Amazing China

The boom in the Chinese local delivery market
The boom in the Chinese local delivery market 1678 1119 Altavia

The last-mile delivery market, which stems directly from the e-commerce sector, has grown considerably in China and was estimated to be worth over $250bn in 2018, indicating a significant change in consumer behaviour as we become accustomed to having all manner of products delivered to us at any time. Altavia Key Account Manager Stéphane Joly helps shed some light on this trend.

Being able to have pretty much anything delivered to you at any hour of the day or night has become the norm in China, where millions of customers’ relationships with the delivery sector have changed with the increasing digitalisation of the retail sector. The local delivery market has truly sky-rocketed, experiencing more than twice the level of growth of the e-commerce sector itself (56% and 24% respectively between 2017 and 2018).

 

“Sales outlets are finding that they have to open more or less 24/7 to meet the needs of an elusive consumer who can order a meal at any time of the day or night these days”, Stéphane Joly explains, “with restaurants now employing chefs to work from morning to night, ready to spring into action whenever an order comes in”. 

 

 

3 major home delivery companies

There are 3 giants who currently share the monopoly over last-mile logistics in China, representing the fierce war that is waging between Alibaba and Tencent.

 

Ele.me (Alibaba): this platform, the name of which is Mandarin for ‘Are you hungry?’, is used by some 170 million Internet-users and delivers for Starbucks, health & beauty store Watsons, cinemas and restaurants, among other companies.

 

Koubei (Alibaba): this site boasts some 160 million users who use it to book cinema tickets and spa treatments, as well as ordering meals, among other things.

 

Meituan (Tencent): this company, which originally specialised in group buying, has since grown considerably and now offers all sorts of delivery services.

 

“Any sales outlet, restaurant, cinema, etc. can register on these platforms, regardless of its size”, Stéphane Joly explains. “They simply pay a small fee for each transaction completed in return for access to a market of millions of potential customers, and delivery is free for the end-customer, too”. 

 

 

A meal delivered in under 30 minutes

Ordering meals for delivery has become a way of life, and Chinese consumers can do so several times a day, in fact. Once the order has been placed on one of the corresponding platforms, the ready-to-serve meal is delivered within a maximum of 30 minutes. “What’s surprising about China is that it’s not unusual to see very little difference in turnover between physical restaurants and delivery services!”.

 

 

Succumbing to the new diktat

All physical retailers are now also finding themselves forced to offer a fast and efficient delivery service, with Auchan-RT-Mart, Carrefour-Suning and Hema (Alibaba), for example, all succumbing to this new consumer diktat. “Retailers have no choice but to register on Ele.me, Koubei or Meituan, giving them access to a market of over 150 million users, if they want to survive. Then, of course, they just have to make sure they are flawless, since negative reviews and comments posted on platforms by unhappy consumers can have devastating effects”. 

 

 

A market with a very bright future

Whilst this new consumption pattern comes at a certain cost where the platforms are concerned (in terms of staff, packaging, shipping, etc.) and ‘super apps’ such as Ele.me, Koubei and Meituan are far from profitable (despite being valued at tens of billions of US$), local delivery volumes are such that the market has plenty of momentum left in it yet, and the thousands of drivers employed in the sector (and who have no social status!) will no doubt continue to risk life and limb on their mopeds to make sure we get our meals in under 30 minutes for many years to come. But what about all these tonnes of plastic packaging that in a matter of minutes becomes waste that cannot be recycled? Let’s hope that further thought will be given to the environmental aspect in the near future and that viable alternatives can be sought.

The role of e-commerce platforms in the sale of luxury articles in China: the case of JD.com
The role of e-commerce platforms in the sale of luxury articles in China: the case of JD.com 1562 1202 Altavia

 

 

In China, luxury products are rarely bought in the store or on the website of the brand itself but on platforms like Alibaba and JD.com. The latter, originating from Beijing, has more than one ace up its sleeve. We breakdown this perfectly calibrated phenomenon with Altavia Global Key Account Director, Stéphane Joly.

“JD.com, the largest retailer in China”

It is the 2nd largest e-commerce platform behind Alibaba. The figures presented at the conference given by Kevin Jiang, Vice-President of International Business at JD.com, confirm that the platform is now a key player.

