China's Mobile Economy

Opportunities in the Largest and Fastest Information Consumption Boom

Winston Ma

• Publisher: Wiley
• Year: 2016
• Print ISBN: 9781119127239
• eBook ISBN: 9781119127246
• Edition: 1
• Topic: Business
• Subtopic: Finance
• Index: Business

Explore the world-changing digital transformation in China

China's Mobile Economy: Opportunities in the Largest and Fastest Information Consumption Boom is a cutting-edge text that spotlights the digital transformation in China. Organised into three major areas of the digital economy within China, this ground-breaking book explores the surge in e-commerce of consumer goods, the way in which multi-screen and mobile Internet use has increased in popularity, and the cultural emphasis on the mobile Internet as a source of lifestyle- and entertainment-based content. Targeted at the global business community, this lucid and engaging text guides business leaders, investors, investment banking professionals, corporate advisors, and consultants in grasping the challenges and opportunities created by China's emerging mobile economy, and its debut onto the global stage.

Year 2014-15 marks the most important inflection point in the history of the internet in China. Almost overnight, the world's largest digitally-connected middle class went both mobile and multi-screen (smart phone, tablets, laptops and more), with huge implications for how consumers behave and what companies need to do to successfully compete. As next-generation mobile devices and services take off, China's strength in this arena will transform it from a global "trend follower" to a "trend setter."

• Understand what the digital transformation in China is, and impact on global capital markets, foreign investors, consumer companies, and the global economy as a whole
• Explore the e-commerce consumption boom in the context of the Chinese market
• Understand the implications of the multi-screen age and mobile Internet for China's consumers
• See how mobile Internet use, its focus on lifestyle and entertainment is aligned with today's Chinese culture
• Learn about the mobile entertainment habits of China's millennial generation and the corresponding new advertisement approaches

The development of China's mobile economy is one of the most important trends that will reshape the future of business, technology and society both in China and the world. China's Mobile Economy: Opportunities in the Largest and Fastest Information Consumption Boom introduces you to the digital transformation in China, and explains how this transformation has the potential to transform both China and the global consumer landscape.

Chapter 1
The World's Biggest Mobile Economy

What is the most celebrated Chinese holiday globally, by the Chinese and by everyone else? Here's a hint: It's not the Spring Festival, also known as the Chinese New Year. It is November 11, known as Singles’ Day. Not only is it the largest online shopping day each year in China, but it is also the largest in the world in terms of the total value of transactions.

Started by China's e-commerce giant Alibaba in 2009, the November 11 holiday has become an annual 24-hour online shopping extravaganza. (See the “Singles’ Day” box.) It is the single most important day each year for online vendors to target young, tech-savvy consumers who are accustomed to buying online and using their mobile phone wallets to pay for almost all goods, services and entertainment.

In 2015, during the run up to the shopping holiday, Alibaba hosted a gala celebration titled Double-11 Night Carnival. The four-hour TV variety show was directed by a top Chinese film director, Feng Xiao-Gang, and held at the Water Cube, a landmark structure built for the 2008 Beijing Olympics. Aired on the satellite channel Hunan TV, the variety program was also streamed on China's major video streaming site Youku Tudou, which was acquired by Alibaba only days before the Carnival.

Just like China's annual Spring Festival variety show carried by the state television network CCTV, the 2015 celebration included an 11.11 countdown, “to celebrate the potential for limitless innovation that technology has provided for all of us”, according to Alibaba's promotional statement. To ensure the 2015 holiday was a “Global Shopping Festival”, during the televised extravaganza Alibaba's founder, Jack Ma, rang the opening bell for the New York Stock Exchange remotely from the Water Cube, while the program featured western celebrities including the actor Daniel Craig, who played James Bond in the latest 007 film Spectre, as well as the singer Adam Lambert.

Employing China's social networks, Jack Ma had announced prior to the event that even the US President would appear at the Carnival. And as the celebration reached its climax, actor Kevin Spacey appeared as his character in the web TV series House of Cards, US President Frank Underwood. Thanks to the explosive growth of video streaming sites in China, House of Cards and Kevin Spacey are both famous in China. From an Oval Office set, Kevin Spacey addressed Chinese shoppers in a two-minute video. In his trademark Southern drawl, President Underwood expressed his disappointment that the White House firewalls blocked him from shopping online to take advantage of the “amazing deals” on that day.

This November 11 online shopping event in 2015 illustrates several important trends of China's e-commerce in the mobile internet age.

First of all, while e-commerce has disrupted retailers world-wide, its boom in China is unprecedented both in terms of pace and scale. In 2013, China overtook the US as the world's biggest e-commerce market. Today, this annual shopping festival generates more sales than “Black Friday” and “Cyber Monday” in the US combined. On the basis of gross merchandise volume (GMV), Alibaba is now the largest online and mobile commerce company in the world.

