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
•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
a1 a2 a3 a4 a5 a6 a7 a8
%
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
x1 x2
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 Bank Cards Issued in China Impact
0
1
2
3
4
5
a1
no. in bn
A
Q1, 2014
a2
2010
Y% X%
x y
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
A B C D
b
a
z
y
x
0
a4
a2
a1
0
%
Users (mn)
XX
2013
a3
x3
2012
a2
x2
2011
a1
x1
A B

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 Mobile Internet Users Impact
B
A
0
C
B
A
0
%
Users (mn)
2013
a4
x4
2012
a3
x3
2011
a2
x2
2010
a1
x1
x y
Mobile Application – Utilization Ratio*
0
20
40
60
80
100
%
x7 y7
Online
Game
y6
x6
Online
Video
y5
x5
Online
Music
y4
x4
Mobile
Search
x3 y3
Netnews
y2
x2
Instant
Messaging
x1 y1
Travel
Booking
x16 y16
Mobile
Forum
y15
x15
Group
Buying
y14
x14
Phone
Banking
y13
x13
Online
Payment
y12
x12
Mobile
Mail
x11 y11
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
x y
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
Total Income Profit / Loss
233.4
483.9
25.0
8.1
-4.0
0
200
400
600
-20
0
20
40
2011 2012
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

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

22
SAMPLE
Business Highlights
Description
News
Overview
XX
Some of the Current and Pending Investors
XX
Current and Pending Subsidiaries / Investments
XX

23
SAMPLE
XX
XX
XX
XX
T
O
W
S

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
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

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
Thank you for the attention
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Market Research Report : Online retail market in china 2014 - Sample