 

Let’s take a quick look at the figures:

 

  • Over 300 million active users, i.e. up 30% compared to 2017.
  • Turnover in excess of $200 billion (value of the products that pass through the platform) at the end of 2018, i.e. up 150% compared to the previous year.
  • A $67 billion profit, i.e. +200% in one year for a stock market valuation of $46 billion.
  • “JD.com sees itself as the largest retailer in China and the world’s 3rd Internet company, behind Google and Amazon” explains Stéphane Joly.

 

 

A major platform

JD. com alone works with 160,000 traders. It sells electronics, fresh produce, consumer goods, textiles, Hi-Fi equipment, furniture and decoration… as well as luxury products.

 

“According to Kevin Jiang, platforms have become search engines: 37% of users use the site to look for products and 42% for inspiration” explains Stéphane Joly.

 

 

The advantages of JD.com

Although the Beijing-based platform remains behind Alibaba with its two platforms Alibaba, Taobao and Tmall that account for 600 million active users, it has nevertheless set itself apart in more than one area. “JD.com has decided to join forces with Tencent, whose messaging app WeChat is the largest social network in China, with 1 billion active users. This partnership is highly strategic as it allows the platform to collect a vast amount of data and thus optimise the targeting of its communication to users. Alibaba, for its part, does not use any social networks”. JD.com has also partnered with the search engine Baidu and Toutiao, a news and video content platform. “A highly intelligent positioning, that allows JD.com to collect information on products likely to interest its customers” adds Stéphane Joly.

 

Another advantage: counterfeit control. JD.com applies a strict policy that gets results – unlike Alibaba, which suffers from its lack of reliability in this area.

 

JD.com is also backed by excellent logistics. 90% of the articles available can be delivered in 24 hours within China. A VIP delivery system is also available, allowing young women, for example, to have their order delivered by handsome young men wearing white gloves…

 

 

JD Luxury

In China, luxury products are rarely bought in the store or on the website of the brand itself but on platforms like JD.com, which has launched JD Luxury.

 

Who are the website’s clients? According to Kevin Jiang, 74% are aged between 26 and 45 and 60% come from big cities.

 

“The website has great ergonomics and all the codes associated with brands are respected”, says Stéphane Joly. “A large number of prestigious brands, like Paul Smith, Prada, Tod’s, Escada, Fred, Versace, etc. have opened a boutique in their name. Delivery is handled by the platform”. The return rate, between 15% and 20%, is well below that of other Chinese websites; proof of the efficiency of its data collection, made possible in particular thanks to its partnership with Tencent.

 

“It appears that Chinese consumers of luxury products are becoming less and less accustomed to receiving deliveries from abroad”, reveals Stéphane Joly. The difference in the sales price between those applied in China and those in the country of origin is narrowing. The new anti #代购 (Daigou) laws – intermediaries that buy luxury articles abroad for a third party and take them through customs on their return to China without paying the import taxes – mean that 22% of purchases of luxury articles are made in China, compared to 8% previously.”

 

 

JD is able to target the ‘generation self’ which is creating its own fashion

Just a few years ago, Chinese consumers only bought brands (and often the same ones). Nowadays they are less followers and much more interested in design.

 

“Chinese consumers of the “generation self” are part of the 2nd generation of only children – the first without cousins,” explains Stéphane Joly. “They are very egocentric, curious, and confident of their ability to create their own fashion, on the hunt for a niche design product.” A real challenge for luxury brands, which can no longer predict what these consumers will buy. “We talk about Audience X to refer to the fact that with ultra personalisation, it is difficult to known what will be a success.” But the good news is that access to luxury products in mid-size and secondary Chinese cities means that growth for these brands is phenomenal.

 

 

The influence of key opinion leaders

Although the Chinese are confident of their ability to create their own fashion, they also follow the opinion of influencers on social networks. “Social commerce, linked to interaction between social media and the power of influencers, is highly developed in China”, notes Stéphane Joly. “In a short space of time, a brand can therefore skyrocket… or plummet! That was the case of Dolce&Gabbana at the end of 2018, which still has not recovered.”