For the 2015 Singles’ Day, Alibaba Group announced that $14.3 billion GMV was transacted on its online marketplaces, an increase of 60% from 2014, making the 2015 GlobalShopping Festival the largest shopping day in history. It is worth noting that the GMV numbers in recent years have enjoyed steadily increasing growth (see Table 1.1). Also, the actual number of shoppers is increasing as additional buyers from smaller Chinese cities are using e-commerce, primarily through Alibaba's marketplaces every year. Although their purchases are smaller than those placed by buyers from first-tier cities, such as Shanghai and Beijing, they are an important driver for growth in the future.

Table 1.1 Singles’ Day gross merchandise volume (GMV) growth 2012–2015

Year	GMV ($)	Year-on-year growth
2012	3.3 billion	–
2013	5.9 billion	80%
2014	9.3 billion	58%
2015	14.3 billion	60%

(Data Source: Alibaba)

Second, Chinese customers are migrating to the mobile internet rapidly. Because China has the largest smartphone user population in the world, the trend of “going mobile” has taken off with greater speed than anywhere else in the world. As the wired infrastructure has not yet fully covered the country, for many people in China, especially in rural areas, their first internet experience is often mobile instead of PC-based – from the moment they start using a smartphone. Since 2014, the number of people in China who surf the internet via mobile devices has exceeded the number of people doing so via their computer, with smartphones becoming the primary device of access for Chinese internet users.

On Singles’ Day 2014, 43% of all transactions through Alibaba were made through mobile devices, up sharply from 2013 (21%). Even more remarkable, in 2015 Alibaba's consumers made the majority of orders (68.7% of total GMV) through mobile channels. The total mobile GMV was approximately $9.8 billion, an increase of 158% from 2014. In fact, 2015’s mobile GMV alone exceeded the total GMV in 2014.

Third, this latest shopping festival has also highlighted Chinese consumers’ strong demand for international products. In 2015, Alibaba specifically made “globalization” a critical priority for the group's strategy, and it was committed to making the 2015 shopping festival “a truly and unprecedentedly global shopping experience for consumers”.

According to Alibaba, more than 16,000 international brands, including Burberry, Apple, and Uniqlo, took part in the 2015 sale. During the Carnival TV show, western brands such as Columbia, Levi's, Budweiser and Corona bought time slots for advertisements. Buyers and sellers from 232 countries and regions participated. 33% of the total buyers made purchases from international brands or merchants, with the United States, Japan, South Korea, Germany and Australia as the top countries selling to Chinese consumers.

Finally, the inaugural Carnival show in 2015 illustrates the seamless fusion of online shopping and mobile entertainment. The main use of mobile internet in China is skewed towards fun and entertainment. Moving to align with this trend, Alibaba has recently been establishing its own movie and television production subsidiaries, launching a film crowdfunding financial product, and fully acquiring the online streaming video site Youku Tudou. The movie unit of Alibaba made its first direct Hollywood film investment in Paramount Pictures and actor Tom Cruise's blockbuster Mission: Impossible — Rogue Nation.

By integrating the shopping event with a televised show, Alibaba successfully created a continuous feedback loop of online consumption of both merchandise and entertainment. The Carnival show kept people up until midnight, when the sales began. During the program, online viewers were prompted to check their smartphones periodically, as discount coupons were distributed through their mobile shopping apps. Viewers could also play along with the game show portion of the event. When the hosts of the show greeted “Mr. Bond” and asked viewers to “support 007”, consumers were guided to online ticketing services for the latest James Bond film Spectre.

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Singles’ Day (November 11)

November 11 was first known as the “Guangun Jie” (Bare Sticks Festival or “Bachelors’ Day”) in the 1990s. It was celebrated by students at Chinese universities because the numerals that form the date, 11/11, looked like four solitary stick figures. Over the years, this loosely defined holiday has become a celebration for all sing...

Table of contents

• Cover
• Epigraph
• Title Page
• Copyright
• Dedication
• Foreword
• Preface
• Acknowledgments
• About the Author
• Introduction
• Chapter 1: The World's Biggest Mobile Economy
• Chapter 2: Users, Partners, Investors and Competitors: Global Stakeholders
• Chapter 3: Xiaomi: The Most Valuable Start-up in China
• Chapter 4: The Omni-Channel Age of e-Retailing
• Chapter 5: Mobile e-Commerce and Online-to-Offline (O2O)
• Chapter 6: Mobile Entertainment
• Chapter 7: “Internet+” Movies
• Chapter 8: Internet Finance
• Chapter 9: Going Overseas: A Bumpy Road
• Chapter 10: Launched in China
• Bibliography
• Index
• EULA