumer base, thus… Increasing Internet Use (1/x)
Impact
• Point 1 • Point 2 • Point 3
• Point 4 • Point 5
Internet Population and Penetration Rate
Top 3 Countries – Internet users (2013)
mn
%
D C
B
B
A
A
a1 a2
b1
2008
0
C c1
F
D
E
d1
e1
f1 f2
b2
c2
d2
e2
2009
2010
2011
2012
2013
60 40
Users (mn) D C
20
B
0
A
China has the highest number of internet users
X
Male
Z
USA
India
0 China
Penetration Rate
Y
Female
E-COMMERCE MARKET IN CHINA 2014.PPT
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Ease of shopping online over traditional retail outlets coupled with… Rise in Online Shopping (1/x)
Impact
• Point 1 • Point 2 • Point 3 • Point 4 • Point 5 • Point 6
Online Shoppers – Growth Trend
Mobile Online Shoppers
Users (mn)
Users (Mn)
D x6
C
X
B A
x3 x1
x5
b
C B
x4
A
x2
x2 a
x1
x
0
2012 2008
2009
2010
2011
2012
2013
E-COMMERCE MARKET IN CHINA 2014.PPT
x3
y
0 0
%
2013 Penetration Rate
10
Increased usage of plastic money offers immense support to e-commerce market in China Extensive Usage of Plastic Money
Bank Cards Issued in China
• Point 1 • Point 2 • Point 3 • Point 4 • Point 5 • Point 6
Impact
no. in bn E
X
x2
D C
x1
B
A
Credit Card Transaction Value Growth
0 2010
Q1, 2014
USD tn F E
X
x2
x1
D
C
XX
x
xx
B
A 2012
2013
A E-COMMERCE MARKET IN CHINA 2014.PPT
B 11
Better online security services are encouraging people to pay for goods and services over the internet Enhanced e-payment services
Impact
• Point 1 • Point 2 • Point 3 • Point 4
Rise in E-Payment Users Users (mn)
E-Payment Providers – Market Share (2013) %
X
C
a2
a3
x4
a1 B A
a
x5
b
x3 x1
x2
x3
d
x2 x1
0
c
0 2011 Penetration Rate
2012
2013 Online Payment Users
b
E-COMMERCE MARKET IN CHINA 2014.PPT
c
d
a 12
Government encouragement continues to boost the ecommerce market in China 12th Five-Year Plan of China (2011-2015)
Primary vision of the 12 th Five Year Plan is to target complete technological up gradation to support the expansion and development of e-commerce in the future
• E-commerce regulations for the 12 th Five-Year Plan has been drafted by nine national government bodies, including China's Ministry of Industry and Information Technology (MIIT) and the National Development and Reform Commission (NDRC) • The major targets of the policies are: • XX • XX • XX • XX • XX • XX
China’s e-commerce market may also benefit from the government’s focus on the next generation IT
E-COMMERCE MARKET IN CHINA 2014.PPT
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Government has introduced a tax structure to strengthen tax supervision and tackle tax evasion in the country
SAMPLE
E Commerce Tax: China • XX • XX • XX
Tax Heads
Tax (%)
Corporate Income Tax
X
Dividend Tax
X
Value Added Tax
X
Business Tax
X
Individual Income Tax
X
E-COMMERCE MARKET IN CHINA 2014.PPT
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Shopping through mobile device has quickly gained acceptance among Chinese digital consumers Smartphone Usage *
Use of Mobile Devices • Point 1 • Point 2 • Point 3 • Point 4 • Point 5
%
D
X1 X2
X3
India
Singapore
C
Online shopping through mobiles are getting more attention
B A
0 China
Smartphone Usage (Online shopping) %
Mobile Shopping Apps – Monthly Estimates Application Name
Active Accounts (mn)
X
X
X
B
X
X
X
A
X
X
X
X
X
X
X
X
X
D
Average Usage Times
x1
C
x2
0
China
US
Note: * Use of Smartphones for searching price comparisons and Product review
E-COMMERCE MARKET IN CHINA 2014.PPT