 

An inescapable phenomenon that luxury brands must also incorporate into their strategy. As such, JD.com has been able to position itself, within 5 years, as the key intermediary in the quest to conquer this flourishing market

 

 

Luckin Coffee: delusions of grandeur in China
Luckin Coffee: delusions of grandeur in China 1677 1119 Altavia

 

 

With Luckin Coffee about to float on the New York Stock Exchange and overtake Starbucks in China, Altavia Key Account Director Stéphane Joly introduces us to this latest Chinese unicorn.

“ 

The US financial market is no longer enough – Shanghai launches its own Nasdaq

China, being the unicorn factory that is, recently introduced the Western world to one of its latest creations in the form of Starbucks’ Chinese rival Luckin Coffee, #瑞幸咖啡. The coffee chain is set to float on the New York Stock Exchange in May 2019 with the hope of raising $1 billion and consequently seeing its value reach nearly $5 billion. In order to achieve this goal and surpass Starbucks in China, however, the company will need to open a new outlet every 210 minutes!

 

Now unicorns may be mythical creatures whose futures and lifespans are so difficult to predict, but one thing for certain is that, however long or short their lives may be, unicorns do have an annoying tendency to attract money and to see their value reach dizzying heights!

 

 

Following the PER (Price Earning Ratio), Chinese investors have now invented the PDR (Price Deficit Ratio).

Luckin Coffee burns a considerable amount of money, much to the delight of its investors. Whereas alarm bells previously rang when PERs were too high, what we have now is a topsy-turvy situation where the higher the PDR, the more freely the money flows.

 

It is important to note that investors the world over have believed that companies like Amazon, which, of course, has just piteously withdrawn from the Chinese market, had a future, even though the company was still in the red in 2015, despite generating a turnover of nearly US$90 billion.

 

The Chinese are therefore about to launch their own Nasdaq – the Science and Technology Innovation Board – as if New York, the Hong Kong Stock Exchange and even the Nasdaq were no longer sufficient when it came to raising capital. As a result, technology companies will be able to get listed and raise funds more quickly on the Shanghai Stock Exchange, just as Beijing wanted and as President Xi Jinping announced in November 2018, by accelerating IPOs and therefore supporting the development of future national champions – one sure-fire way to do away with the United States’ dominance over the international funding of Chinese companies.

 

Beijing hopes to take advantage of small Chinese shareholders who are frustrated at not being able to invest in foreign markets as they see fit, and this new Nasdaq in Shanghai will enable Chinese investors, who are also particularly keen gamblers, to support the cash needs of these unicorns that they see and use on a daily basis.

 

 

Luckin Coffee: a prime example of a start-up’s ability to understand its market

Coffee consumption in China rose from virtually zero in the year 2000 to account for 2.4% of global consumption by 2018.

 

Even as recently as 2 years ago, Starbucks held nearly 80% of the market, but that was before the Luckin Coffee caribou set out from Beijing to defeat the little mermaid from Seattle!

 

The reality is that both companies have adopted very different models and have very different USPs:

 

  • Starbucks focuses on well-being at its outlets, with free Wi-Fi, baristas, etc. and a high price positioning that could be considered quite brazen when you think about the margins to be made on coffee! The initial idea, of course, was to allow customers to spend some quality time with friends, curled up comfortably on a sofa for a few hours, but alas, a 30-seater outlet where customers spent a few hours at a time was not going to generate sufficient turnover, and Luckin Coffee quickly realised this! Starbucks has positioned itself as a ‘third place’ that’s neither work nor home and has an international image that brings with it a certain social status.
  • When it came to a very individualistic country like China,  where delivery now generates over half of all restaurant business, Luckin Coffee decided to adopt a different approach. The company has a very clear understanding of its market and appeals to a much younger population, with 80% of its customers being under the age of 30 and a price positioning 20% lower than that of Starbucks. Coffee shops are springing up all over the place, with Luckin Coffee going from just 9 outlets in 2017 to opening over 2,000 in the space of a year, beneath office blocks and shopping malls, in places where there isn’t space to sit down. The company has focused on mass consumption, immediacy and ease of ordering and delivery and done away with baristas in the process! Delivery drivers make up Luckin Coffee’s main customer base, and one major factor that makes it different from Starbucks is that Luckin Coffee is a Chinese company.

