Online Retail Market – China November 2014
Executive Summary Market
Drivers & Challenges
Trends
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
Challenges: - Huge online counterfeit market - Psychological barrier and adaptive difficulty - Security issues - System lacks talent and information resources
- Growing social networking user base - Consumer Benefits over Traditional Retail Format - Benefits to Sellers over Operating from Conventional Stores Internal logistics networks Use of Mobile Devices Use of Social Media Group buying
Major Online Retailers
Competition
Company A
CompanyB
Company C
Company D
Company E
Company F
ONLINE RETAIL MARKET IN CHINA 2014.PPT
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•Macro Economic Indicators •Market Overview •Drivers & Challenges •Government Regulations •Trends
•Competitive Landscape •Mergers and Acquisition
•Strategic Recommendations •Appendix ONLINE RETAIL MARKET IN CHINA 2014.PPT
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Economic Indicators (2/3) Lending Rate: Annual
2010
a2
a3
a4
Trade Balance: Annual a5
a6
a7
a8
% Per Annum
a5 a4 USD bn
a1
SAMPLE
x1
x4 x1
x2
x3
a3 a2 a1
2011
x2
0 2010 2011 N.B.: 2009 2012-13 encompasses figure for Apr – Nov 2012
2012
FDI: Net Inflow 2012
x3 USD bn z
2013
a2
x4 y
a3
a4
a1
x Commercial Bank Rates: Key Lending Rates as Prescribed by RBI (All Commercial Banks including SBI) - Minimum Rate General
0
2009
ONLINE RETAIL MARKET IN CHINA 2014.PPT
2010
2011
2012
4
With increasing prosperity and easy access to the Internet, online retail sales is likely to surge in the coming years
SAMPLE
Online Retailing – Market Overview (x/x)
Major Online Chinese Retailers (2014)
• In 2013, China became the world’s largest online retail market
Site
Daily Page Views per visitor*
Percent of Chinese visitors (1st Sep)
• By 2015, online retail sales volume is expected to account for over x% of China's overall consumer retail sales
X
X
X
X
X
X
X
X
X
X
X
X
• Alibaba accounted for around x% of overall Chinese online retail with USD xx bn transactions handled in 2013 E-Retail’s Share of Total Retail Sales
Online Retail Market Share (2013)
% a5
X
a4
x4
Y%
x5
x3
a3 a2
X%
Y%
x1
x2
a1 x%
0 2010
2011
2012
2013
H1 2014
Note: Major Online Chinese Retailers: Data taken as of 1st Sep 2014, *last three months data
ONLINE RETAIL MARKET IN CHINA 2014.PPT
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…regularity of online purchase, boosts the Chinese online retail market
SAMPLE
Online Retailing – Market Overview (x/x)
Online Shopping Penetration – China
• 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
C
AA
B
a3
a2
a1
a5
a4
A
• Online shopping has become a part of the daily routine of many Chinese consumers
0 2012
Online Shoppers – Growth Trend
2013
2014e
2015e
2016e
Mobile Online Shoppers
Users (mn) Users (mn)
a4 x6
a3
XX
a2 a1
x3 x1
x5
a2
a3 a2
x4
a1
x2
y
a1 x
2009
2010
2011
2012
2013
x1 0
2012 2008
x3 x2
0
0
%
2013 Penetration Rate
Note: Online shoppers as % of total internet users population ONLINE RETAIL MARKET IN CHINA 2014.PPT
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SAMPLE
…stimulating growth in the online retail market
Average Online Duration: Weekly (Per Internet User)
Increasing Internet Use (x/x) • 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
Broadband User Base
xy
a3 a2
y
x
a1 0 2013
x
z y
a1
a2
a3
2010
2011
2012
a4
x 0 2013
Average Internet Access Speed (2013)*
No. of users
Users (mn)
Hours
2015e
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)
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Increased usage of plastic money offers immense support to Online retail market in China
SAMPLE
Extensive Usage of Plastic Money
Bank Cards Issued in China
• While the population of internet users is on the rise, the population holding credit/debit cards is also rising impressively
no. in bn 5