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Development of e-books in China will mature in the coming years Rising popularity of e-books
E-Books Penetration: China
• Point 1 • Point 2
Z
• Point 3
Y
• Point 4
X
x2
x1
Expansion of the ebook service pattern to promote the application of e-book
X
• Point 5
0 2011
2012
B2B segment is the most quickly developing market for English-language trade eBooks in China and players operating in B2C segment are principally offering eBooks in the Chinese language
English Language E-books: Market Opportunity
y x
B2B
Currently, opportunity for trade English-language title sales in China is x percent B2B and y percent direct to the consumer
B2C Note: CAPP refers to the Chinese Academy of Press and Publication and the mentioned survey covers more than 19,000 people from 51 cities in 29 Chinese provincial regions
E-COMMERCE MARKET IN CHINA 2014.PPT
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Mergers & Acquisitions (M&A)/Private Placement (X/X) Announced Date
Closed Date
Transaction Type
Target
Buyer/Investors
Sellers
Deal Size (USD mn)
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Note: Data for the year 2014
E-COMMERCE MARKET IN CHINA 2014.PPT
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Market Competition – Porter’s Five Forces Analysis Threat of New Entrants
SAMPLE Impact X
• XX
Impact X Bargaining Power of Suppliers
• XX
Competitive Rivalry
Impact X
Impact High
• XX
Bargaining Power of Buyers
• XX
Threat of Substitutes
Impact X
• XX
E-COMMERCE MARKET IN CHINA 2014.PPT
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Competitive Benchmarking (1/X) Public Trading Comparable (FY 2013) Player 1
Player 2
Players 3
Market Capitalization (USD mn)
X
X
X
Share Price (USD)
X
X
X
EV/EBITDA (x)
X
X
X
EV/Revenue (x)
X
X
X
PE Ratio
X
X
X
Note: Top 3 Public companies based on the Market Capitalization; Market Capitalization is as on 28/08/2014, Share Price is as on 27/08/2014 and PE ratio is as on 28/08/2014 E-COMMERCE MARKET IN CHINA 2014.PPT
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Competitive Benchmarking (2/X) Key Ratios of Top 4 Companies – Operational Basis (FY 2013) (1/x) A
% E D
B zz1
x1
x2
C B
y1
y2
A 0
zz2 z1
Player 1
Player 2
z2
Player 3
Player 4
• XX • XX
• XX • XX
E-COMMERCE MARKET IN CHINA 2014.PPT
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Competitive Benchmarking (3/X) Key Ratios of Top 4 Companies – Operational Basis (FY 2013) (2/x)
A
B
A
% Y Z
Z
x4 x1
y1
x2
y2
0 Player 1
Player 2
y4 x3
x1 x2
Y
x3
x4
y3
Player 3
0 Player 4
Player 1
Player 2
Player 3
Player 4
• XX • XX
• XX • XX
E-COMMERCE MARKET IN CHINA 2014.PPT
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Competitive Benchmarking (4/X) Key Ratios of Top 4 Companies – Operational Basis (FY 2013) (3/x) A
B
%
D
x4
C B A
x1
y1
0
Player 1
x2
y2
Player 2
x3
y3
Player 3
y4
Player 4
• XX • XX • XX
• XX • XX
E-COMMERCE MARKET IN CHINA 2014.PPT
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Competitive Benchmarking (5/X) Key Ratios of Top 3 Companies – Financial Basis (FY 2013) A E D C B A 0
B y2
y1
x1
x2 Player 1
y3
x3 Player 2
Player 3
y4
x4 Player 4
• XX • XX • XX • XX • XX
E-COMMERCE MARKET IN CHINA 2014.PPT
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Public : Domestic Company – Player 1(1/x) Company Information
Locations – China
XX Corporate Address Tel No.
Xx
Fax No.