 

Another thing that sets Luckin Coffee apart, of course, is the time Starbucks takes to form partnerships (as it has recently done with Alibaba). What’s more, the American company took too long to accept mobile payments using Alipay and WeChat Pay, instead favouring now-outdated cash and prepaid plastic card payments. Luckin Coffee, meanwhile, is a 2-year-old baby unicorn that has had the support of Tencent from the very outset.

 

So what next?

No one can predict what will happen next; although Starbucks, which has operated in China since 1999, does, of course, have a much greater market valuation than Luckin Coffee.

 

Coca-Cola has also recently invested in caffeine with its buyout of British chain Costa, with co-working unicorn WeWork, whose spaces are becomingly increasingly popular in China, also establishing a presence in this lucrative market.

 

There are, of course, plenty of examples of unicorns that have failed to reach any real level of maturity, with Ofo, for example, no longer with us and Mobike not looking very healthy, either. The barrier to entry is low, the aggressive price positioning not necessarily sustainable, names easily replaceable, products not particularly innovative and investors very versatile.

 

Without wishing to rain on Luckin Coffee’s parade as it basks in the glory of its flotation in New York, there is one question that begs to be asked: ‘who will be the next unicorn to get itself noticed in this thriving market?’

”

 

Stéphane Joly, Global Key Account Director, Altavia Europe

 

 

Douyin/TikTok: a first-class marketing tool for brands?
Douyin/TikTok: a first-class marketing tool for brands? 1678 1119 Altavia

 

 

Douyin, aka TikTok, has become the leading Chinese social media app. Secret recipe of this “sweet and sour” app.

 

Douyin is a hip short video app launched not so long ago in September 2016. In November 2017, ByteDance, the holding of Douyin, bought the US Musical.ly app for 1 billion USD. Since then, the app has seen exponential growth over the last 3 years, becoming hugely popular among China’s young social media users. The app currently has 250 million daily active users (DAU) and 500 million monthly active users, and is gaining millions of new users every month. 60% of Douyin users are female, and around 70% reside in China’s top-tier cities. Outside of China, the app is known as TikTok and targets users aged 10 to 18. It has 2.5 million users in France alone, and has recorded more downloads than giants like Snapchat, Facebook and Instagram in recent months.

 

 

The sweet: huge marketing value for advertisers

Leveraging its massive popularity among Chinese millennials, the app has obvious value to luxury marketers like Christian Dior, Louis Vuitton, and Chanel which are placing advertisements on the platform in China.

 

 

Beyond ad placement, Christian Dior has an official account on Douyin with a posting schedule synced to the brand’s operations in China. Photo: Jing Daily illustration

 

 

Content and format are key in determining if a video will go viral on Douyin. A good video should motivate followers to regenerate secondary content for secondary communication. In general, Douyin content is fairly down-to-earth and even sometimes distasteful. It would be easy to think that such a platform create a mismatch between Douyin’s audience and luxury clients. But in recent months, Douyin has also started to expand its e-commerce functionality to allow brands and retailers to capitalize on their traffic. Christian Dior, for example, added a store on the app that allows users to place orders. Social selling is a real phenomenon in China, and viewers can easily transform into impulsive buyers. It is therefore easy to see the benefit for marketers in using such a platform to push brand content and trigger sales.

 

 

The sour: a not so friendly app

Many foreign countries have tried to alert their youngsters to the dangers of the dark sides of social media (narcissistic behavior, bullying, addiction). TikTok is no exception to this, and has recently been under criticism due to the disconcerted facility to publish content that then spreads like wildfire onto various other platforms.

 

 

 

 

TikTok’s main feature is nothing fancy, since the app is basically a karaoke machine. Users take selfies singing and dancing. But its secret weapon lies in the challenges issued to all users on a weekly basis, such as trying different outfits or shoes on in 15 seconds… This scheme develops addictive behavior. Special effects and make-up are included to allow users to look like their idol. Like on any other social media platform, the ultimate goal is to get as many “likes” and “followers” as possible striking stereotyped and sexy poses. TikTok has become the ultimate narcissism platform. Many users try their best to look like their idols. If they fail, they risk being bullied and mocked. Indeed, it is not rare to find aggressive and sexist comments sent to users who post videos of themselves.

