Digital overview report of China by daxue consulting

DIGITAL OVERVIEW
OF CHINA
www.daxueconsulting.com dx@daxueconsulting.com +86 (21) 5386 0380

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A BOOMING AND PROMISING MARKET WITH EVER-INCREASING ONLINE SHOPPERS VIA M-COMMERCE
DIGITAL OVERVIEW OF CHINA
VS. Internet Users
VS. Population61%
Population
1.40 Billion
Internet Users
854 Million
Mobile Terminal
847 Million
60%
99%
+1.6% of penetration rate
+0.4% of Urban users
2019 H1 vs. 2018 H2
2019 H1 2019 H1
Source: CIW

CHINESE DIGITAL CONSUMERS SPEND THE MOST TIME ON SOCIAL APPLICATIONS
DIGITAL CONSUMERS’ ONLINE BEHAVIOR IN CHINA
Social (e.g. WeChat,
Weibo),
33%
Short video (e.g. Douyin),
11%
Online video (e.g. iQiyi),
8%
News, 9%
Online music, 3%
Gaming, 8%
Online shopping,
4%
Others, 24%
Time spent by digital consumers on different channels
(2019)
Total time
spent online
(per user per
day)
358
minutes
Social Apps
Content Apps
Other Apps
Source: McKinsey, China digital consumer trends in 2019

TOP CHANNELS FOR REACHING THE TARGET AUDIENCE
MOBILE USERS SPEND ON AVG. 4.2 HOURS A DAY ON APPS, 55% OF THIS TIME IS ON SOCIAL MEDIA
Top Platforms Others
MAU - Monthly Active Users
SOCIAL MEDIA
E-COMMERCE
1083 M
30 M600 M 74 M
MAU 2018 MAU 2018
446 M
MAU 2018 MAU 2018 MAU 2018
VIDEO TYPE
493 M 231 M
70 M500 M20.2 M
503 M
MAU 2018 MAU 2019 MAU 2018
MAU 2018MAU 2018 MAU 2018
In million In million

CHINA’S RETAIL ECOMMERCE WILL GROW FASTER THAN TOTAL RETAIL, AND A QUARTER OF DIGITAL BUYERS WILL PURCHASE
FROM FOREIGN COUNTRIES
E-COMMERCE ACTIVITIES IN CHINA
1.5
1.9
2.4
30.9%
27.3%
24.3%
29.7%
36.6%
44.0%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
0.5
1
1.5
2
2.5
2018 2019E 2020E
Retail Ecommerce sales in China
(trillion USD, 2018-2020E)
Retail Ecommerce sales % Change % of total retail sales
Note: Includes products of services ordered using the internet via any
device; excludes travel and event tickets, payments such as bill pay,
taxes or money transfers, food services and drinking place sales,
gambling etc; excludes Hong Kong
134.4
147.0
158.8
13.9%
9.4%
7.8%
24.0% 24.5% 25.0%
0%
5%
10%
15%
20%
25%
30%
0
20
40
60
80
100
120
140
160
180
200
2018 2019E 2020E
Cross-border retail Ecommerce buyers in China
(million, 2018-2020E)
Retail Ecommerce buyers % Change % of total digital buyers
Note: Ages 14+; internet users who have made at least one purchase from a
foreign country via any digital channel during the calendar year, including
desktop/laptop, mobile and tablet purchases; includes goods bought via
Daigou; excludes B2B; excludes Hong Kong
Source: https://www.emarketer.com/content/china-ecommerce-2019

CHINESE E-COMMERCE PLATFORMS ARE CROWDED & COMPETITIVE
Total number of brands
on Tmall
Number of brands in
Tmall’s luxury pavilion
Number of international
brands on Tmall Global
~200,000 brands
Oct, 2019
~50 brands
Mar, 2018
~22,000 brands
Oct, 2019
Brands statistics on Tmall
Source: https://www.alibabagroup.com

BY WORD-OF-MOUTH MARKETING, SOCIAL E-COMMERCE ACQUIRES AND RETAINS CONSUMERS WITH HIGH EFFICIENCY.
RAPID RISE OF SOCIAL ECOMMERCE IN CHINA
4.7 22.5
176.2
626.9
1,316.6
379.6%
682.8%
255.8%
110.0%
0%
100%
200%
300%
400%
500%
600%
700%
800%
0
200
400
600
800
1000
1200
1400
2015 2016 2017 2018 2019E
Year-on-yeargrowth(%)
GMV(inRMBbillions)
Gross merchandise volume of social ecommerce in China
(in RMB billions, 2015-2019E)
GMV Growth
GMV transacted on Tmall in fiscal year 2018 was increased 36%
compared to fiscal year 2017, which is much lower than the
number on social ecommerce.
The sales revenue from social ecommerce platforms will account
for 20% of the country's online retail market this year.
In contrast to traditional e-commerce, the
essence of social ecommerce is to leverage the
role of individuals in the sales process.
Purchase conversion rate comparison
Social
ecommerce
Traditional
ecommerce
6%-10% 0.37%
Regarding individual trust as intermediary, social
ecommerce has better adapted to the challenges
faced by traditional ecommerce channels.
Source: https://www.chinainternetwatch.com/29573/social-ecommerce-2021e/;
https://www.alibabagroup.com

BRAND STORES OR CHANNELS ARE THE MOST IMPORTANT INFORMATION SOURCE FOR CHINESE CONSUMERS
CONSIDERABLE INFLUENCE OF SOCIAL MEDIA AND CONTENT
37%
26%
7%
50%
48%
25%
Aware Interested Purchased
Influence of social media and content on the
consumer journey
(2017-2019)
2017 2019
+35%
YoY
Growth +85% 3.6x
90%
45%
28%
28%
16%
12%
8%
7%
5%
In-person experiences
at brand stores
E-commerce
Official brand
online channels
Word of mouth
KOLs
Media
Celebrity
endorsement
Digital ads
Traditional ads
The sources of information that most influence
purchase (top 3 mentions)
Source: McKinsey, China digital consumer trends & China luxury report 2019

CONVENIENCE AND EXTRA BENEFITS DRIVE CHINESE CONSUMERS TO ECOMMERCE MINI-PROGRAMS
SHOPPING ON WECHAT IS INCREASINGLY POPULAR IN CHINA
E-commerce,
20%
Food delivery, 13%
Daily Life, 11%
Travel, 10%
Tools, 8%
Game related, 8%
Video related, 6%
Office management,
5%
News, 4%
Financial management, 3%
Photo related, 3%
Social network, 2%
Communication, 2%
Automobile related, 2%
Reading,
1%
Others,
2%
Top types of active mini-programs
(no. of mini-program, April – June, 2019)
43%
40%
34%
27%
22% 21%
17%
Reasons for shopping on WeChat mini-programs
(Top 3 mentions)
Source: Iresearch database 2019

ANOTHER PORT OF ENTRY TO CONNECT DIRECTLY WITH AUDIENCE ON WECHAT
WECHAT BRAND ZONE HELPS BUILD A CENTRALIZED BRAND IMAGE
In 2018, WeChat launched a new feature known as “Brand Zone”.
The “Brand Zone” is a specific section that shows up on the top in the search
result page when users search a brand name on WeChat.
Brands can display brand information, official accounts, sales channels, and
other customized content in one centralized section.
Therefore, brands can reach consumers directly through WeChat’s search engine.
Brands that use “Brand Zone”
Search “Luckin
Coffee” on WeChat
Public account
Brand Intro
Mini-program
Related service
Luckin’s “Brand Zone” in WeChat
Source: WeChatwiki

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