中国电子商务碎片化报告.docx

OURTHESIS IN PICTURES-China Internet SectorUBS Research THESIS MAP a guide to our thinking and what's where in this reportMOST FAVOUREDLEAST FAVOUREDPIVOTAL QUESTIONSQ: Can social e-commerce become a driver for online retail sales?Yes. In 2015-17 social e-commerce GMV grew at a 58.4% CAGR in China, faster than overall e- commerce GMV at 26.3%. We estimate online e-commerce GMV growth will slow to a 20.3% CAGR over 2017-22, reaching Rmb15.3trn. We estimate social e-commerce GMV will grow at a 35.2% CAGR over the same period, reaching Rmb2.3trn by 2022E or 15% of the entire e-commerce market-up from just 8.5% in 2017.more7Q: Which online retailers are best positioned in the transition towards social e-commerce?Alibaba and Pinduoduo are the best positioned online retailers in the social e-commerce space, in our view. We believe they have scale advantages in terms of users and merchants/brands, strong partnerships and ecosystems, and the right business models to acquire consumers and increase engagement more efficiently.more-»WHAT'S PRICED IN?Investors believe Alibaba will remain the dominant platform in China e-commerce. But beyond that investors views diverge. They are concerned JD will not be able to penetrate lower-tier cities and new product categories in a significant way due to competition from Alibaba and smaller platforms. There is much more controversy around Pinduoduo, as investors are not sure how it will fare as Alibaba focuses its resources to go after Pinduoduo's core user base.UBS VIEWThe e-commerce market in China is fragmenting, which defies the commonly held belief that scale and networking effects should drive the "big to get bigger" in e-commerce. We believe e-commerce is evolving and incorporating more social and offline elements, which decrease standardisation. We expect social e-commerce to be a key driver of overall e-commerce growth in China, especially among new users who are younger or older, from lower-tier cities, or have less spending power than existing e-commerce users. We expect Alibaba and Pinduoduo to benefit most from this trend.EVIDENCEChina's social e-commerce GMV grew at a 58.4% CAGR over 2015-17, faster than the total e- commerce GMV growth rate of 26.3%, The social e-commerce penetration rate of overall e- commerce has risen from 2.0% in 2013 to 8.5% in 2017, and Frost & Sullivan forecasts this number to reach 15.2% in 2022. In 2018, Alibaba and JD's GMV share dropped from about 90% over the prior few years to 86% as new social e-commerce platforms grew, and we expect the share of the previous 'big 21 to drop to 77% by 2022.Social e-commerce GMV and user breakdown20162020ECAGRGMV(Rmbbn)3471,49144.0%S ocial E-com m e rceUser (mn)15257339.3%KOL GMV(Rmbbn)1711160.9%Conte nt S haringKey Players: Xiaohongshu, Mogujie, Taobao, RuhnnUser (mn)9747448.7%Team PurchaseKey Players: Pinduoduo, Taojiji; Xingsheng Youxuan, NiwoninGMV (Rmb bn)2317465.5%Membership BasedKey Players: Yunji, BeidianSource: Company data, Qianzhan, iiMedia, UBS estimatesAlibaba, PinduoduoVipshopModel 2: team purchaseThe second business model for social e-commerce platforms is the team purchase model. The team purchase model can be broken into: 1) small-group purchase platforms, such as Pinduoduo and Taojiji; and 2) community-group purchase platforms such as Xingshen Youxuan and Niwonin. On team-purchase platforms that cater to smaller groups, buyers can choose between buying the product individually or in a team. However, buyers are encouraged to join or form teams of at least two buyers when purchasing so they can enjoy lower prices. If the buyer decides to initiate his or her own team, they have the option to wait for a stranger to join the team or can invite friends and family members to join by sharing the product information on social networks such as Weixin (Wechat) and QQ.Figure 10: Level of e-commerce platformsSource: UBSGroup-purchase platforms benefit from their buyers sharing product information with their social circles online. iiMedia research estimates the number of users that participate in group buy will reach 474m by 2020, fueled by the large existing user base on Weixin (WeChat) and the convenient purchasing journey of group-buying platforms. When a buyer initiates a team purchase with his/her social circle via social networks, the platform is able to acquire organic traffic at a low cost as new users join the shopping team. The platform gains a better understanding of the social graph of its users, which it can use to improve ad targeting or product recommendations. The new users are also more likely to execute an online purchase with a familiar social contact, thereby increasing the conversion rate and future purchasing frequencies.Small group purchase platforms primarily monetise through online marketing services and commission revenue. Online marketing services are charged on a cost-per-click basis in which