110609-cao

Report
China’s E-Commerce
Opportunities & Constraints in
a Booming Market
Amy Cao, Deloitte Beijing
June 2011
Chinese e-players offer full commercial / social solutions, mostly following their US
counterparties’ business model
Online
Shopping(B2C)
Online
Shopping(C2C)
Microblogging
Deal-of-the
day
Blogging
Mobil
Chat
Instant
Wikis
Messaging
SNS
Video
Sharing
Professional
Q&A
Message
SNS
Boards
2
©2011 Deloitte Touche Tohmatsu Limited. All rights reserved.
B2C and C2C models have seen substantial growth and potentials
Business-to-business (B2B)
• Emerged in late 1990s
• Become the major platform of exporter and connection between
manufacturers and wholesalers
• Transaction value reached around USD45 billion in 2010
• Alibaba accounted for 65% of market share
Business-to-customer (B2C)
•
•
•
•
Customer-to-customer (C2C)
• The real C2C model is very rare in China.
• C2C sellers are mostly entrepreneurial wholesalers, rather than
individuals, but enjoy the tax free benefits
• Transaction value reach USD 63.5 billion in 2010
• Taobao has 90% market share
• Large shops in C2C platform gained PE investments and started to
create their own platform to reduce dependence on Taobao
Small shop
owners
Emerged in early 2000
Rapid growth: 175% in 2009 and 150% in 2010
Transaction value reach around USD9 billion in 2010
3C, apparel, and tourism sectors received most of the PE/VC investment
3
©2011 Deloitte Touche Tohmatsu Limited. All rights reserved.
China’s online shopping market (B2C&C2C) reached 72.5 bn USD in 2010 and is
expected to grow at a CAGR of 70% for the next five years
China Online Shopping Market (bn USD, 1997-2015f)
2010 US
market value
140.0
120.0
Period
2003-2006
2006-2010
2010-2015f
CAGR
202%
106%
70%
Close to
2004 US
market value
Strong Growth
100.0
1213
Early Development
80.0
72.5
Infancy
60.0
38.8
40.0
19.1
20.0
0.0
0.0
0.1
0.5
1997
2003
2004
1.9
3.5
2005
2006
7.4
2007
2008
2009
2010
2015f
Source: www.iresearch.com.cn, Access Asia, National Bureau of Statistics (NBS)
4
©2011 Deloitte Touche Tohmatsu Limited. All rights reserved.
VC / PE investment: 2010 saw a boom
Online Shopping
Market
1997-2002
2003-2005
2006-2009
2010
13
84 (59 disclosed)
47 (30 disclosed)
65
455
540
9
18
Number of Deals
Disclosed Total
Investment (mn USD)
• A small number of
signifiant investment
• Majority of deals
were smaller than
5mn USD
Average Investment
(mn USD)
5
Source: www.zero2ipo.com.cn, www.chinaveture.com.cn, toocle.com
5
©2011 Deloitte Touche Tohmatsu Limited. All rights reserved.
VC /PE investment over 10mn USD – 2009 slowed down due to financial crisis
Time
Target company
Business sector
PE/VC investor
Investment value ($ mn)
2000
Ctrip
B2C - Tourism
Soft Bank, Carlyle, IDGVC
12
2003
eLong
B2C - Tourism
Tiger, Blue Ridge
12
2004
DangDang
B2C - Book
Tiger
10
2006
DangDang
B2C - Book
DCM, Walden Int.
30
2006
SousouKe
C2C
D&H Capital, Asian Groove
17
2007
Redbaby
B2C - Motherhood
KPCB
25
2007
360Buy
B2C – 3C
Capital Today
10
2008
IntoHotel*
B2C - Tourism
KPCB, Zero2ipo
30
2008
Udooo
B2C–Gift
Legend , SIG
25
2008
Liba
B2C -Comprehensive
Investor AB, Walden
15
2008
ByeCity
B2C - Tourism
JAFCO, Investor AB
10
2008
Vancl
B2C – Apparel
Qiming, IDG, Legend
10
2008
9diamond
B2C - Luxury
KPCB, Rapaport, Qiming,
Zero2ipo
10
2009
360Buy
B2C – 3C
Capital Today
21
2009
Okbuy
B2C–Footwear
Sequoia Capital
17
Source: ChinaVenture database, Zero2ipo.com.cn, Deloitte analysis
6
©2011 Deloitte Touche Tohmatsu Limited. All rights reserved.