Transaction done via plastic money is the primary source of revenue generation within the online retail market
4
• An anticipated increase in the penetration of plastic cards will further boost the Chinese online retail market
3
Credit Card Transaction Value Growth
Impact
A
a2
a1
2 1 0
2010
Q1, 2014
USD tn 2.5 2.0
xy
y
x1 The transactional value accounted for x percent of the total retail sales of consumer goods
1.5 1.0 0.5
Y%
X%
0.0
2012
2013
x ONLINE RETAIL MARKET IN CHINA 2014.PPT
y 8
Better online security services are encouraging people to pay for goods and services over the internet
SAMPLE
Enhanced e-Payment Services
Impact
• 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
Rise in E-Payment Users Users (mn)
E-Payment Providers – Market Share (2013)
XX
a4
%
x3
x2
a
x1 a2 a1
a1
b
a2
z
a1
a3
a2
y
a4
x
0
a3
0 2011
2012 A
2013 B ONLINE RETAIL MARKET IN CHINA 2014.PPT
A
B
C
D 9
Internet access from cellular phones is an important driver for the Chinese online retail market
SAMPLE
Rise in Mobile Internet Users
Mobile Internet Users
• Over half of the internet users in China use mobile phones for internet access
Users (mn)
Mobile internet penetration has increased to 81% of total internet population in 2013
C
Impact %
x1
x2
x3
x4
B
a1
a3
a4
A
a2
B
• On Taobao more than abc “cell phone stores” have been set up to drive sales
A
Increasing use of smart phones with advanced utility and security features provides improved and convenient access to the internet, boosting the online retail market
0
0 2010
2011
2012 x
2013 y
Mobile Application – Utilization Ratio* % 100 80
2012
x1 y1 x2
y2
2013
x3 y3
60
x4
y4
40
y5
x5
y6 x6
x7 y7
x8
y8
x9 y9
y10 x10
20
x11 y11
y12 x12
y13 x13
y14 x14
x15
y15
x16 y16
Mobile Forum
Travel Booking
0
Instant Netnews Mobile Messaging Search
Online Music
Online Video
Online Online Microblog Social Online Mobile Online Phone Game Literature Networking Shopping Mail Payment Banking
Group Buying
*Note: Utilization ratio of various mobile applications by mobile internet users
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Deluge of fake products sold online hampers the growth of online retail market
SAMPLE
Huge Online Counterfeit Market
Impact
• 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 IP Infringing: By US Officials
y XXXXXX x
x
y ONLINE RETAIL MARKET IN CHINA 2014.PPT
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Government of China has removed various legal restrictions and has formulated…
SAMPLE
Regulations : Foreign Investment (x/x) • XX
• AAA AA
• AAA AA
• AAA AA
• AAA AA
• AAA
Note: MIIT refers to Ministry of Industry and Information Technology
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Shopping through mobile device has quickly gained acceptance among Chinese digital consumers
SAMPLE
Smartphone Usage (2013) *
Use of Mobile Devices • XX • XX • XX • XX • XX • XX • XX • XX
% D
Online shopping through mobiles is getting more attention
a1 a2
a3
India
Singapore
C B A 0 China
Smartphone Usage: Online shopping (2013) %
Mobile Shopping Apps – Monthly Estimates Application Name
Active Accounts (mn)
Average Usage Times
X
X
X
B
X
X
X
A
X
X
X
X
X
X
X
X
X
D
x1
C
x2
0 China
US
Note: * Use of Smartphones for searching price comparisons and Product review
ONLINE RETAIL MARKET IN CHINA 2014.PPT
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Porter’s Five Forces Analysis
SAMPLE Impact High
Threat of New Entrants XX
Impact Low
Bargaining Power of Suppliers • XX
Impact High
Impact High
Bargaining Power of Buyers • XX
Competitive Rivalry • XX
Impact Medium Threat of Substitutes • XX
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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
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Competitive Benchmarking (x/x)
SAMPLE
Key Ratios of Top 3 Companies – Operational Basis (FY 2013) (3/3)
XX
%
YY
600
z1
400 200 0
y1
x1 x2
Alibaba Group Holdings Ltd.
y2
JD.com,Inc.
z2
Vipshop Holdings Ltd.