 

 

In a nutshell: impressive growth of its user base, but Douyin is still not a par with the WeChat ecosystem

TikTok has gained massive notoriety among youngsters. Like all other social media, users must be highly cautious about the content they post on it. TikTok is clearly the first ever “developed in China” social app with a clear agenda of conquering the world (not only China and Southeast Asia). Despite its fame, TikTok is still no match for the current social media marketing king WeChat. WeChat has a complete ecosystem, from social media, videos, to mini-programs and payment. Douyin is by no means a threat to it for now.

 

 

By Stéphane Joly, Global Key Account Director, Altavia Europe

 

 

Meituan

Meituan: a risky gamble on the future
Meituan: a risky gamble on the future 1677 1119 Altavia

Super applications such as WeChat –TenCent–, Alipay –Alibaba– and Meituan are very popular in China

 

Although Alibaba and Tencent are now well known to the European general public, the same cannot be said for another Chinese giant, founded in 2010: Meituan. The start-up, which is now a member of the highly exclusive “super apps” club, went public last year. So it must be a flourishing company with rapid growth…? The reality is very different. Here’s an update from Stéphane Joly, Key Account Director at Altavia.

 

Meituan: an introduction

When the start-up was founded by entrepreneur Wang Xing in 2010, its business model was based on online group purchases of products and services, giving customers access to significant discounts, like Groupon. Over the years, Meituan considerably expanded its offering:

 

  • In 2015, the company bought Dianping, a participative restaurant and hotel listing platform with 200 million active users per month.
  • Meituan also set out to conquer the home meal delivery sector, pitting the company against Ele.me, owned by the Alibaba giant.
  • The 2.7-billion-dollar purchase of the Mobike self-service bicycle company – with 320 million customers! – expanded Meituan’s offering still further.
  • Lastly, the start-up recently entered the VTC(chauffeured vehicle) reservation market.

 

“Super applications such as WeChat –TenCent–, Alipay –Alibaba– and Meituan are very popular in China; it’s a phenomenon you don’t find anywhere else!”, Stéphane points out. “WeChat has already exceeded one billion users, who spend several hours a day using the messaging services, but also extensively use the WeChat Pay m-wallet. As for Alibaba, more than 600 million Chinese people use it very actively to pay for everything and anything on a daily basis. And then Meituan, with its mere 200 million users, arrives… That’s a big deal!”

 

But unlike its two main rivals, Meituan is used only in the Chinese market. Its reach beyond those borders is considerably smaller.

 

A gamble on the future 

“Wang Xing, the founder of Meituan, arranged for his company’s flotation on the Hong Kong stock exchange,” says Stéphane. The event took place in September: Meituan was valued by investors at nearly 53 billion dollars (45 billion euros)! It’s worth putting that figure into perspective by comparing it with something more familiar to us: groups like Accor and Carrefour, whose valuations are much lower.”

 

So are we witnessing the rise of a new “unicorn”? Only time will tell. In 2017, Meituan lost a cool 3 billion dollars. “The start-up is investing enormous sums, and spending colossal amounts of money – hence the need to go public,” explains Stéphane. “Meituan is operating in a booming sector in China; so you can consider this valuation as a gamble on the future. It’s the same thing Amazon did back in the day. But the gap between the valuation and the annual losses is wide enough to make this a genuinely risky gamble for Meituan!”

 

Chinese pragmatism

So what will happen in years to come? Will Meituan have a strong enough stomach to continue its commercial fight for market share against the Alibaba group’s Ele.me, which has a war chest and a market valuation for its group which is ten times larger? “As is often the case in China, pragmatism wins out: Alibaba and TenCent have both invested in Meituan’s capital, Stéphane reveals. So if Meituan were to succeed in turning this tale into a real success story, the two giants won’t have lost their shirts entirely.”

 

Keep watching… very closely.

Alibaba has entered the serious multi billion business of RT-Mart hypermarkets stores.
Alibaba has entered the serious multi billion business of RT-Mart hypermarkets stores. 1985 1185 Altavia

 

For the last 2 years, with its 40 Hema stores, Alibaba has learned a lot about physical retail. It was a good warm up. No offense to Hema stores, but we need a dozen of them to match the sales of a large hypermarket.

