Archives 2014

More and more shoppers are going mobile

The retail data on both Black Friday in the US and the 11-11 “Valentine’s Day” shopping spree in China show that a sizable number of the transactions were completed through handheld devices and the Internet, a trend that retailers and e-commerce enterprises might want to keep an eye on.

This year’s holiday shopping season got an earlier than usual start as a number of retailers launched online sales on Thanksgiving Day or even earlier. Luxury retailers like Neiman Marcus and Bloomingdales started offering deals a week early on their websites and the strategy seemed to work well.

ChannelAdvisor, an e-commerce company based in North Carolina, said roughly 2,700 online retailers had witnessed in general a 20 percent growth in Thanksgiving holiday sales volumes over last year, with Amazon leading the pack with a 25.9 percent growth year-on-year.

According to IBM’s Benchmark data released on Nov 30, mobile played a bigger role this year especially on Thanksgiving Day when mobile and online retail accounted for 52 percent of all online traffic. By 6 pm EST on Black Friday in the US, mobile traffic accounted for up to 46.7 percent of all online traffic — an increase of 24 percent over the same period last year, said the report.

Hand-held devices such as smartphones are noted to have played an increasingly important role on this weekend, but all did not go well everywhere.

According to Cathpoint Systems, a web performance monitoring company, Best Buy had undergone three crashes after its Thanksgiving sales began. The first outage took place from 5-6:30 am (EST); the second was 8-9:30 am, both on Thursday. On Black Friday, the company’s website crashed again at 10 am.

Market observers also noticed that despite retailers running early sales, Black Friday still generated the biggest online sales volumes, which were up 8.5 percent over the same period last year, according to IBM.

Meanwhile, though mobile on Black Friday didn’t claim over half of online traffic as it did on Thursday, the percentage of online sales steadily increased. Mobile sales accounted for 26.1 percent of all online sales on Black Friday, an increase of 24.7 percent over last year.

For China’s largest e-commerce company, Alibaba, which reported a record high of more than $9 billion in sales within 24 hours on Nov 11, the story was similar.

Alibaba’s researchers found that 43 percent of sales on Nov 11 were generated through mobile devices and the Internet.

Li Jingming, president and chief architect of Alipay US, told China Daily that the company had prepared to cope with the increased online shopping population, and has tailored their services and tools to better meet clients’ needs. In October, Alipay launched ePass, a new service that will help US and European retailers sell products directly to Chinese shoppers.

By integrating into Western retailers’ websites as an alternative payment solution like eBay’s PayPal, ePass is expected to help overseas merchants tap into China’s rapidly growing online shopping community without actually expanding their presence in the Chinese market.

Through ePass, American and European merchants would enable Chinese shoppers — with a good command of English — to have access to foreign retailer’s websites and buy directly online, Li explained.

“It functions like a combination of cross-border foreign currency settlement with overseas delivery solutions from Alibaba’s Smart LogisticsNetwork in China, also known as Cainiao,” Li said.

“We are trying to make it easy for Western merchants to reach Chinese consumers without actually being present in China,” Li said, noting that with ePass, retailers can save themselves the headache of establishing bricks-and-mortar warehouses or hiring staff in China.

Lenovo to build 50 cloud computing hubs in China

Lenovo Group Ltd will invest 300 million yuan (US$48.7 million) to build 50 cloud computing centers in China as the world’s biggest personal-computer manufacturer makes its latest move to tap the booming enterprise service market.

Lenovo also aims to establish the centers in some overseas markets like the United States and Germany. It will also train more than 1,000 experts in cloud computing, data analysis and storage and backup services.

Lenovo, which just completed the US$2.1 billion acquisition of IBM’s low-end server business, wants to help firms do “business transformation in cloud” through the new united end-to-end services covering both Lenovo and former IBM services. The enterprise services are expected to be adopted in all industries especially in finance, education and health care sectors, said Ye Ming, former IBM executive and now Lenovo’s vice president.

“Enterprise is a core place for Lenovo to explore in its PC Plus strategy in long-term development,” Ye said yesterday in Shanghai.

The new CEMS (cloud, enterprise, mobility and services) business now accounts for 15 percent of Lenovo’s total revenue, up from only 3-4 percent last year, according to Ye.

In October, Lenovo’s Chairman and CEO Yang Yuanqing said the company aims to generate a revenue of 10 billion yuan in enterprise services in the near future after acquiring IBM X86 server business.

Ford planning more SUV traction with the all-new Everest

Ford unveiled the all-new Everest in early November in Beijing.

Ford unveiled a seven-seat SUV in early November in Beijing in response to the growing consumer enthusiasm for large sporty vehicles.