merchants typically use an online bidding system to determine the price and placement oftheirads when certain key terms are searched. Merchants can work with pla廿orms on promotional events such as flash sales or coupons for shopping festivals that can direct traffic and generate demand. As on other social e-commerce platforms, commission revenue comes from taking a percent of the value of good the merchant hassold.Figure 11: Total users engaged in group buying (m)Source: iiMedia ResearchCommunity group-purchase platforms have been gaining in popularity, as they are easy to access and user friendly. Community group purchase platforms differ from the small-group purchase platforms in that most of the interactions are done through mini-programs or chatrooms on Weixin (WeChat), instead of dedicated apps. Once a user enters the platform's mini-program, they will be asked to select a community leader that is closest to their physical location (usually residential). After a community leader is chosen, the buyer will get to see what type of products the leader offers. The community leader will be responsible for managing the Weixin buyers5 group and collating orders from group members. Once the order is placed, the goods will be shipped to the community leader, and users will pick up the goods from him or her.Most products sold in the Weixin groups are low-price, everyday products, which have high re-purchasing frequency such as fruit, vegetables and tissues. Furthermore, unlike other e-commerce platforms where buyers have an array of brands to choose from, community group purchase platforms limit buyer's choices, in order to gain scale and lower costs. This also increases a user's chance for impulse purchases and placing greater trust in the community leaders. Interestingly, many of the community leaders are stay-at-home moms who have turned into influencers and entrepreneurs. They are also generally perceived to be trustworthy by their communities.Figure 12: Number of users that shopped through mini-programs (m)140132Source: iiMedia ResearchCommunity group purchase platforms maximise margin and minimise cost by centralising the supply chain. As these platforms usually work with only a handful of brands for each product category, the platforms have greater negotiating power when ordering goods from the vendors. In addition, by shipping the bulk orders to one location, the platforms can minimise logistics costs. The community leaders usually do not need to store the goods for a long period as the buyers will want to pick up their usually perishable orders quickly. The platforms will set revenue key performance indicators (KPIs) for the community leaders, and if they miss targets then new community leaders will be appointed. This incentivises the community leaders to become top local influencer by running campaigns to sell goods and by encouraging group members to post usergenerated content (UGC) and increase engagement. The community leaders monetise by taking a cut of the GMV they deliver.Figure 13: Community group-purchase platforms use a B2B2C modelFigure 13: Community group-purchase platforms use a B2B2C model-Orders-Feedbacks Logistic & Support Commission-Product selectionSource: UBSSidebar: the power of social tools in driving social e- commerceWeixin mini-programs are also popular with SMBs given the decentralised nature of the social networking platform. Instead of joining a traditional e- commerce marketplace, many small and medium businesses (SMBs) choose to set up their own Weixin Official Account or mini-program so they can have more control over traffic and transaction data. By establishing their own Official Accounts or mini-programs, these merchants have greater power in shaping their brands, targeting audiences, and acquiring new users. However, since most SMBs have limited budgets and technology know-how, many struggle to expand their businesses both online and offline. This issue has given rise to Weixin-based third- party service providers such as Weimob and Youzan. In fact, Frost & Sullivan estimates the market for third-party service providers on Weixin will grow at a 54.1% CAGR over 2017-22, reaching Rmb30.4bn.Figure 14: Weixin based third party service market for SMBs (Rmb bn)30.423.010.7Source: Frost & SullivanThe third-party service providers on Weixin offer SaaS products and advertising solutions to assist SMBs. Many SMBs lack the experience and resources to set up online stores, manage IT teams and infrastructure. Third-party service providers help the merchants bypass these technology hurdles by offering industry tailored cloud solutions merchants. The SMBs can use the software as a service (SaaS) products to build their own customised storefronts on Weixin, optimise their sales efficiency, and manage their customer relationships, all at lower costs. As many SMBs are trying to create an online presence and integrate their offline