VC / PE investment over 10mn USD in 2010 and 2011 – sector spread, large deal
emerge
Time
Target company
Business sector
PE/VC investor
Investment value ($ mn)
2010
2010
360Buy
Moonbasa
B2C – 3C
B2C – Apparel
Tiger Fund
Tiger Fund, GSR ventures
75
80
2010
Lashou
B2C - Group buying
Tenaya Venture
50
2010
VANCL
B2C - Apparel
Tiger Fund
49
2010
Lightinthebox
B2C – Outbound
Ceyuan, Trust Bridge Partners
35
2010
Mbaobao
B2C – Accessory
Legend Capital, DCM
30
2010
Vipshop
B2C - Luxury
Sequoia Capital, DCM
20
2010
Redbaby
B2C - Motherhood
Northern light,
20
2010
Okbuy
B2C – Apparel
Sequoia Capital, Intel, DFJ
17
2010
Ayatuan
B2C - Group buying
Individual Investor
17
2010
2010
2010
2010
2010
2010
Letao
Yuego
yesmynet
Manzuo
Didatuan
Masa Maso
B2C - Apparel
B2C - Motherhood
B2C – Food
B2C - Group buying
B2C - Group buying
B2C – Apparel
Ceyuan
DT Capital Partners
Mandra, DCM, Zero2ipo
KPCB
IDG
Sequoia
11
10
10
10
10
10
2011
360Buy
B2C – 3C
DST, Tigar
500
2011
Lashou
B2C – Group buying
Milestone Capital, Reinet Fund,
GSR Ventures
110
2011
OkBuy
B2C – Apparel
Not disclosed
60
2011
Zbird
B2C - Luxury
Ceyuan, FountainVest Partners
50
2011
Letao
B2C – Apparel
Not disclosed
31
2011
Xiu
B2C - Comprehensive
KPCB
20
Note: All disclosed deals above USD 10 million are included
Source: ChinaVenture.com.cn, Zero2ipo database, Deloitte analysis
7
©2011 Deloitte Touche Tohmatsu Limited. All rights reserved.
More online shopping companies are expected to go public following Mexcolane and
Dang Dang in the next a couple of years
IPO
Company
Business Sector
Time Listing
IPO multiples
EPS when listed
Current P/E
Current EPS
Ctrip
B2C/B2B:Online
travel agency
2003 Nasdaq
39
0.01
42
1.07
Mecoxlane
B2C: Apparel
2010 Nasdaq
157
0.06
63
0.08
103
0.03
745
0.02
B2C:
Dang Dang books/comprehensiv 2010
e
NYSE
To-be-IPOed
Company
Business
Sector
Proposed IPO
Time
Proposed listing
Estimated Market Value
(mn USD)
Business Sector
360buy
B2C
2012-2013
HK or Nasdaq
10,000
3C/comprehensive
Vancl
B2C
2012-2013
Nasdaq
5,000
Clothing
Source: www.pedaily.cn, www.chinaveture.com.cn, finance.yahoo.com, multiple media
8
©2011 Deloitte Touche Tohmatsu Limited. All rights reserved.
Established 8 years later, Taobao now has a comparable transaction value as ebay does
today. Registered user accounts for 1/4 of China population
vs.
Year Established
1995
2003
Enterprise Type
Listed: Nasdaq
Private
Business Model
C2C
C2C(individual seller based B2C) /B2C
9,510
770
11.3%
115%
Main Revenue Stream
Service fee and sales commission
Advertising (product ranking, stand-alone ads, etc.);
value-added service fee
No. of Registered users
(2010 Global)
94.5 million
370 million
Total Transaction Value
(2010, bn USD)
62
61
2010 Revenue (mn USD)
CAGR (2006-2010)
Comment
• ebay is Holding company of Eachnet (since 2003),
• Taobao is the current C2C market leader, taking
currently 3rd largest C2C platform in China, with a
over 80% market share
total transaction value of 1.4 bn USD in 2009,
− no service fee and no tax paid for the seller
accounting for 4% of total C2C market
− A supporting online payment system
• Eachnet lost its market leadership to Taobao in
• Launched Taobao mall as B2C platform
2006 and has been losing market share since
Source: company websites, www.zero.ipo.com.cn, Deloitte Analysis
9
©2011 Deloitte Touche Tohmatsu Limited. All rights reserved.
Fueled by several rounds of PE investment, Ctrip has shaped China’s online tourism
booking market and gained 50% share
vs.
Year Established
Enterprise Type
Business Model
Focus Sector
2010 Revenue (mn USD)
1996
Listed: Nasdaq
B2C
Tourism
1999
Listed: Nasdaq
B2C, B2B
Tourism
3450
444
11%
44%
Main Revenue Stream
Commission
Commission
Market Cap (mn USD)
6,770
6,420
50+ million
50+ million
65.6
6.0
• Expedia holds 56% of eLong’s share
• eLong is 2nd largest online trabel booking agency
in China, with 79 mn USD revenue in 2010,
accounting for 8% of total market share
• eLong has been losing its market share over the
past five years
• Market leader in online travel booking, with 49%
market share
• Ctrip is expanding its business to more tour
operation focused, recently acquired several local
travel agencies
CAGR (2006-2010)
Number of Members,
2010 Global
Total Transaction Value
(bn USD)
Comment
Source: company websites, iReseach, www.zero.ipo.com.cn, Deloitte Analysis
10
©2011 Deloitte Touche Tohmatsu Limited. All rights reserved.
Struggling in the low margin book selling sector for 10 years, Dangdang managed to go
public in 2010 and substaintially expanded the product offering
vs.
