IDC: Some Key Implications From 6.18 E-Tailers' Promotions
24 Jun 2014
June 19, 2014, Beijing -- While the E-tailer (third-party online platforms/channel) promotion campaign first initiated by JD.com on 6.18 anniversary is burning like a raging fire, competitors such as Tmall and Gome followed with similar campaigns. It is noteworthy that consumer IT products such as smart connected devices (desktop PCs, laptops, tablets and smart phones) have been the major "battle fields" by JD.com, Tmall, Gome and others. IDC predicts that the shipment of the smart connected devices in the second quarter of this year through the E-tailers will hit 15.7 million with a year-on-year increase of 60.9%. This increase is greater than that of the overall smart connected devices market in China; meanwhile, E-tailers outshine other channels with the biggest shipment increase for all product segments of smart connected devices.
Liu Yanjia, IDC China’s lead analyst on the Chinese E-tailers market for smart connected devices, said that E-tailers are an increasingly important marketing channel in the rising tide of Internet, imposing significant impact on the traditional retail model. Since mid-May, the traditional retailers have cried out "the wolves are coming!", largely due to the price competition and overall depressed market demand. Indeed, traditional channels of smart connected devices have witnessed significant decline in sales volume. With the 6.18 campaigns, there are several implications worth considering:
Implication 1: Retailers Must Remain Open-minded and Collaborative
Without any doubt, the rapid growth of the e-tailer channel has made a huge impact on the retail system built up by the traditional IT vendors. On one hand, the e-tailer platforms are highly advantageous in terms of customer viscosity, publicization and channel lower costs. Especially for the Tier 1-3 cities markets, E-tailers such as JD.com have managed to expand such an advantage through their optimized logistics systems. IDC holds that the traditional IT vendors should develop a more open- mind to deal with the future market and optimize their own marketing systems. On the other hand, online and offline collaboration will be a new trend in the future. IDC predicts that the rural smart connected devices market will be one of the major growth stimulators thanks to the huge depth and breadth of the Chinese market. Customers have gradually begun to acquire information about prices, products and other things through E-tailers before their purchases. In some regions where the e-tailers' logistics services cannot cover and those where relevant supportive services cannot be provided, online and offline collaboration is especially important.
Implication 2: Traditional Retail Stores Must Reform to Focus on Customer Experience
The traditional retail store system in China evolved from the traditional department stores in China modified by the IT hypermarkets in the Asian-Pacific region. Each IT hypermarket comprises many different vendors, attaching importance to professionalism and cost- performance ratio. Due to increasing customer popularity of smart connected devices as well as the competitive prices of offered by the e-tailers, the core competence of the traditional retail stores is fading away, which necessitates a change in strategy. IDC holds that the retail store system in China should reform its core competence centering on store experience by drawing lessons from the modes prevailing in America and Europe. For example, during the rapid growth period of the E-tailers in America such as Amazon, traditional IT chain stores still manage to attract consumers by offering much better customer experience.
Implication 3: Development of E-tailers to Compete in Services
According to IDC China’s quarterly PC E-tailers market data, the competition among the E-tailers tended to be much more intense in the first quarter of 2014, although JD.com and Tmall.com still occupied 80% of the e-tailer market share. E-tailers such as Suning.com, Yixun.com and Amazon.com have penetrated into the smart connected devices market by leveraging their own respective advantages. Gome.com.cn will is expected to earn a bigger market share in the future with the its O2M (offline physical stores + online e-Tailer + mobile terminal) channel development strategy. The mature E-tailers will continue to develop by optimizing their logistics services and customer experience. For example, after its successful IPO in America, JD.com further improved its service quality and customer experience. The huge influx of money will help JD.com develop the logistics services for the lower-level counties; in the future, JD.com will realize the "next day delivery" and even "same day delivery" services in more cities. Similar e-tailing enterprises are now switching their battle field from prices to services.
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