and online stores, third-party service providers revenue from cloudbased e-commerce and marketing services for SMBs grew at a CAGR of 29.5% from 2013-17 according to Frost & Sullivan, which also forecasts a 27.2% CAGR over 2017-22. While Frost & Sullivan thinks revenue contributions from large enterprises for e-commerce and cloud-based marketing services will also grow at a mid-20s CAGR, their revenue contribution will still be less than 30% of the industry's total.Figure 15: China's cloud-based e-commerce and marketing service market (Rmb bn)Source: Frost & SullivanTo help SMBs grow, many third-party service providers have branched out into the targeted marketing solutions space. Targeted advertising services not only help promote the merchant's store on various social media platforms, but also can also provide data analysis for the SMBs to target audiences and identify potential customers. According to Frost & Sullivan, the market size of targeted marketing for SMBs will reach Rmb327bn in 2022. Most of this spending will be outside of Tencent, but the company's ecosystem should achieve higher growth. Frost & Sullivan also expects spending on Tencent to jump from 1% of the total market in 2013 to 31% in 2022, and believes spending there will grow by 79% CAGR from 2017 to 2022.Figure 16: Targeted marketing for SMBs (Rmb bn) OnTencentOutside TencentSource: Frost & SullivanModel 3: membershipsThe membership-based model is the third social e-commerce platform business model. Membership-based platforms, like Yunji and Beidian, are one of the newer forms of social e-commerce and work to attract users by offering discounts and rewards through membership programmes. This innovative business model has helped the platforms gain users and drove rapid growth in GMV over the last few years. According to China Insights Consultancy (CIC), membershipbased GMV as a percent of total social-ecommerce GMV increased from 2.3% in 2015 to 8.3% in 2017. CIC expects it to reach 16.0% by 2022 (we estimate Rmb372bn in value by 2022).A user can become a member of these platforms through an invitation from an existing member. The invited user would then purchase a merchandise package, which can be viewed as a membership fee. Once a new user pays, they can start to buy products on the platform at more attractive prices. Furthermore, the member can earn benefits, often in the form of coupons, by referring new members to join or by selling products they promote through their social media. Platforms will help members sell products by showing them which items are popular, and providing them with online training and promotional materials.Figure 17: Membership-based online shopping GMV (Rmb bn) and penetration of social e-commerceNote: Absolute numbers are UBS estimates; percentages are from Frost & Sullivan. Source: CIC, Frost & Sullivan, UBS estimatesMembership-based platforms control the whole supply chain from product selection to order fulfillment and delivery. Unlike many 3P e-commerce platforms, membership-based platforms have dedicated product procurement teams that will work with suppliers to manufacture products they believe users will buy and promote. This strategy allows the platforms to negotiate with suppliers for discounted prices, control quality, and stay nimble, shifting to popular categories quickly. The platforms will generally store their products at third-party warehouses and rely on third-party logistics service providers to deliver the orders. As members are only responsible for selling the products, membership-based platforms will also hirethird-party business processoutsourcing(BPO) companies to handle customer service.Figure 18: Membership-based platforms use a S2B2C modelMembers /CustomersMembers /CustomersBrands / SuppliersWarehouseDiscountsIT SystemTrainingBenefitsMembers /CustomersMembers /CustomersSource: UBSUBS Researchreturn 个China Internet SectorPIVOTAL QUESTIONSQ: Which online retailers are best positioned in the transition towards social e-commerce?UBS VIEWAlibaba and Pinduoduo are the best positioned online retailers in the social e- commerce space, in our view. We believe they have scale advantages in terms of users and merchants/brands, strong partnerships and ecosystems, and the right business models to acquire consumers and increase engagement more efficiently.Smaller platforms competing with Alibaba and Pinduoduo in either content- sharing or team purchase scenarios will face growth and margin challenges, and may be relegated to a niche or a few core verticals. Some social e- commerce models, such as community group purchases, have natural barriers to growth, such as regional or user interaction limitations that prevent them from scaling as effectively as Alibaba and Pinduoduo.EVIDENCEAlibaba has invested in both Ruhnn and Xiaohongshu to strengthen its content offerings on Taobao. KOLs from Ruhnn and Xiaohongshu not only help direct traffic o