The coronavirus pandemic has presented huge obstacles as well as some opportunities and necessary shifts for business. What’s the current state of China’s ecommerce and big platform advertising? Read on to find out.
The state of the leading Chinese ecommerce marketplaces
Taobao and Tmall
Currently Taobao (including Tmall) has over 8 billion MAU and is operating according to the current trend of “content plus ecommerce” in tandem with the new ecommerce path of “content-demand-purchase”.
Taobao is relatively mature in the live streaming ecommerce market just as it starts to take off. During Tmall’s Double 11 shopping festival in 2019, Taobao’s live streaming single-day GMV reached nearly 200 billion RMB. Meanwhile new platforms are getting into live streaming.
For example, JD.com is about to invest 1 billion RMB to launch 10 superstar live streaming bloggers in 2020, which will undoubtedly impact Taobao.
JD.com
JD.com is a technology-driven retail company at the forefront of technological transformation, and its supply chain and logistics are irreplaceable. Using their cooperation with Nongfu Spring as an example, when consumers place orders on JD, the order is put into a system to calculate the closest delivery source, helping them achieve the fastest home delivery experience offered by JD.com of 15 minutes.
At the JDD (JD Digital Discovery Meeting) conference this year, the focus was on the transformation of service technology. For example, distribution robots that were used in Wuhan will enable materials to be delivered efficiently with non-touch, secure services, just as during the epidemic.
JD.com is very competitive in home appliances and electronics, making up 61% of online appliance retail sales, according to data from the China Market Information Survey Association. But JD.com still has some problems, including Liu Qiangdong’s scandal from 2018 and the company’s moves in April 2019 to take away the base salary of delivery personnel and replace it with commission-only payments.
Pinduoduo
Pinduoduo’s positioning is to seize the lower-tier city markets that have been ignored or abandoned by JD.com and Taobao. The essence of the strategy is creating low-cost supply chains for those who engage in low-cost consumption. Despite any criticism, consumer groups that favor low cost items exist and they need to be served.
Pinduoduo now has 429 million monthly active users (Taobao has 720 million while JD has only 334 million). 52.7% of Pinduoduo’s sales came from things such as flash sales and orders with limited-time free shipping. This is how they’ve managed to create demand. On the other hand, 93.1% of Taobao’s and JD.com’s purchases are the result of direct searches.
Pinduoduo’s biggest risks and weaknesses are low quality/fake items and customers who may only be loyal to the lowest price. With low quality and price standards, other platforms with lower prices can easily draw them away.
NetEase
NetEase covers games, messaging and other large traffic ways to promote but things haven’t been going well. It still hasn’t reached its 2018 goal of 20 billion RMB set by CEO Ding Lei.
ODM (Original Design Manufacturers) associated with NetEase have caused plagiarism and quality concerns. NetEase’s core selling point is buying big-name products of the same quality at low prices using an ODM model. All the products are supplied directly by the brand’s manufacturers, ensuring the materials and processes.
The platform’s cross-border ecommerce company, Netease Koala, was sold to Alibaba and has been renamed Koala Haigou. It seems like NetEase has abandoned ecommerce.
What is their GMV growth outlook?
Tmall and Taobao
Albabai’s GMV in 2018 reached 5.73 trillion RMB with an annual growth of 18.8%. Huatai Securities previously predicted that the growth rate would reach 20% in 2020. Alibaba stated in February that the March epidemic will have a serious impact on finances. CEO Zhang Yong, said, “The situation will improve after this event. And many new users in low-tier cities have started to buy daily necessities online, which is a positive change for the future. “
JD.com
As of Q4 2018, JD.com no longer publishes GMV data. JD’s GMV growth had been 30% for six quarters since 2017. In 2020, JD may be able to reach about 40%, because the outbreak has enabled consumers to see the difference that JD’s fully owned and controlled logistics network makes.
In addition, through its “Back to Work” plan, JD.com has created an exclusive purchasing platform where enterprises can do contactless, efficient procurement. Corporate customers won’t want to give this up because of its convenience and efficiency.
Pinduoduo
UBS predicts that Pinduoduo’s annual active users will reach 628 million in 2021. In 2021, the annual GMV of Pinduoduo will reach 2.07 trillion RMB. As of the end of 2018, Pinduoduo’s annual GMV was 471.6 billion RMB with a year-on-year increase of 234%. Based on this calculation, UBS believes that in the next three years, Pinduoduo will maintain a GMV growth rate of at least 60%.
However, due to the epidemic, this goal might not be possible in 2020. The sinking market where Pinduoduo is concentrated has been greatly affected by impaired logistics and some people may be affected by slow sales of vegetables and fruit.
2020 User Growth and Ad Trends for Big Platforms
According to data from R3, in 2019, Alibaba dominated China’s digital advertising market, taking a 33% market share. In second was Bytedance with 23%, followed by Baidu and Tencent, respectively with 17% and 14% shares. The epidemic seems to have created opportunities on 3 platforms.
For ByteDance, its news and information platform Toutiao set a precedent for offline movies to migrate online, contributing to MAU growth of 9.4%.
During the Spring Festival Gala 2020, Douyin cooperated with multiple TV channels and that, in combination with online interaction and entertainment launched during the epidemic, increased monthly active users by 9.2%.
For Tencent, the MAU growth for Tencent Video and Tencent News were 6% and 7.3% respectively. Other subsidiaries like QQ, QQ-zone and QQ browser also grew between 1.5 – 3%.
For Alibaba, Youku and UC News experienced MAU growth of 4.4%. The average number of viewers per Taobao’s live broadcast broadcast during the Spring Festival rose by 43.13%, and the average number of viewers per stream rose by 30.05%.
These platforms were users’ primary access to real-time news, communication and entertainment. News about the epidemic and relevant prevention information were transmitted in real time. Because of the growth in users and viewers, Alibaba, Tencent and Bytedance attracted bigger ads budgets in early 2020. However, when deciding on digital advertising, brands must still choose the platform that fits their brand best.
Implications and trends going forward
People in China, already strong mobile internet users, are relying even more on online consumption and online activity. Tourism, catering and hospitality have been negatively impacted. Traditional businesses that were resisting have now started to migrate online, such as legal firms. Companies are also aiming more ecommerce at 4th and 5th tier cities which have increased their online consumption.
Alibaba
Alibaba has no logistics solutions of its own. The epidemic forces Alibaba to reckon with this key weakness and consider improving logistics functions using automation. Although the demand for ecommerce shopping has skyrocketed, most orders are for cheap products with less spent on less urgent but much more expensive commodities, such as electronics.
Alibaba’s office software DingDing, driven by the epidemic, has transformed from office software into one of the most popular online education platforms. Alibaba Health in the pharmaceutical business and Freshippo in the new retail fresh food sector increased their influence during this key time when people across the country could not go out.
Tencent
Tencent’s core business sector is gaming. It’s facing challenges from ByteDance. During the epidemic, ByteDance’s two ace products, Douyin and Toutiao, absorbed more and more traffic and users, laying a solid user foundation for its gaming side. To respond to this, Tencent is exploring overseas opportunities to launch new games and investing in a number of overseas game developers to reduce its dependence on the Chinese market.
The epidemic sped up the modernizing and digitizing of traditional businesses, and forced companies to adjust their business models and strategies. And now, it’s time for your brand to adjust its strategy to prepare for the new normal after all this passes.
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