 

So, Alibaba, for the last 4 months has changed gear and the league by entering the serious business of brick and mortar “old style” hypermarkets. In couple of weeks Alibaba’s influence has become really obvious in RT-Mart’s daily operations.

RT-Mart has become a large Hema store. Off-line and Online are one.

Since end of 2017 in RT-Mart stores (Sun Art group which includes Auchan China), the famous basket conveyors hanging on the ceilings of the Hema stores, (40 opened so far in China and plan to open up to 1000 by 2020) are operating now in RT-Mart stores and it is clearly not a gimmick.

 

Pickers in the store are preparing orders that they received on their PDA the same way as in Hema stores. They take baskets that are piled up in various strategic locations of the store (mainly fresh and FMCG) then put the basket on one of the load stations and the basket is conveyed above our heads, making some noise until it reaches the back (storage) of the store where delivery men will have the deliver to client’s doorstep within 1 hour.

 

Same show, same technique as in Hema stores. Less busy than in a Hema store. I nevertheless found them quite actively used when I visited the store.

 

Alibaba RT Mart

New retail - Alibaba

RT-Mart has also become a Tmall store

Alibaba and Tmall bannes are everywhere in the store.

 

Alibaba rt-mart

 

We find dedicated Tmall shop in shop, gondola heads, displays, sticker on the floor, special prices tag which are AR (augmented reality) ready.

 

Alibaba -shop in shop

 

Banners, displays prompting clients to download the App for home delivery are everywhere.

 

The store plays it part in making sure that every client knows that the store delivers 5000 items in a radius of 3 km like Hema in 1 hour (instead of 30 min for Hema).

 

They are still in the acquisition phase and do not hesitate to give away coupon of $8 for any first time user.

 

Digital screens with content from TMall or Youko programs are in alleys and at cashier desks.

 

When it comes to payment the store does not advertise for #WeChat pay of course and push the Alipay but you still (up to now) pay with WeChat.

 

Alibaba - Alipay

 

I did not think Alibaba would have moved so fast. They are a minority stakeholder of the SunArt Group but they clearly do no intent do be sleeping partner and their influence is really visible in the store. For the better.

 

Auchan will probably follow a similar trend and install the same kind of basket picking system in store which is quite efficient on top of being visible, reassuring if not entertaining. And soon we might see Tmall corners in Auchan stores as well.

 

What is striking is that the store is really doing its job. RT-Mart’s management is clearly not afraid to potentially see some of its customers leaving the stores because they would have chosen ordering their goods on the App. The store is a wonderful and powerful media to push online sales and that’s the right thing to do.

 

Because at the end of the day, sales whether online or offline, will still be accounted under the same banner. So who cares ? if it is what the client wants…

 

By Stéphane Joly, Executive vice-president, Altavia Asia

 

Logistique Alibaba

Logistics battle : Alibaba 1, Tencent 0.
Logistics battle : Alibaba 1, Tencent 0. 1827 1028 Altavia

In the ultimate goal of “owning the customer” Alibaba may have won the logistics battle, if not the war, against its rival Tencent.

The first battle between these two mastodons was to build and drive online traffic… Well, with 1 billion users for WeChat and $25 billion of goods sold in 24 hours during the last double 11 (11 November 2017) on Tmall we can say that both of them succeed in this first round. Let’s call it a draw.
Their second battle was to get a strong offline footprint. On Alibaba’s side: Stake or full control of Suning, Hema, Intime, Sun Art ( RTMart and Auchan China)… On Tencent’s corner: Stake in #Yonghui, #Carrefour, #D physical stores, strong cooperation on payment with #Walmart… We might think that say that Alibaba has a slight advantage for now.
Since it was not enough to control the whole value chain and share the market among themselves, they open a new front… They want to own the customer.
Their latest battlefront has moved to the logistics. But not the logistic offline retailers (between suppliers and offline stores) know. We are talking about the visible logistics between offline stores and final users / clients / customers.
Until last week Alibaba, through its stake in Cainiao, was already leveraging on its thousands delivery men… Well, that was last week…

Deliveries in more than 300 Chinese cities

Now with its latest purchase of the remaining stake of #ele.me, Alibaba overnight has just added a labour force of couple more thousands … valuing at the same time the food delivery platform at $9.5 billion… The platform claims to deliver, in more than 300 Chinese cities, to its 50 million customers (95% of them ordering on their mobile) food from more than 300 000 restaurants.