Chairman and CEO of Ford China John Lawler said target customers of the powerful offroad SUV are those “who love life, have dreams and boast an adventurous spirit” in emerging economies like China and India.

Lawler said the model was designed at Ford’s design center in Australia with “the Asia-Pacific region in mind” following extensive research into markets and consumer preferences?the most research ever conducted for a vehicle developed by Ford in the region.

“Customers told us they wanted an SUV that balances off-road toughness with a refined, comfortable interior, and we listened,” said David Dewitt, exterior design manager, Ford Asia Pacific. “This vehicle reflects what the consumer wants, inside and out.”

Highlights of the new Everest include best-in-class 225 mm of ground clearance and its ability to forge through water as deep as 800 mm, deeper than any competitor.

It also has several powerful and efficient engine options: the latest generation of Ford’s tried-and-tested four-cylinder 2.2-liter and five-cylinder 3.2-liter Duratorq TDCi diesel engines, and a new 2.0-liter EcoBoost petrol engine.

The new Ford Everest also offers a number of segment-first features including a curve control technology to help drivers maintain control when approaching turns too quickly.

The latest generation of Ford’s in-car connectivity solution, SYNC 2, lets drivers use natural voice commands to control the car’s entertainment system, climate controls and connected mobile devices more easily than before.

In China, the SUV will be produced at Ford’s partner Jiangling Motors Co and is expected to hit the road in 2015.

“Things are going as scheduled at our Xiaolan plant,” said JMC Chairman Wang Xigao at a press conference after Everest’s launch ceremony.

The Xiaolan plant has a production capacity of 300,000 units. In addition to Everest, it is producing the Ford Transit light commercial van.

JMC President York Chen said the production of the Everest marks the beginning of JMC-Ford cooperation in the passenger vehicle segment, adding other models will come in the future, but the agreement does not include cars.

Chen added that JMC will expand the number of its dealerships by 40 percent to ensure it will make the SUV accessible across the nation.

Lawler said he is optimistic about the performance of the model but said he has not set a sales goal for it.

Ford sold 813,412 vehicles in the Chinese market in the first three quarters of the year, a 26 percent surge from the same period in 2013. Its share of the SUV market grew from 0.3 percent in 2012 to 4.5 percent in 2013.

Wal-Mart axes senior jobs, stores

Wal-Mart Stores Inc, the world’s largest retailer, has dismissed around 20 mid- and senior-level executives and closed stores in China as part of a restructuring aimed at countering growing pressure from local rivals and online retail sales.

The company said the measures will optimize the organization.

“As we have previously stated, we are transforming our business to meet the needs of a rapidly changing market and customers. Reorganization has been a necessary business reality,” it said in a statement, adding that the jobs cuts have been agreed by mutual consent, with the company paying compensation in line with the laws and regulations.

The retailer also said it had shut some outlets and was remodeling dozens more as the overhaul continues.

It insisted, however, it was making “good progress” toward opening around 110 new stores across China between now and 2016, within a plan that also includes new distribution centers, and creating what it called “a highly efficient supply chain and enhanced compliance process”.

Wal-Mart, based in Bentonville, Arkansas, is facing stiff competition in China, and earlier this year also had to withdraw donkey meat products from sale in its stores after they were found to contain fox DNA.

Among the executives being sidelined are vice-presidents from its hypermarket business Wal-Mart China and its wholesale arm, Sam’s Club China, according to two Wal-Mart China employees, who asked not to be named. Others have been removed from divisions including merchandising and innovation, they said.

Many of the dismissed have at least 15 years’ working experience, according to local media reports.

“This is a sign that Wal-Mart is facing more competition as well as cost pressures,” said Ben Cavender, principal of the Shanghai-based China Market Research Group.

“This looks like an attempt to streamline their operations, to cut costs and become more efficient.”

The current overall economic climate as well as the fallout from bad publicity from its own and other food safety scandals are also hurting the brand, said Cavender, while at the same time competitors are becoming more efficient and competing more aggressively.

Jason Yu, general manager of consumer information organization Kantar Worldpanel China, said the US retailer has seen a relentless growth in competition from local retailers as well as from e-commerce.

He said e-commerce now accounts for a 3 percent share of total fast moving consumer goods sales and continues to record incredible growth.

“This is achieved at the expense of modern trade retailers, especially in the first- and second-tier cities,” he said.

Other Wal-Mart restructuring efforts included its integration of nearly 30 purchasing offices into eight regional purchasing offices in November 2012.

The company reported a 0.8 percent fall in China sales during the quarter to Oct 31, which it attributed to government austerity measures and deflation.