• XX • XX • XX • XX
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SAMPLE
Public : Domestic Company – Company A 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 Cosmetic Products
Headquarters
Products/Services XX
Key People Name
Others
XX
Designation
XX
XX
XX
XX
XX
XX
XX
XX
ONLINE RETAIL MARKET IN CHINA 2014.PPT
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SAMPLE
Public : Domestic Company – Company A Financial Snapshot Total Income USD mn
Key Ratios
Total Income
Profit USD mn
Profit / Loss
600
25.0
400
-4.0
200
21.8
0
2011
8.1 483.9 233.4
2013
• 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
2013
2012
2011
2010
Profitability Ratios Operating Margin
9.80
14.15%
4.34%
-20.19%
N.A
20
Net Margin Profit Before Tax Margin Return on Equity Return on Capital Employed
1.70
5.17%
3.47%
-18.35%
N.A
3.73 -13.01 34.88
8.12% 33.05% 90.49%
4.39% 46.06% 55.61%
-20.65% -43.52% -42.54%
N.A N.A N.A
21.69
108.27%
86.58%
-80.22%
N.A
20.81
35.05%
14.24%
-23.28%
N.A
1269.26% 503.13% -962.80%
N.A
0
Return on Working Capital Return on Assets Return on Fixed Assets
Financial Summary
y-o-y change (2013-12)
40
-20
2012
Particulars
766.14
Cost Ratios Operating costs (% of Sales)
-9.83
85.83%
95.65%
120.01%
N.A
-4.98
25.09%
30.07%
103.82%
N.A
0.00
0.00%
0.00%
0.00%
N.A
Current Ratio
25.17%
1.53
1.22
1.64
N.A
Cash Ratio
50.62%
0.97
0.64
1.06
N.A
N.A.
N.A
N.A
N.A
N.A
N.A
N.A
N.A
N.A
N.A
N.A
N.A
N.A
N.A
N.A
-22.64%
89.54
115.74
47.68
N.A
-24.52%
2.47
3.28
1.15
N.A
-26.77%
2.64
3.61
1.55
N.A
-61.65% -51.84%
7.64 6.38
19.92 13.25
3.97 2.37
N.A N.A
Administration costs (% of Sales) Interest costs (% of Sales) Liquidity Ratios
Leverage Ratios
Financial Summary Indicators Market Capitalization (USD) Total Enterprise Value (USD) EPS (USD) PE Ratio (Absolute)
Value (16/09/2014) 3,741.4 mn 3,164.1 mn 0.21 122.15
Debt to Equity Ratio Debt to Capital Ratio Interest Coverage Ratio Efficiency Ratios Fixed Asset Turnover Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed Turnover
Improved
ONLINE RETAIL MARKET IN CHINA 2014.PPT
Decline
18
SAMPLE
Public : Domestic Company – Company A Key Business Segments 100.0%
100%
Key Geographic Segments
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
50% 0% 2013 Operation*
100%
100%
The company’s geographic reportable segment is ‘Peoples Republic of China’
50% 0% 2013
People’s Republic of China (PRC)
Business Highlights Description
News
Overview
XX
Recent Developments
XX
New Development
XX
Note: * Operation to Sell or to Facilitate Third Party Merchants to Sell Beauty Products, Apparel and Other Lifestyle Products
ONLINE RETAIL MARKET IN CHINA 2014.PPT
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SAMPLE
Public : Domestic Company – Company A
XX
XX
S
W
O
T
XX
XX
ONLINE RETAIL MARKET IN CHINA 2014.PPT
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SAMPLE
Private : Domestic Company – Company B Company Information
Locations – China
XX Corporate Address Tel No.
XX
Fax No.
XX
Website
XX
Year of Incorporation
XX
Products and Services Category Products
Products/Services XX
Headquarters
Key People Name
Designation
XX
XX
XX
XX
ONLINE RETAIL MARKET IN CHINA 2014.PPT
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SAMPLE
Private : Domestic Company – Company B Business Highlights Description
News
Overview
XX
Some of the Current and Pending Investors
XX
Current and Pending Subsidiaries / Investments
XX
ONLINE RETAIL MARKET IN CHINA 2014.PPT
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SAMPLE
Private : Domestic Company – Company B
XX
XX
S
W
O
T
XX
XX
ONLINE RETAIL MARKET IN CHINA 2014.PPT
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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
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
Note: Data for the year 2014
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SAMPLE
Strategic Recommendations (x/x)
Track down the indirect indicators that shape up consumer behavior across tier II and III cities in China • XX • XX • XX • XX • XX • XX
XX
XX
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