 

It is obvious that Alibaba bought nothing more than “time to market” to outpace its rival. Alibaba did not want to reinvent the wheel and go thru any learning curve… Time is money and size makes its all.
On the other corner, before we forget and before the next buy, Tencent has a large stake in Meituan-Dianping delivery service company which is dealing with hundreds of thousands of meals delivered per day.
Both of these two titans already own so much data on their users (through social media, games, but more importantly thru all of their purchases on and offline). They both want to own the relationship with the consumer at any time of the day and the night.

 

Customers might have to choose…

The same way brick and mortar retailers in China have started to choose their champion, (Walmart for Tencent, Auchan for Alipay, probably Carrefour for Tencent …) we, common consumers, might as well be forced to make a choice between one of the two banners because they might not continue accepting our fickle behavior using either one of the other according to our own benefit. Loyalty comes at a price.

 

By Stéphane Joly, Executive Vice-president, Altavia Asia

 

Les géants chinois creusent l'écart

The Chinese Giants are Striding Ahead
The Chinese Giants are Striding Ahead 1827 1028 Altavia

Two Chinese companies, Tencent and Alibaba, are streaking ahead in the big leagues. With huge sums of money behind them, and aware of the need for lightning speed, both web giants are taking gambles and risks and buying up at every turn, becoming bigger and bigger with every passing month. An overview of these two phenomena, so different and yet so alike, with Stéphane Joly, Executive Vice-President of Altavia Asia.

Both of these Chinese giants, created 20 years ago have seen absolutely spectacular growth rates. A few figures:

 

Tencent:
  • Stock market value: $550 billion
  • Earnings: $3.5 billion
  • Date of creation 1999
  • Workforce: 39,000

 

Alibaba:
  • Stock market value: $485 billion
  • Earnings: $3.9 billion
  • Date of creation: 1998
  • Workforce: 50,000

 

“To put that into context, Carrefour Group, which employs 400,000 people around the world, and Tesco are both worth less than $20 billion,” Stéphane Joly points out. “This shows the gulf that separates the two Chinese firms from the others.” 

 

A war of speed, fought on the same battlefield

Tencent, which provides video games and the popular messaging application, WeChat, and Alibaba, an online sales company, occupy two different worlds. However, we can see many similarities in their growth strategy. “Tencent and Alibaba have both implemented a phenomenally successful service: mobile payment,” Stéphane Joly tells us. WeChat (Tencent) et Alipay (Alibaba) are used massively by the Chinese, who almost never use cash to pay for their purchases (editor’s note: see also CHINA: The dazzling success of mobile payment). “The two powerhouses also own a virtual bank, a self-service bicycle company, a large travel agency, a video site home delivery company, and more.” Both groups are surfing on identical waves, and are always very successful.

 

Fewer but bigger stakeholders

“In the last ten years, we have seen an acceleration in equity participation for pure players and, in the last few months, ‘offline’ too, with buyouts of shopping centres and stores,” Stéphane Joly adds.

 

Tencent:
  • 20% of the e-commerce platform JD.com
  • 100% of the e-commerce platform Yihaodian: $1.5 billion
  • 4% of Dalian Wanda (huge conglomerate of shopping centres and cinemas): $1.5 billion
  • 7% of Vipshop.com: $600 million
  • 5% of the supermarket chain Yonghui Superstores
  • Close ties with Carrefour China

 

Alibaba:
  • 36% of Auchan China: $3 billion
  • 30% of the electrical goods company Suning: $7 billion
  • 100% of the supermarket chain Hema: $300 million
  • 75% of Intime Group’s shopping centres: $2.6 billion
  • 77% (with the Chinese group Cultural Investment Holdings) of Dalian Wanda: $1.2 billion

 

“In the space of a few months, Tencent has spent $5 billion,” Stéphane Joly points out. And Alibaba has spent $15 billion. That’s colossal! And the phenomenon never stops ramping up. There has barely been a week without a billion dollar deal. Both firms want control and are going after the same prey. Money doth flow.”

 

More mergers and buyouts are still expected in the coming months/years in China and South East Asia. There will be fewer and fewer players; and only the heavyweights will survive.