Net group urges operators to step up controls on apps

Mobile network operators and smartphone application providers in Beijing drew up an agreement on Wednesday to enhance internal controls, improve supervision of the content of apps and keep the industry in good order.

The growth of mobile technology has brought a great deal of convenience for users who surf the Internet or keep in touch via social media networks while on the move.

However, smartphone applications with security gaps, or that are used to spread rumors and pornography, have created problems, according to the Beijing Internet Association.

The association, in an effort to tackle such problems and clean up the industry, has urged 50 mobile network operators and application providers across the capital to sign the agreement.

The document calls for stricter inspections of apps before they are uploaded to online stores.

Zhang Yuejin, director of the association’s information security committee, said the agreement is intended to maintain a fair competitive environment in the industry, while encouraging Internet giants to behave in a more socially responsible way instead of focusing only on earning money.

Net group urges operators to step up controls on apps

China had 632 million Internet users at the end of June, including 527 million who access the Web from mobile devices, and the total is expected to rise to 850 million next year.

“Smartphone applications represent the most advanced Internet technology, so the information they carry and the degree to which they are safe will affect the future development of the industry and people’s lives,” Zhang said.

Xu Xiaolong, deputy manager of the app store run by smartphone maker Xiaomi, said his team spends a considerable amount of time removing applications with unacceptable content every day.

“Apps with pornographic content are the ones our inspection team deletes most frequently, followed by ones that steal money from users,” Xu said. At least 200 requests for apps to be removed from the store are received every day, he added.

“If we find someone who uploads unacceptable apps five times, he is put on a blacklist,” he said. “Some apps are found to have problems after they pass through our inspections, which requires us to increase checks on the updated contents.”

Yu Dan from search giant Baidu said he supports the improvement of internal controls by mobile network operators, and added that the agreement is timely.

The Cyberspace Administration of China, the nation’s Internet watchdog, said at the beginning of the month that it is working on guidelines for smartphone applications to ensure that the industry develops in line with the law.

Tong Liqiang, director of the authority’s Beijing branch, said then that the guidelines were among a number of rules for the Internet that the organization is studying.

Yu said, “Wednesday’s agreement is a timely measure that can be said to echo the decision to draw up app guidelines.”

Yang Hongpeng of security software provider Qihoo 360 said stricter inspection of apps by companies could reduce security risks online. However, he said the city’s government should establish uniform standards for the removal of apps.

Wal-Mart lays off 30 execs

Retailing giant Wal-Mart Stores Inc said Wednesday it has laid off some 30 senior executives in its China unit in an effort to “streamline and simplify” its business, Bloomberg reported.

The departure of these executives is “consistent with actions taken over the last several months,” Ray Bracy, Wal-Mart’s China spokesman, said in an e-mail reply to Bloomberg.

This is not the first time Wal-Mart has decided to downsize its workforce in China. In March this year, employees at Wal-Mart store in Changde, Central China’s Hunan Province, launched a protest as they were unsatisfied with the company’s employee resettlement plan, news portal 163.com reported Wednesday.

Battle looms over mobile pay systems

China’s thriving mobile payment market will witness a new battle for dominance between Apple Inc and its local smartphone rivals, with industry insiders anticipating a direct showdown between Apple Pay and a home-grown digital wallet service in late 2015.

Analysts said the Android Pay project, which is led by Shanghai-based bankcard association China UnionPay, will have widespread support from Chinese handset vendors.

These vendors sell about 300 million Android operating system-based phones each year in the country.

Citing anonymous sources, Shanghai-based newspaper China Business News reported on Tuesday the proposed service will be launched in the third quarter of 2015 and UnionPay is seeking partnerships with local smartphone manufacturers.

UnionPay would not confirm the existence of the Android Pay project, but it did express an interest in establishing a new payment service.

In a statement to China Daily, the company said: “We have been constantly trying new technologies and business models in the mobile payment sector.”

Established in 2002, UnionPay has about 400 domestic and overseas members.

Wang Yanhui, secretary-general of the industry organization Mobile China Alliance, said in his micro-blog account that UnionPay had decided to team up with local handset makers as early as last week.

Major smartphone makers, including Xiaomi Corp, Lenovo Group Ltd and ZTE Corp, had not announced any such arrangements as of Tuesday.

Sources from Lenovo’s supply chain told China Daily that the company is developing a new phone equipped with fingerprint unlocking capability. The feature can be used as a substitute for entering passwords before transactions.

Only a handful of local smartphones support near field communication, a technology used in wireless handset payment services. Virtually no brick-and-mortar stores in China have installed cashier systems that accept NFC-enabled payments.

NFC is not popular even in the United States, where Apple first deployed its wireless payment service known as Apple Pay. The service is available only in selected stores in the US, including McDonald’s Corp restaurants and department stores run by Macy’s Inc.

