Visualising how fast is online retail in China *really* growing?

I've been doing some onsite engagements with a client in China in the last few months. Last time I visited, I managed to forget the power cable for my laptop. So my client very kindly ordered me a replacement online from JD.com, which arrived within 3 hours of the order being placed... OK Shanghai probably isn't representative of China as a whole (although JD says this service is available in 30 cities, total population > 300 million people!), but the impression you get of ecommerce while you're out there is fairly staggering. Certainly I've never seen so many people browsing their mobiles in one place as on the Shanghai metro, and every other advertising hoarding seemed to be for a retail website of some kind.

I've seen lots of graphs showing ecommerce growth in China, and separate graphs showing ecommerce growth in western countries, but I haven't really seen anything that puts the two in some sort of context. As I'm doing some research for the next edition of The Multichannel Retail Handbook at the moment, I happen to have been able to take the opportunity to set UK and Chinese official statistics side by side.

And here's the picture:

Roughly summarised:

1. Chinese retail as a whole is growing roughly as quickly as online retail in the UK. (CAGR of ~15%)

2. Chinese online retail is growing 4x faster than UK online retail (CAGR of ~60%)

Impressive stuff, a nice to see the on-the-ground impression confirmed in a side-by-side comparison. You can draw your own conclusions about whether China, despite its apparent recent economic wobble, is an interesting place to target online for retailers.

Data sources: UK Office of National Statistics, National Bureau of Statistics of China

Incidentally since the graph is inevitably a bit squeezed out for the slower growing lines, here's the same data with a logarithmic scale:

Grocery click and collect article

Well I was about to publish an article for this blog about click and collect grocery when someone rang up and offered to pay me to do exactly the same thing as I was already doing for their magazine...


So of course I sold out :-)


Here's the outline link, although you'll find you have to subscribe to their magazine to see the actual article. I guess at a safe distance in time they'll open up the link.


http://www.esmmagazine.com/201403302354/Technology/ESM-Magazine-The-Technology-Issue.html

Is taking a page out of Booker's book an opportunity for Ocado?

Another set of Ocado sales figures, another half year of no-profit growth.

The latest figures continue to underline the basic issue with Ocado's business model. Quite simply, on a cart-by-cart basis they've just about made it break-even. But on that same basis it's extraordinarily difficult to see where the profits are going to come from.

This picture tells the story:

Ocado enjoys pretty good margins for a Food retailer, but these are entirely swallowed by the costs of delivering each order. Margins are being squeezed, and delivery income is being squeezed by increasing competition.

The only way forwards is to increase cart-sizes. But year-on-year, cart-sizes actually fell  by almost £2 between 2010 and 2011 as customers cut back.

One option to increase cart-sizes to to increase the range of products on offer, which Ocado continues to do. The problem with this approach is that eventually you start to extend into categories which are not naturally part of a weekly grocery shop. Health & beauty: maybe. Consumer electronics or fashion: probably not. And as Ocado themselves observe in their analyst presentations, non-food requires a different distribution model. In other words, it doesn't really play to their strengths. Worse still, it sets them into online competition with Amazon, John Lewis, Tesco Direct, Argos, Debenhams, Marks-and-Spencer...

But while Ocado has been slugging it out unprofitably with the supermarkets, another online Food retailer has been quietly growing its online business even faster than Ocado: Booker Cash & Carry.

And while Ocado has a minimum cart-size of £50, Booker has two minimums (depending on whether you are a restaurant or corner-shop customers): £100 and £500. What would Ocado give for some £500 shopping carts? Maybe a bit of that 26% gross margin - cash-and-carry margins are inevitably lower. And e-commerce in the B2smallB sector is a tough nut to crack. These customers expect B2bigB service, B2bigB prices, and B2C charges.

But with all that automated infrastructure, you can't help wondering if there's an easier way to profitable growth than slugging it out with Tesco and Sainsburys.