China’s Internet focus lifts online spending
In this article (5)
In a strategy known as ‘Internet Plus’, China is integrating the Internet, big data and other technologies with traditional industries, like retail. This is boosting China’s already vast e-commerce market further. As the government looks to use the Internet to create more spending – and jobs.
Denny Liu returned to Beijing after graduating from Wharton Business School in the United States.
Last year, he and his wife set up Le Chun – or Le Pur, in English – selling yogurt, using only natural ingredients.
Before opening a physical store, they shared their story and mission online.
“That story actually went viral for a little bit and that got us our first 5,000 seed users. Who are all yogurt lovers.We didn’t know any good milk sources around Beijing, so we threw it to our community and said ‘do you guys know any good milk source around’ and about 10 people gave us leads. When we designed our logo and picked out the store location, we asked our followers,” Liu said.
With 40,000 followers on WeChat, the Internet has played a key part in Le Chun’s success.
In less than a year, the startup is making a profit.
Most of their sales are online. Thanks to word of mouth, from social media fans.
Now, the government is backing them too. With 100,000 yuan or roughly 15,000 dollars in funding. No strings attached.
China wants consumer spending to be a central part of the economy. But malls like this one don’t exist in every city. So it’s supporting online stores to get more Chinese shopping.
““That story actually went viral for a little bit and that got us our first 5,000 seed users.”
“Clothes, computer stuff, food. I buy about 80 percent of my things online,” Student Quan Jiujiu said.
Retail expert, Professor Xiangdong Liu, says official data shows that last year, China’s online sales hit 2.79 trillion yuan. Taking 10 percent of its total spending. And overtaking America’s.
He says the government’s Internet focus will encourage e-commerce further.
“The government will invest more in Internet infrastructure, cutting costs for surfing online. It’s also setting up pilot projects, to make Internet companies better, as well as encouraging companies to open online services, by providing subsidies and lower taxes. The government’s approach is first to let them mature, then unveil more policies to manage them,” Professor Liu said.
This is changing brick-and-mortar giants, like electronics retailer, GOME. It launched its online store in 2011. Now with a mobile platform and App.
But while their online options give customers a bargain, it’s been tough business.
“10 percent of our sales are online. We predict GOME’s online consumers will grow faster, to exceed 20 percent in three years. Online customers pay more attention to price, so goods online have simpler functions and are cheaper. But since prices online are cheaper, many online businesses are making a loss,” Wang Junzhou, president of GOME Electrical Appliances Holding Ltd., said.
While keeping costs down for niche retailers, like Le Chun. The Internet is proving costly for mainstream players.
That’s likely to test China’s e-tail industry, in the years ahead.
Questions & Answers
Q.What is the 'Internet Plus' strategy in China and what is its main goal?
What is the 'Internet Plus' strategy in China and what is its main goal?
The 'Internet Plus' strategy involves integrating the Internet, big data, and other technologies with traditional industries like retail. Its primary goal is to boost online spending and create more jobs within the economy.
Q.How did Le Chun, the yogurt startup, initially attract its customers and grow its business?
How did Le Chun, the yogurt startup, initially attract its customers and grow its business?
Le Chun first shared its story and mission online, which went viral and gained them 5,000 seed users. They then involved their online community in sourcing milk and designing their logo, before making most sales online.
Q.What is the Chinese government doing to encourage e-commerce and support online businesses?
What is the Chinese government doing to encourage e-commerce and support online businesses?
The government is investing more in Internet infrastructure to cut online costs and setting up pilot projects. It also encourages companies to offer online services by providing subsidies and lower taxes.
Q.How do online sales affect traditional retailers like GOME compared to niche businesses?
How do online sales affect traditional retailers like GOME compared to niche businesses?
For GOME, online sales are a tough business, with customers focusing on cheaper prices and simpler goods, often leading to losses for online operations. However, the Internet keeps costs down for niche retailers like Le Chun.
Reader pulse
Is the government's 'Internet Plus' strategy sustainable long-term?
22,323 votes so far