Popular retailers such as Best Buy Co Inc (electronics), Wal-Mart Stores Inc and two major pharmacy chains (CVS Health Corp and Rite-Aid Corp) do not accept Apple Pay.

Over the past week, Apple announced it had started to accept online payments made through UnionPay cards at its Chinese mainland app store. The US-based company subsequently kicked off a UnionPay-customers-only promotion campaign by lowering the download price of more than 100 apps to 1 yuan (16 cents).

Analysts speculated this move meant Apple would soon launch Apple Pay on the Chinese mainland.

According to industry consultancy Forrester Research Inc, Apple Pay’s technology will accelerate payments and enable new customer experiences in the coming year.

“China and Australia will run ahead with Apple Pay on mobile (in 2015),” Forrester said.

It also said that the mobile payments landscape in China and other Asia-Pacific markets would remain fragmented over the next year. Wang said the official Apple Pay launch in China is likely in March 2015.

Li Ye, a researcher from Analysys International, said that with China opening up the bank card clearing market, UnionPay’s position as the only bank card organization is being challenged.

“Quick emergence of third-party online transaction channels forced UnionPay to find new business models suited to the mobile Internet era,” Li said.

The mobile transaction volume of third-party platforms exceeded 2 trillion yuan in the third quarter of this year, a jump of 25.6 percent year-on-year, statistics from Analysys International show.

“Although Apple Pay has yet to enter the Chinese market, it has heightened local players’ interest in mobile phone payments and NFC technology,” it said.

Shanghai vows to build international insurance center by 2020

Shanghai’s municipal government announced plans to create an advanced insurance market that meets the demand of economic and social development for the metropolis, with plans to make itself an international insurance center by 2020.

The insurance penetration rate, or premiums as a share of GDP, has goals to rise by six percent and the insurance density, the per capita premium, will reach 7,300 yuan (1,189 U.S. dollars) in the city by the year of 2020, according to the detailed enforcement proposal released on Tuesday to implement the State Council’s plans of speeding up development of the modern insurance services.

Taking advantage of the Shanghai Pilot Free Trade Zone, the municipal government pledged to accelerate system innovation and opening up of the insurance sector in the proposal.

Shanghai will also highlight the insurance sector’s functions in building an international financial center and shipping service center, and increase the role of insurance in promoting social security.

Merger plan lifts BesTV, Oriental Pearl

Shares of Shanghai-based BesTV New Media Co and Shanghai Oriental Pearl Group surged on news that the two companies would merge as part of the city’s push to reform state-owned media companies.

BesTV is merging with Oriental Pearl through a share swap with one share for every 3.04 shares of the target company, valuing the latter at 10.69 yuan (US$1.74) per share, according to a stock exchange filing yesterday. BesTV surged by the daily limit of 10 percent to 35.19 yuan.

Oriental Pearl would be delisted on completion of the deal. The company’s shares also jumped 10 percent to 12.01 yuan yesterday.

BesTV will also acquire companies such as SMG Pictures, Wings Media, Shanghai Interactive TV, and TV shopping company Oriental CJ through a private placement at 32.54 yuan per share to cement its market position and diversify revenue streams.

“Through the acquisition, BesTV now covers the whole industry including content production and Internet distribution channels, and it fits with China’s reform and consolidation in the media sector,” China International Capital Co said in a research note yesterday.

BesTV will also issue new shares to raise up to 10 billion yuan through a private placement with 10 institutional investors, including Shanghai Media Group Investment Center, the Bank of Communications Culture Investment Fund and China Merchants Fund.

Part of the capital will be used to fund Internet TV projects at the new entity after the completion of the merger.

Parent Shanghai Media Group will remain the controlling shareholder of BesTV with 45.07 percent after the merger.

Market needs say in pricing meds

The National Development and Reform Commission (NDRC) has lowered drug and medicine prices more than 30 times over recent years. Yet some drugs are still being sold at inflated prices, while other low-cost medicines are often in short supply.

As in all markets, pricing is a key factor in the sale of medicines as it naturally affects the supply and demand of various products. The NDRC’s decrees alone cannot effectively lower medicine prices because the commission’s regulations clash with the natural order of the drug market.

Regulators must give more leeway to drugmakers when it comes to setting the prices of their products. This is not to suggest that proper supervision is unnecessary with various factors affecting prices. While the government does have a responsibility to regulate prices of electricity, water, medicine and other services and commodities that are closely related to the public good, allowing the market to play its role in resource allocation is essential in coordinating the healthy development of the drug industry. Only by granting more discretion to drugmakers will efforts to reform the medical industry truly be realized.