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IREU Merchandising Report 2019

IREU Merchandising Report 2019

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Insight Around the world

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Will Miller, Policy Analyst, British Chamber of Commerce in China

China’s slowing economic growth, underscored by recent GDP data, has been a significant concern for foreign businesses and investors. Annual GDP growth for 2018 stood at 6.6% according to official statistics, the slowest rate in almost three decades, while fourth-quarter growth dipped further, indicating a continuing downward economic trajectory going forward.


The slowdown has taken a toll on retail sales as overall consumer spending across China has slumped. Total retail sales growth, an important indicator of consumer spending, dipped 6.9% year-on-year in 2018, down from 9.1% in 2017.


In the face of gloomy economic forecasts, British businesses in China are overwhelmingly positive about their future operations in the world’s second largest economy. In a study of more than 200 British businesses by BritCham China, 65% of respondents were optimistic about business prospects over the next two years. Correspondingly, more than two thirds of companies plan on increasing their investment over the coming year, highlighting the continued interest and confidence of firms in the China market.


Despite the optimism, businesses still face numerous market access barriers, the most pressing being cybersecurity and IT restrictions, intellectual property rights protection, and issues around licensing and certification. The predominant concerns among retailers pertain to high tax rates, mandatory animal testing for cosmetics, and similarly intellectual property rights.


For British retailers, China’s emerging middle class presents numerous opportunities for future growth. Among survey respondents, more than 75% of businesses in retail and consumer goods/services were optimistic about the future of the sector while more than 85% will be increasing investment.


As the country’s economy shifts towards more consumer-oriented growth, ecommerce and retail is likely to play a much stronger role in driving China’s economy forward, with future demand likely to be underpinned by growing consumption in third and forth tier cities. British retailers in China certainly have cause to be cheerful.


Elena Gatti, Managing Director, DACH Azoya International

Global ecommerce behemoth Amazon is rumoured to be merging its China business with Netease Kaola, China’s second-largest cross-border ecommerce platform. After losing the world’s largest ecommerce market to Alibaba nearly a decade ago, this partnership could pave Amazon’s way back into the Chinese market. Kaola on the other hand would benefit from Amazon’s global network and trust from international brands.


China’s cross-border ecommerce market has been plagued by incidents of fake products, and some consumers still turn to Amazon China for imported goods, e.g. milk powder and cosmetics.

 

However, Amazon’s business in China is small; according to research intelligence firm Analysys International it has a 6% share of the £43bn ($56bn) cross-border ecommerce market. For Amazon, this partnership could be its way back into the China market. While it lacks in market share and its platform lacks a localised Chinese user experience, Amazon does have a strong global supply chain and an extensive global network of quality suppliers.


Though Netease Kaola has done well in the cross-border space, it has fallen behind as of Q4 2018 and now occupies a 24.5% share of the market, compared with Tmall Global’s 31.7% market share. The purported merger therefore comes as Netease Kaola is ramping up its business in a bid to unseat Tmall Global as the market leader in cross-border ecommerce.


The two competitors have been going neck and neck throughout the past few years. Kaola’s platform is a standalone website consisting of purely cross-border ecommerce goods, whereas Tmall Global operates as a subsection of Tmall and shares user traffic with domestic Chinese suppliers. Kaola is under pressure to provide a wider variety of goods, which will drive traffic to its retail platform.

 

The challenge: Kaola is relatively small compared to Alibaba as it has been a global company from day one, and its brand is much stronger in overseas markets. Global suppliers trust the Alibaba name, whereas Kaola is relatively unknown.


Mark Street, Head of Campaigns, Royal Mail

In our latest report from the Delivery Matters series, Royal Mail has looked at online shopping trends in Australia. One of the key insights from the report is that Australians like shopping from overseas websites and 30% of online shoppers purchased from a UK site. Of these shoppers, the average spend on UK websites, across a three-month period, was £39 per month.


Australian online shoppers find UK items to be cheaper than buying locally and 80% of these shoppers trust items purchased from UK sites not to be fake. The key reasons that Australian shoppers cited for shopping on UK sites were availability and price. If a product is only available from the UK, Australian shoppers will use a UK retailer.


Just over three quarters (76%) buy products from the UK if they can’t find them locally. Almost half (46%) seek out items that are only on sale in the UK and 59% do so because they love British brands.


Over one in ten (12% ) Australian online shoppers has returned an item purchased from a UK site. The research also found that almost three in four (74%) would be unlikely to shop with a retailer following a difficult return experience.


Australia is an attractive market for exporters. The country has high internet penetration, English as a main language and a high potential for international ecommerce sales. To help retailers, Royal Mail has developed a new tracked returns service in Australia to give customers confidence and provide peace of mind, alongside giving retailers greater visibility of their stock.

 

You will find the link to the full Sentiment Survey here.


Gareth Cleevely, VP, Head of Paid Search, iProspect

The five days between Thanksgiving and Cyber Monday, affectionately known as the “Turkey 5”, continue to be key for US retailers. According to Adobe Analytics, 2018 Cyber Monday had a record $7.9bn (£5.94bn) in online US sales, up 19% YoY, with Black Friday close behind at $6.2bn (£4.66bn).


For the 2018 holiday season, we refined our holiday strategy for clients: start planning early, be decisive on promotions, and ensure there was adequate inventory. We also wanted to implement safeguards to prevent site outages and poor mobile experiences of holidays past.


So how did it turn out? We saw some clients’ click-through-rates reach an all-time high across Amazon, Google, and Bing. As brands continue to evolve their data, advertisers are targeting better and reaching their desired audience with more compelling, actionable ads. Layer in the latest advancements in ad formats and you’ve got a successful paid search holiday season.


Of course, advertisers battled the increase in cost-per-clicks. For iProspect clients, we found increases in competition, driving the cost-per-clicks when vying for top-shelf position, especially on Amazon. This caused some client investment to increase by 720%.

 

Yet, despite the increased costs, many advertisers still paid more to drive people to their brand store. Similarly, competition increased on Google and Bing; even with increased adoption of advanced audience targeting and utilization of first-party data, brands were willing to pay more in order to reach their desired audiences.


While consumers will continue to shop heavily during “Turkey 5”, the majority of sales are falling outside that window. December 2018 converted 20% better than November, yet spend was down 39% month-over-month. With less competition and budget, coupled with higher conversion rates, it appears that “Turkey 5” has been by prioritized by brands, but this momentum is not continued or capitalized on into December. Keep this in mind when planning your 2019 holiday strategy.

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