Wealth Blog

Inside the wonderful world of China e-tail

PUBLISHED : Monday, 11 November, 2013, 7:36pm
UPDATED : Monday, 11 November, 2013, 7:38pm

I suppose we suspected it already but now it’s official. We now spend more time on machines: PCs, ipads, smart phones and tablets – than we do with our husband or wife.

That’s what Robert Li, executive director of supply chain for Lenovo told the Asian Logistics and Maritime Conference in Wan Chai yesterday, so it must be true. Another of many startling statistics to emerge from this day-long talkfest was that a survey shows 85 per cent of people use their smart phone while doing something else. In Hong Kong that “something else” is usually meandering along the street, tripping everyone else up.

Next scary number is that there are 246 million smart and hand held devices in China, 10 per cent more than the 230 million who have them in the US. Smart phone penetration in China is now at 66 per cent – compared to 53 per cent in America, according to Mark Millar of the Hong Kong Logistics Association. Just where do they get the money?

Keep one, send two back

The topics soon changed to online shopping.

One thing has always put me off doing this for clothes – what happens if the frock doesn’t fit? Justin Zatouroff, global head of logistics for KPMG, said people now buy three sizes – the one they hope will fit, plus one size bigger and smaller, and return the other two. This messy business now has to be factored into the fashion supply chain with arrangements for collecting up the wrong sized items. I predict a lot of one-size items coming into vogue; otherwise it’s a true logistical nightmare. Droves of expensive old world warm bodies with fingers will be needed to sort the mounds of returned garments.

Among the other fascinating facts to emerge over the long day were that China is planning to build a bridge to Sumatra. So says George Yeo, chairman of Kerry Logistics network. China also intends to slap a load of concrete across the middle of Myanmar to bypass the South China Sea. What a depressing thought.  

We also learned that the cost of doing business in Chongqing are only 60 per cent of Shanghai, due to the super smart workforce, brutal work ethic and cheaper wages.   

Walmart leads virtual charge

Mr Walmart Asia Scott Price was the big draw of the morning, and he did not disappoint. Internet shopping is now worth US$1.4 trillion across the world, he said.

And if you thought that bricks and mortar stores were doomed, far from it. It’s just that the game is changing. In China at any rate, their growth continues unabated alongside their virtual rivals. The US retail giant continues to invest in real shops.

The reason, explains Price, is that shoppers are now buying “cross channel, not single channel.” So hip retailers need both.  “They are buying online, they are buying in stores; sometimes they are buying online and having it delivered in stores. Then they are online comparing prices, at times in the store.” Confused? You will be. 

All about China

But the show pony of virtual retail is China. “This year China surpasses the US in terms of value of the e-commerce market, it is growing at an extraordinary rate,” says Price.

So Walmart wants to be here there and everywhere when you feel like shopping, in your pocket and on the street corner. In Walmart UK, they find customers want to pick up the online purchase at the store as often as have it delivered to their home. “They are either working or they have the car. Who would have ever guessed that? And then, adds Price, having had their online purchase delivered to the store, 65 per cent of them continue on into the store to carry on shopping, in many cases buying fresh produce. “So it does not have to be either or, it can be both.”

In China things have taken a weird virtual step further, with Walmart’s “augmented reality store.” That trips off the tongue. This bizarre concept straddles the physical store and online world. They walk into a real space where about a thousand items are displayed, but they click and buy and check out online and have the stuff delivered to their home. Where I come from, you’d get funny looks if you said you’d gone to a fake shop to buy your groceries. 

Walmart has grasped the metal and also have their “Get it on the shelf” thing where smaller and medium size companies can list on Walmart.com, even though they don’t produce enough to supply 5,000 real stores. They also promote women’s initiatives, stocking products from 29 female-run companies with 200 lines.

Chinese love bargains and sales 

So what else did we learn? Well Chinese love two things: bargains and sales. Tao Bao, which is growing at a yearly rate of 65 per cent per year, did 7 per cent of its annual turnover in one day when they had on of their “bachelor sales.” No I don’t know what that is, but in gender-skewed China, you’d think they’d do even better with spinster sales.

Can you have a luxury experience online?

This question is posed by posh frock retailer Net-a-Porter’s Paul Teague. He claims you can. Forget the cheapie sales, he says. “You don’t have to be the cheapest all the time,” he claims, though as Tao Bao knows, it sure helps. He claims their average trade is in the thousands of US dollars and often, in China, tops the US$30,000 mark.

“We don’t undercut the fashion brands on price,” adds Teague. Well that makes sense, or none of them would list their clobber on his site.

Which brings me to a final startling e-tail fact.

The average volume of virtual purchase packages shipped domestically in the US each day is about 15 million. This Monday is something called “Singles Day” – the 11th of the 11th. It must mean something to the business. Last November on Singles Day in China, Alibaba shipped 72 million packages. That’s in one day. We can only guess how many they will deliver this Monday.