Year Established
Enterprise Type
Business Model
Focus Sector
2010 Revenue (mn USD)
CAGR (2006-2010)
Main Revenue Stream
Number of Registered
users (2010 Global)
Total Transaction Value
(mn USD)
Comment
1994
Listed: Nasdaq
B2C, C2C
Book/comprehensive
36,930
2000
Listed: NYSE
B2C
Book/comprehensive
346
34%
64%
Online sales, service fee, sales commission
online sale of books and other products
100+ million
40 million
33,251
342
2nd
• Amazon.cn, formerly joyo.com, is the
largest B2C company in China, with over $3200
revenue in 2009, accounting for 9.4% market
share
• Amazon.cn is the 2nd largest online book seller in
China. It has diversified its product portfolio from
mainly books to 20+ categories
• It offers free delivery in China
• 3rd largest B2C company in China, accounting
for 8.5% market share in 2009
• Market leader in online book sale sector
• Dang Dang still focuses on book sector while
expanding its product categories
• Dang Dang offers best price guarantee for its
books and free delivery services
Source: company websites, www.zero.ipo.com.cn, Deloitte Analysis
11
©2011 Deloitte Touche Tohmatsu Limited. All rights reserved.
Group buying is an emerging hot sector with over thousand websites and received over
500 million dollars since 2010. Industry consolidation is expected
vs.
Year Established
Enterprise Type
Business Model
Focus Sector
2010 Revenue (mn USD)
CAGR (2009-2010)
Main Revenue Stream
Number of Registered
users, (2010 Global)
Total Transaction Volume
(bn USD)
Comment
2008
Private
B2C
Group buying
460
2009
Private
B2C
Group buying
150
2000+%
6000+%
sales commission and advertising
sales commission and advertising
50 million
3 million
2
0.15
• Groupon just entered China market and looking for partnership/acquisition opportunities
• Lashou currently ranked 2nd in group buying market in terms of number of user covered, after
ju.taobao.com, the group buying platform developed by Taobao
• Leading online shopping companies (e.g. 360buy.com), social networks (e.g. renren.com), information
portals (e.g. ganji.com) and communication portal (e.g. qq.com) all launched their group buying
platform
• Currently there are over 2000 group buying platforms established all over China. Experts expected only
4 to 5 will survive in five years
Source: iResearch, company websites, www.zero.ipo.com.cn, b2b.toocle.com, techweb.com.cn, Deloitte Analysis
12
©2011 Deloitte Touche Tohmatsu Limited. All rights reserved.
As China’s micro blogging, Weibo developed dramatically and became the hottest
emerging media covering 140 million users
Sina Weibo
• Registered members reached 140 million; daily posts exceed 25 million
• Average time spend / day, user is over 1 hour
• Conquer 87% market shares by spending time per member and 57% market share by
number of active user
• Weibo may have a more significant influence to the public
than many of the traditional media, i.e. newspaper
A comparison with Twitter
Year Established
2006
2009
Registered user
195 million
140 million
Obtaining first 50
million users
In 3 years
In 1 year
Visit proportion
in total internet 0.40% in UK, 0.18% in US
visits
Active user
38 million accounts with
16 or more followers
•
Top account in Weibo
has followers of over 8
million
•
China’s No1 newspaper
issued 3.5 million
everyday and only 19
newspaper has
circulation over 1 million
0.63% in China
• Weibo has become the most important information
sources for internet users; an emergency may spread to
millions of user in very short time
− A recent example: a well known and well respected
PE fund founder post his decision of elopement in
Weibo. The post was forwarded by 5000 times in one
hour and 2.4 million comments in 10 days
100 million accounts with
over 20 or more followers
13
©2011 Deloitte Touche Tohmatsu Limited. All rights reserved.
Bottlenecks – Less reliable third party logistics services and underdeveloped credit and
payment system remain the biggest issues
Low Ratio of Online Payment
• Awareness of online payment is still low. Many of customers still prefer cash payment upon receiving products for
following reasons
− The credit system in China is still at early development stage. Online payment safety is a significant concern among
e-shoppers
− Currently online payment platform are not user friendly and often requires installations of specific software under
specific systems or websites
• China has just set up its Third-Party Payment Association and issued licenses to 20+ online payment companies
Unreliable Third-party logistics support
• Most of couriers companies not able to cover lower tier cities / counties
• Missing the delivery deadline or damaging products are quite common
• Short of hands in holiday seasons, especially Chinese New Year, resulting in delay on delivery
• Many of the significant players have invested heavily to build their own logistics system
Lack of trust on products and services
• Many product descriptions online are different from real products, or reported fake products
• Most consumers are only comfortable to purchase low-value products online, e.g. books, clothes, etc.
• After sales servcies is usually poor, with a very difficult return / refund terms
Information Security
• Over 20% of Chinese Internet users reported having experiences of being cheated by fraudulent websites
• Over 40% of Chinese internet users reported having had personal information stolen or manipulated.
14
©2011 Deloitte Touche Tohmatsu Limited. All rights reserved.
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