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Walmart and Macy’s Delve into Chinese e-Commerce

Chinese mobile commerce eclipses US mobile commerce in a big way!

Chinese Mobile Commerce Set to Dwarf US Market

It comes as no surprise that mobile commerce is one of the fastest-growing markets in Asia, notably China. A lesser known fact is that the m-Commerce sector in China is expected to outpace US m-Commerce growth in a big way. Mainland Chinese mobile commerce figures are going to increase 5 times within the next 16 months. In dollar terms, a more than 50% increase in mobile commerce transactions will catapult revenues to $505 billion – a whopping 56% of all e-Commerce transactions in China. By contrast, mobile commerce in the United States is expected to increase by 28%, topping out at just over $96 billion for 2016, comprising 25% of all e-Commerce activity.

Macy's Inc Partners Up With Fung Retailing Limited

US retailing giant Macy's Inc is now exploring a joint-venture with Fung Retailing Limited of Hong Kong vis-a-vis the retail sector in China. Since China is the world's fastest-growing retail market – the numbers don't lie – many of the biggest multinationals are looking to tap into this lucrative market. The free-standing joint-venture that has been established is 35% owned by the Hong Kong retailer and 65% owned by Macy's Inc. Within the next couple of months, Macy's intends to roll out retail sales operations throughout China by way of an exclusive arrangement with Tmall Global and the Alibaba Group. The retail operation will be known as Macy's China Ltd and it will be based in Hong Kong. The payments processing option will be facilitated by way of Alipay for all Chinese commerce operations. The decision by US retail giant Macy's Inc is based on strong brand awareness by Chinese visitors to the US. Macy's is hoping to drill down into global markets like China where a large and growing middle-class exists.

594 Million Mobile Users and 668 Million Internet Users in China

According to the chief innovation & business officer of Macy's, Peter Sachse, the company is looking to expand business operations in China in incremental steps. It should be pointed out that Macy's does not intend to develop physical stores – it is merely an online presence and warehouses that the company is looking to establish. The inventories will be based in Hong Kong for the Chinese customers, in an effort to reduce costs, shipping speeds and flexibility. The total cost of the freestanding joint-venture is approximately $25 million and sales of $50 million are forecast for Macy's from e-Commerce in China by the end of 2016. And if one takes the facts and figures of Chinese mobile Internet growth into account, retail projections are anything but overstated. According to the China Internet Network Information Centre, mobile Internet usage is currently at 594 million (June 2015). And when it comes to Internet users, there are 668 million people in China surfing the Net.

Wal-Mart stores Inc Cashes in with Yihaodian

Online retail is now a major component of Wal-Mart Stores Inc operations in China. The company recently assumed ownership of one of its Chinese e-commerce operations – Yihaodian. Prior to Walmart's takeover, it owned 51% of the Chinese company, but now it owns the lot. With full ownership, Wal-Mart Stores Inc plans to expedite online retail operations. The company has made a concerted effort to take on other major e-Commerce giants like Amazon.com. Wal-Mart will be investing upwards of $1.2 billion in 2016. As part of its cost-cutting initiatives, the company will decrease the construction of land-based stores and focus instead on its online retail operations.

Land-based Wal-Mart stores are not performing as expected. As a case in point, traffic has decreased by 8.9 percentage points across 400 Chinese physical stores over the past 3 years. In spite of its new focus on Internet sales, Wal-Mart Stores Inc still plans to develop 115 stores in the country within the next two years. Almost 50% of Chinese people purchase their groceries on the Internet, a full 25% higher than the global average. While the purchase of Yihaodian by Wal-Mart Stores Inc is a big deal for the US company, it pales in comparison to other Chinese juggernauts which completely dominate online landscape – JD.com and Alibaba Group Holding Ltd.

China is the World’s Large Online Shopping Market

Incidentally, China now ranks as the #1 country in the world in terms of e-Commerce. In 2014 alone, online sales in China topped $453 billion – making up 11 percentage points of all retail sales in the country. It's no wonder then that companies like Macy's and Wal-Mart Stores Inc are looking to drive profitability and reduce costs by taking the e-Commerce and mobile commerce route. 

 

Major US Retailers Explore e-Commerce Options in China
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