E-commerce platforms to expand offline presence

Cross-border e-commerce platforms in China have stepped up efforts to open more brick-and-mortar stores, hoping to cash in on growing demand arising from consumption upgrades and the rise of middle-and high-income Chinese shoppers, said industry experts.

Ymatou, a Shanghai-based cross-border e-commerce site, plans to open 1,000 offline stores in 100 cities through cooperation with various local governments within three years in an attempt to cover 200 million to 300 million emerging consumers in third-tier cities, said Zeng Bibo, founder and CEO of the company.

Zeng said these offline stores will adopt a "self-operated plus franchising" operational model, and will cover urban clusters in the Beijing-Tianjin-Hebei region, Yangtze River Delta, Pearl River Delta, Bohai Bay, central and southern parts of Liaoning province and Southwest China, thus serving emerging consumers in third-and fourth-tier cities.

In terms of business models, the new retail stores will include flagship stores, which span 2,000 square meters each and are mainly located in well-known business districts in provincial capitals. They will combine innovative formats including global live broadcasting and launch new products, and boast 800 sq m experience stores and 400 sq m community stores in third-tier and smaller cities.

Ymatou also signed a contract with Chongqing's Yuzhong district and announced its first offline store will be located in Chongqing, with its southwest headquarters and flagship store established in the city this year.

Moreover, the company is banking on the livestreaming e-commerce segment, which has become a powerful sales channel for traditional industries as more consumers have switched to online shopping amid the COVID-19 pandemic. It aims to nurture 1,000 live broadcasters who are expected to sell more than 100 million yuan ($14.5 million) worth of products this year.

Founded in 2010, Ymatou is a consumer-to-consumer (C2C) marketplace engaged in cross-border e-commerce. So far, the site has over 80 million users in 627 cities in China and employs more than 80,000 overseas buyers in 83 countries including the United States, the United Kingdom, Japan, South Korea and Australia.

China's cross-border e-commerce sector has been growing exponentially over the past few years as the country's middle-and high-income shoppers are demanding increasingly diversified and personalized products and services.

Market consultancy iiMedia Research said the country's cross-border online shopping is expected to reach 12.7 trillion yuan in sales this year.

Chen Tao, an analyst with internet consultancy Analysys in Beijing, said, "More cross-border e-commerce platforms will launch offline stores, hoping to grasp the opportunities emerging from the consumption upgrades of Chinese shoppers."

Chen added the offline stores could play a complementary role in boosting sales of online retailers and help in cultivating purchase habits of consumers.

"By virtue of big data and artificial intelligence, the offline stores will better capture consumers' shopping habits and preferences, and make accurate recommendations."

Koala Haigou, another Chinese leading cross-border e-commerce platform, has been keen to expand its offline presence in recent years. It officially opened its first flagship store in Hangzhou, Zhejiang province in January 2019. The flagship store, located near the West Lake scenic spot, features the use of big data and algorithms to pinpoint customer needs. Spread over 700 sq m, the store sells the most popular products among Chinese customers, including product categories like cosmetics, personal care, baby goods, electronics, home appliances, clothing and luxury items.

In the flagship store, consumers can browse the recommended commodities through electronic interactive screens, which will help reduce decision-making times and improve operational efficiency at the store. The company was acquired by Alibaba Group Holding Ltd in September 2019.

It also set up two offline stores in Hangzhou and Zhengzhou, Henan province in April and August 2018, respectively. In April 2019, Koala Haigou also opened its first offline factory-to-consumer (F2C) store in Hangzhou, offering goods direct from factories to consumers.

In addition, Alibaba opened its first physical store serving cross-border e-commerce platform Tmall Global in its headquarters in Hangzhou in April 2018, taking advantage of preferential policies in the city. Alibaba said it will quicken the pace to roll out similar stores in cities like Shanghai; Ningbo, Zhejiang province and Shenzhen, Guangdong province.

"Consumers are becoming accustomed to buying imported goods through the cross-border e-commerce channels, which has become very effective and complementary to the general trade model," said Zhang Tianbing, a consumer products and retail industry expert from Deloitte Asia Pacific.

Zhang said as an alternative channel to handle imported goods, it also stimulates significant purchasing demand and diversifying product offerings to the Chinese consumers. The internet-savvy post-1990 generations already make up the largest consumer segment for imports, he added.

Mo Daiqing, an analyst at the China E-Commerce Research Center, said the offline stores will present a new opportunity for major online retailers to expand their retail channels.

Mo noted Chinese consumers show an increasing demand for personalized and differentiated products, and the competition among cross-border e-retailers is mainly concentrated on the quality of products, services and supply chains.

"It might be a trend that more and more cross-border e-commerce platforms in China are stepping up efforts to open more offline stores," Mo added.