Xx
Website
Xx
Year of Incorporation
Xx
Ticker Symbol
Xx
Stock Exchange
Xx
Products and Services Category Products and Services
Headquarters
Products/Services • XXXX
Key People Name
Designation
XX
XX
XX
XX
XX
XX
XX
XX
E-COMMERCE MARKET IN CHINA 2014.PPT
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Public : Domestic Company – Player 1 (2/x) Financial Snapshot Total Income USD mn 6,000 4,000
534.7
2,000
1,222.8
0
Key Ratios
Profit Total Income Profit / Loss USD mn 1,737.5 1,677.4 2,000 1,053.1 1,000 5,542.3 3,800.1 2,381.6 0
2010
2011
2012
2013
• The company earned a net profit of USD 1,737.5 mn in FY 2013, as compared to net profit of USD 1,677.4mn in FY 2012 • The company reported total Income of USD5,542.3 mn in FY 2013, registering an increase of 46 percentage points over FY 2012 • The company earned an operating margin of 33.36 per cent in FY 2013, a decrease of 13.30 percentage points over FY 2012
• The company reported debt to equity ratio of 0.42 in FY 2013, an increase of 18.96 per cent over FY 2012
Financial Summary Market Capitalization (USD)
Total Enterprise Value (USD) EPS (USD) PE Ratio (Absolute)
2013
Opera ting Ma rgin
-13.30
33.36%
46.66% 50.47% 49.10%
Net Ma rgi n Profi t Before Ta x Margin Return on Equity Return on Capital Employed
-12.79
31.35%
44.14% 44.22% 43.72%
-14.20 -12.55 -10.86
36.32% 25.87% 18.67%
50.51% 52.01% 50.37% 38.42% 40.66% 41.94% 29.52% 40.02% 46.59%
-6.82
34.98%
41.80% 66.22% 63.54%
-8.43
15.77%
24.20% 32.46% 35.83%
-75.85
208.40%
284.25% 281.24% 244.01%
14.51
64.96%
50.46% 47.75% 49.98%
4.98
16.20%
11.21% 11.67% 13.76%
0.92
1.40%
0.48%
0.57%
0.46%
Current Ra tio
-7.36%
3.90
4.21
3.60
3.44
Ca s h Ratio
-12.40%
3.54
4.04
3.38
3.32
18.96%
0.42
0.36
0.16
0.02
Value (05/06/2014) 6,983.1 mn
39,861.6 mn 5.50 39.17
2012
2011
2010
Profitability Ratios
Return on Working Capital Return on Assets Return on Fixed Assets
Financial Summary
Indicators
y-o-y change (2013-12)
Particulars
Cost Ratios
Opera ting costs (% of Sales) Admi nistration costs (% of Sales)
Interest costs (% of Sales) Liquidity Ratios
Leverage Ratios Debt to Equity Ratio Debt to Ca pital Ratio Interest Coverage Ratio
13.31%
0.30
0.26
0.14
0.02
-75.56%
25.05
102.48
91.75
109.17
Efficiency Ratios
Fi xed Asset Turnover As s et Turnover Current As set Turnover Worki ng Ca pital Turnover Ca pi tal Employed Turnover
3.68%
5.95
5.74
5.38
4.88
-7.87%
0.45
0.49
0.62
0.72
15.40%
0.74
0.64
0.91
0.90
18.33% -8.70%
1.00 0.55
0.84 0.60
1.27 0.77
1.27 0.92
Improved
E-COMMERCE MARKET IN CHINA 2014.PPT
Decline
25
Public : Domestic Company – Player 1 (3/x) Key Business Segments
100%
100.0%
Key Geographic Segments The company operates through single reportable segment namely, Chinese Language Internet Search Provider
50% 0%
Due to lack of critical data, the graph could not be generated
2013 Chinese Language Internet Search Provider
Business Highlights Description
News
Overview
XX
Recent Developments
XX
Recent Launches
XX
E-COMMERCE MARKET IN CHINA 2014.PPT
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Public : Domestic Company – Player 1 (4/x)
XX
XX
S
W
O
T
XX
XX
E-COMMERCE MARKET IN CHINA 2014.PPT
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Private: Domestic Company – Player 2 (1/x) Company Information
Locations – China
XX Corporate Address Tel No.
XX
Fax No.