 

The new black gold: data 

Today, Alibaba and Tencent are playing their biggest card: the customer data garnered from all the transactions. “Purchasing frequency, types of articles purchased, eating habits, if there are children in the household, likelihood to return to the same place to shop… All this “cross-channel” and “cross-banner” data are worth their weight in gold and are being well used!” Stéphane Joly claims.

 

convenience store

CONVENIENCE STORE FORMAT IS DEAD ALREADY IN CHINA…
CONVENIENCE STORE FORMAT IS DEAD ALREADY IN CHINA… 960 720 Altavia

The convenience store format is dead… welcome to the “INSTANT convenience store” 即时便利.

After the siamese cat from TMall, the blue hippopotamus from Hema, the white dog from JD. com, the koala from Kaola m-commerce site, here comes the friendly brown ape with his cap 猩便利 (xingbianli).

 

This four month-old new born ape has already secured a 380 million yuan (Million 60 US $) A1 round of financing early November… where we find the usual supporting and caring parents: …Sequoia Capital China fund, Huaxing Capital and Yuan Jing Capital.

 

The ape company was established in June 2017 and by the end of September, the company has already installed 10,000 vending machines / dispensers in China first and second-tier cities.

 

The ape has opened in less than 5 months 8 stores in Shanghai…

 

I found one not too far away from my office this lunch; here are my first impressions:

The store is a nano convenience store, no more than 100 m2. Instantly we understand that we are not anymore in a convenience store… Welcome to the INSTANT convenience store.

 

Ready to eat, very small packaging and very short assortment. You are not in the store more than 1 per 2 minutes maximum. Payment is of course with your mobile.

 

First, open your WeChat, download the ape APP, then scan the product barcode of the electronic price tag, add the desired number of items ( same way you will do online), pay and leave…

 

It is not a bongo box which means that there is some staff in the store. Price wise, clearly not the battlefield they have chosen, nothing special. But one thing is sure… it is fast, even for the first time, you get what you need for an INSTANT consumption and you leave the place for the next client.

 

The ape is less than 6 month-old but looks like he has already all attributes to become a new KingKong of the INSTANT convenience stores…

 

By Stéphane Joly, Executive Vice President / Business Development Asia

 

YongHui Fresh

YongHui Fresh is taking on Hema (Alibaba) and Bingobox and goes even one step further…
YongHui Fresh is taking on Hema (Alibaba) and Bingobox and goes even one step further… 1024 768 Altavia

This lunch I discovered close by my office the newly opened YongHui Fresh (from the YongHui supermarkets chain which used to be quite well known among retail professionals as a good benchmark when it comes to fresh products)…

 

Now we all know Hema Fresh supermarkets bought by Alibaba… Well… YH Fresh went one step further and has made the cashier (tills) totally obsolete and useless… here how its works. Just amazing:

 

1- SCAN

You enter this small store of no more than 100 sqm and instantly see that all products are pre-packed and have a digital price tag with of course its associated QR code. So far nothing more than #Hema… Both sell fruits and vegetable and live crabs…

 

Both Hema and YH Fresh have also some grocery items, imported goods. YH Fresh is far smaller and therefore caries much less SKUs but the idea is the same and YH Fresh plus clearly in the convenience store league more than the supermarket one.

 

YongHui Fresh grocery products

 

YongHui Fresh fresh products

 

2 – PAY (with your mobile of course) 

Then, what cames next is a game changer… You (I did it) scan the code bar of the product you want to buy (you can, just like online) add, delete, scan again and so on.. Just use your WeChat barcode scan for instance and one you are done, you are asked to pay… then comes the magical part… you pay with WeChat for example and that’s it. Your purchase is done, you get out of the store. I showed my mobile to one of the staff there who was still on training and I went out of the store.

 

YongHui Fresh price label

 

 

3 – GO

3 cashier desks (tills) were here, but I bet they won’t be much used since everybody is so used to pay by phone that they might be soon be replaced by additional shelf space…

 

YongHui Fresh cashiers

 

Shopping in China is everyday more and more simple totally seamless:

1 – Scan

2 – Pay

3 – Go…

 

By Stéphane Joly, Altavia Asia

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