E-commerce platforms are necessary to expand online business
We have already exposed the legal framework regulating e-commerce in China (
http://blawg.lehmanlaw.com/wordpress/?p=1630
), however I did not stress the importance and the role of e-commerce platforms here in China. E-commerce platforms, indded, are of basic importance for other business operators in expanding their own activity. These platforms are operated by a few Chinese giants (e.g. Alibaba, Tencent), without these platforms, e-commerce in China would not so developed.
Alibaba: a giant Chinese
e-commerce
platform
Alibaba Group Holding LTD, China’s biggest e-commerce platform, has recently restructured its seven business groups, turning them into 25 business units in a move to rationalize its business operation. Alibaba CEO Jack Ma explained that the move is necessary its brands more quickly respond to competitive threats, as well as ensure that Alibaba Group takes advantage of rapid changes and developments in the e-commerce space. The last restructuring was carried out just six months ago, when the company turned its six subsidiaries into seven core business groups. These include business-to-business trading portal Alibaba.com consumer-to-consumer online shopping subsidiary Taobao Marketplace, business-to-consumer retail platform Tmall.com and shopping search engine provider eTao.
This e-commerce platform is expanding rapidly thanks to the growing number of on-line shoppers and of the private entrepreneurs opening their shops on-line using the services offered by the platform. However, Alibaba and its competitors (e.g. Tencent Holding Ltd), have to adapt their business operation to the continuing evolving environment if they are to grasp the full potentiality of e-commerce. This is the reason why there are these changes in the structure of their operational system. In fact, “Chinese Internet companies have realized they cannot remain the same when so many changes are taking place in the industry, such as the increasing popularity of mobile Internet” said Xie Wen, a Chinese IT expert and former president of Yahoo China, which is a part of Alibaba.
Tencent Holdig Ltd. one of the biggest Chinese Internet company and e-commerce platform, is shifting its focus from personal computers to smart phones, following trends in changing user activities. All major players are paying great attention to this transition. This is also the reason why it is possible that the Chinese legislator will adopt new rules to better regulate developments in this area.
In any case, one aspect must be stressed, the profitability of the operation of these e-commerce platforms depend on how attractive they appear to other business actors. Therefore, it is a mutual interest which makes this sort of ‘ecosystem’ functioning properly. The participation of other businesses operating on these platforms, contributes to the expansion of e-commerce.
Microsoft launches online store on Tmall
Microsoft Corp. has launched its flagship online store on Tmall which is China’s largest business-to-consumer website, to tap the nation’s e-commerce boom in China. The launch of Microsoftstore.tmall.com follows the debut of the Microsoft Online Store, which opened in October 2012 (MicrosoftStore.com.cn). Analysts said this indicates China’s e-commerce market has become a focal point for the world’s leading software company. According a statement by Kevin Eagan, vice-president of e-commerce for Microsoft Retail Stores “The future of e-commerce will come from China. The future of the successful multinationals will take more of an approach that Microsoft is taking, which is to put their best people, build their best products and to launch their best products first in China.”
Operated by Alibaba Group, Tmall.com is China’s largest consumer e-commerce platform, with more than 50,000 merchants. According to market research firm Euromonitor,
Tmall is set to overtake Amazon by 2015
as the largest Internet retailer in the world. (http://techcrunch.com/2013/03/18/microsoft-opens-online-flagship-store-on-tmall-the-amazon-of-china/ ).
China’s e-commerce market is in effect developing rapidly, and as a result it is predicted that China will overtake the US in terms of online spending from this year i.e. 2013. It is expected that Chinese consumers will spend $265 billion shopping online in 2013. This is one of the reasons why the interest of foreign companies towards Chinese e-commerce marketplace is growing. E-commerce in China undeniably offers an opportunity to boost sales, however, foreign operators should be aware of all the different aspects which surround online activities. They also may be interested in cooperating with Chinese operators to reach their goals. In fact one of the strategies adopted by Microsoft is to built partnerships with a number of local companies to be successful here. These partnerships include: Baozun Technology Co Ltd, a subsidiary of the Alibaba Group with strong ties to many brands in getting their stores launched in China; Alipay, China’s leading electronic payment platform; and logistics companies such as Shunfeng and EMS, according to Brandon Yoon, Microsoft principal program manager and online lead for Microsoft China.
There is no doubt that operating an online shop using these Chinese e-commerce platforms is one of the best options to penetrate this market. However, the Internet and e-commerce in China need to be monitored because the Chinese legislator is still adopting and developing new rules to realize its full potential which can influence the development of both, and sometimes for foreign operators to adapt to the new regulatory environment is not an easy task, and it implies substantial investment and a reasoned plan. This is another reason why to partner with local operators might be the winning move, rather than to go solo.
Cristiano Rizzi