XX
Website
XX
Year of Incorporation
XX
Products and Services Category Services
Products/Services XX
Headquarters
Key People Name
Designation
XX
XX
XX
XX
XX
XX
XX
XX
E-COMMERCE MARKET IN CHINA 2014.PPT
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Private : Domestic Company – Player 2 (2/x) Financial Snapshot Total Income USD mn
Key Ratios
Total Income
5,000 0
Profit / Loss 3,750.3
10,000
671.0 3,270.9 2012
1,372.7 5,703.5
2014
Opera ting Ma rgin
5.71
46.36%
40.66% 24.99%
N.A.
Net Ma rgi n Profi t Before Ta x Margin Return on Equity Return on Capital Employed
17.14
41.21%
24.07% 20.51%
9,101.3
N.A.
18.50 -20.56 -0.85
47.01% 57.28% 35.37%
28.51% 26.72% 77.85% 12.30% 36.22% 14.52%
N.A. N.A. N.A.
2014
10.96
86.15%
75.20% 31.89%
N.A.
0.92
23.52%
22.60% 10.91%
2,000
N.A.
91.55
470.04%
378.49% 209.09%
N.A.
-8.21
50.04%
58.24% 74.28%
N.A. N.A.
-4.56
14.27%
18.84% 26.31%
N.A.
-0.37
4.18%
4.55%
N.A.
Return on Working Capital Return on Assets Return on Fixed Assets
Financial Summary • The company earned a net profit of USD 3,750.3 mn in FY 2014, as compared to net profit of USD 1,372.7 mn in FY 2013 • The company reported total Income of USD 9,101.3 mn in FY 2014 registering an increase of 60 per cent over FY 2013 • The company earned an operating margin of 46.36 per cent in FY 2014, an increase of 5.71 percentage points over FY 2013
• The company reported debt to equity ratio of 0.98 in FY 2014, a decrease of 63.82 per cent over FY 2013
2013
2012
2011
Profitability Ratios
4,000
0
2013
y-o-y change (2014-13
Particulars
Profit USD mn
Cost Ratios
Opera ting costs (% of Sales) Admi nistration costs (% of Sales)
Interest costs (% of Sales)
0.34%
Liquidity Ratios
N.A.
Current Ra tio
0.87%
1.81
1.80
2.37
N.A.
Ca s h Ratio
22.67%
1.76
1.44
2.01
N.A.
-63.82%
0.98
2.71
0.04
N.A.
-32.20%
0.50
0.73
0.04
N.A.
30.33%
11.95
9.17
75.68
N.A.
3.79%
9.41
9.06
8.13
N.A.
-13.02%
0.47
0.54
0.42
N.A.
-3.21%
0.77
0.80
0.72
N.A.
-4.25% -23.24%
1.72 0.65
1.80 0.85
1.24 0.56
N.A. N.A.
Leverage Ratios Debt to Equity Ratio Debt to Ca pital Ratio Interest Coverage Ratio
N.A.
Efficiency Ratios
Fi xed Asset Turnover As s et Turnover Current As set Turnover Worki ng Ca pital Turnover Ca pi tal Employed Turnover
N.A.
Improved
E-COMMERCE MARKET IN CHINA 2014.PPT
Decline
29
Private : Domestic Company – Player 2 (3/x) Key Business Segments
Key Geographic Segments
The Provision of Online and Mobile Commerce and Related Services
100%
100.0%
The company operates through single reportable segment namely, The Provision of Online and Mobile Commerce and Related Services
50%
0%
People’s Republic of China (PRC) 100%
100%
The company’s geographic reportable segment is People’s Republic of China
50% 0%
2014
2013
Business Highlights Description
News
Overview
XX
Business Areas
XX
Some of the Current and Pending Investors
XX
Prior Investors
XX E-COMMERCE MARKET IN CHINA 2014.PPT
30
Private : Domestic Company – Player 2 (4/x)
XX
XX
S
W
O
T
XX
XX
E-COMMERCE MARKET IN CHINA 2014.PPT
31
Strategic Recommendations (1/X) : XX (1/X) XXXX
• XX • XX XX1 XX2
XXXX
XXXX
E-COMMERCE MARKET IN CHINA 2014.PPT
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