E-commerce – Look East.

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In mobile, China is more developed than USA.

• Comparing China’s Singles Day against Brown Thursday, Black Friday and Cyber Monday in USA reveals just how much more advanced the development of the mobile online consumer economy is in China.
• The first figures for Brown Thursday Black Friday are coming in with Adobe estimating that $7.90bn (Gross Merchandise Value, (GMV)) was spent online with another $6.6bn expected to come on Cyber Monday.
• Of the $7.90bn, 37% of the revenue was produced by a mobile device of which 70% was transacted via a smartphone (26% total turnover).
• While these figures are the best ever for the USA in terms of total turnover and smartphone share, they pale into insignificance when compared to Singles Day in China.
• Between them, Alibaba and JD.com make up 87.2% of all B2C e-commerce in China and on Singles Day they racked up $44.7bn in GMV.
• In just one day Chinese e-commerce turned over 5.7x in GMV than the two US days put together.
• If one includes the expectations for Cyber Monday, then the total US holiday shopping period is dwarfed by a factor of 3 to 1.
• Furthermore, 90% of all of Alibaba’s GMV was transacted on a mobile device and AliPay handled a total of 1.5bn transactions.
• It is clear that a big discrepancy here is that Singles Day a recently created, online-only event whereas Black Friday has been going since 1952 and remains mostly an offline event that’s is slowly migrating to online
• However, the scale of the difference between the two clearly demonstrates that when it comes to online transactions and mobile, China is far more developed than USA or other developed markets.
• I have long believed that there are two main reasons for this:
  • First: the offline experience in China is very poor.
  • This is the case for many sectors but particularly in retail.
  • Chinese offline retail is a fragmented and frustrating experience where decent service and information with regards to inventory, product lines and so on is routinely not available.
  • When an online offering appears where this information is clear and one is able to easily purchase goods and know when they will be delivered, shoppers quickly adapt.
  • Hence, Chinese consumers have very quickly adapted to online shopping as the experience and ease of use is far superior to offline.
  • Second: China is a mobile first market.
  • Cellular connectivity in China has better penetration of broadband connections, higher throughput and lower latency than fixed Internet (see here).
  • Consequently, mobile is the first choice for Chinese users as it almost always offers a better user experience.
• This is also why we have begun to see reversal of the direction of innovation in mobile services.
• Historically, Chinese companies have copied ideas pioneered in Developed Markets, but this hs changed meaningfully.
• For example, many of the innovations that are being put into instant messaging platforms by Facebook, Snapchat, Apple and so on are already available in WeChat, LINE, Kakao-Talk etc.
• This is a trend I expect to continue going forward.
• China remains dominated by the BATmen of whom I have preferred Tencent for the last 15 months.
• However, given its rally and its apparent slowness to monetise its ecosystem fully, I am beginning about switching into Alibaba.