A Race to Capture the Chinese Market

3 minute read
Barry Levine avatar

Customer Experience e-commerce china
With about one-fifth of the Earth's population, China is the e-market that cannot be ignored. Some recent news put a spotlight on how e-commerce is shaping up there, for both homegrown and foreign players.

Apple, for one, has seen better days in China. It recently reported "the best quarter ever in greater China" -- which includes Taiwan and Hong Kong -- for the period ending in April, with 8 percent growth. But, for the quarter ending in June, revenue dropped 14 percent, compared with the same time last year. Compared to the previous quarter, it was a drop of 43 percent.

Alibaba’s Huge Profit Margins

Some analysts have suggested that Apple's declining fortunes in China are due -- at least in part -- to its need for a lower-priced LTE phone and for increased distribution/sales channels, such as through more retail stores and/or a distribution deal with China's largest carrier, China Mobile.

Meanwhile, Alibaba, the largest e-commerce company in that country, is doing boffo business. In the most recent quarter, it showed a profit margin of nearly 50 percent, dwarfing the margins of such American companies as Apple or Amazon. Apple, known for its healthy margins, had about 22 percent over the same period, and Amazon’s was less than 1 percent.

Alibaba’s 71 percent rise in sales for the quarter was good news for one American company, however. In 2005, Yahoo bought a 40 percent share of the company for US$ 1 billion, which is now worth about 24 percent. Although it’s in e-commerce, Alibaba is not exactly the Amazon of China, since it doesn't sell products directly. Rather, it provides platforms for retail brands to sell to consumers, making its money from advertising and commissions.

Learning Opportunities

Biggest Installed Base

Yahoo, looking for more good luck in China, last month purchased a social data startup company based in that country, Ztelic.

According to mobile analytics provider Flurry, in February China surpassed the United States to become the country with the largest installed base for active iOS and Android devices. In fact, Flurry reported that China now represents about one quarter of the entire connected-device installed base on the planet.

Flurry also reports that, while Apple and Samsung are the top two device manufacturers in that country, the China-based Xiaomi is coming on strong, building on its current 6 percent market share. Xiaomi is reportedly preparing a tablet for release, which could increase the population of Android tablets in that country. 

Title image courtesy of randomwire on Flickr via a Creative Commons license (Shutterstock)