Accused of poor regulation and unfair competition by traditional import-export traders, cross-border e-commerce in China has been subject to new regulations since the beginning of April. Over the long term, the new regulation is expected to improve the shopping experience by focusing on the quality of goods.
With over 5,000 cross-border online trading platforms and more than 200,000 enterprises involved, e-commerce has become a major force for foreign trade into and out of China. In 2015, cross-border consumer deals settled online reached $ 40 billion, up 50 percent, representing over 6 percent of the total consumer e-commerce sector. China’s Commerce Ministry estimates the broader cross-border e-commerce market is much larger, growing at an average rate of 30 percent to reach up to $1 trillion by 2018. (analysis report) Read Full Post…
Bottom line: A new strategic partnership between Amazon and Chinese retailer Gome could expand later this year into an equity alliance that would see the former buy about a fifth of the latter for around $500 million.
Gome ties with Amazon
A year after getting dumped by private equity giant Bain, fading electronics retailer Gome (HKEx: 493) is being courted by yet another big western name, with word of a new major tie-up with global e-commerce leader Amazon (Nasdaq: AMZN). This particular tie-up is most intriguing due to the timing, which comes after reports emerged last year saying Gome’s controversial founder Huang Guangyu might soon be freed from prison after serving about half of a 14-year sentence for bribery and insider trading.
Reports of the early release, combined with a buyout of Bain’s 5 percent stake last year, hint that Huang may be making new plans for Gome if and when he emerges from prison soon. This new tie-up with Amazon suggests that a major investment from the US e-commerce giant could be in the offing, which could be part of Huang’s plan to breathe new life into his faded retailing empire. Read Full Post…
Bottom line: Alibaba’s new cloud tie-up shows that Korea is a primary market for its global expansion, while the new $4.5 billion funding for its Ant Financial affiliate could be followed by an IPO within the next 12 months.
Alibaba in Korea cloud initiative
E-commerce giant Alibaba (NYSE: BABA) is in a couple of major headlines today, led by word that its Ant Financial affiliate has just raised a whopping $4.5 billion in only its second-ever funding round. That particular story has been rippling through the headlines for a few weeks now, and is most notable because the deal is finally done and is triple the company’s original fund-raising target.
The other headline has Alibaba itself in a new deal to launch cloud computing services in South Korea, working in a partnership with a unit of local telecoms giant SK Telecom (Seoul: 017670). This particular deal is interesting because it represents Alibaba’s recent search for global growth stories, in a bid to satisfy investors worried about a slowdown in its home China market. Read Full Post…
It seems that all the goodwill in China garnered by Apple (Nasdaq: AAPL) CEO Tim Cook wasn’t enough to prevent the company from hitting a major new roadblock, with word that its book and movie services have been blocked in the country. The move nicely illustrates 2 faces of Beijing that sometimes seem contradictory. On the one hand, Chinese leaders crave the attention they get when global leaders like Cook visit China and pay due respect to the market. But on the other, they have little tolerance for anyone who violates the country’s strict censorship rules.
Buzz is now centering on whether Apple will be able to somehow bring its book and movie services into compliance with new Chinese rules rolled out last month, allowing the services to resume. If this were Google(Nasdaq: GOOG) running into similar problems, I would say the answer would be “no”, since the company has little goodwill with Beijing. But Apple has invested heavily to win the favor of Beijing leaders, meaning it’s likely to get a more sympathetic ear, probably after personal intervention by Cook himself. Read Full Post…
Bottom line: Reports of the insolvency of online grocer Yummy77 are probably correct, but the company could still engineer an emergency rescue that would see it emerge as a wholly owned subsidiary of a big backer like Amazon.
Yummy77 reportedly insolvent
Just a week after 2 major new fundings highlighted the big potential for online grocers, a new headline is shining a spotlight on the darker side of a market that has rapidly overheated as new companies rush to cash in on the trend. That headline has media reporting that 2-year-old online grocer Yummy77, which is backed by global e-commerce giant Amazon (Nasdaq: AMZN), has run out of cash and become insolvent, making it the first major casualty in the space.
Before we go any further, I should note that the news on Yummy77 is all coming from media reports that haven’t been confirmed by the company. But at least one of those reports comes from the highly reputable China Business Network (CBN), which cites a number of sources that seem to indicate the news is true. My own visit to Yummy77’s site, www.yummy77.com, showed no signs of anything unusual, and I was able to select items for sale and put them into my shopping cart as normal. Read Full Post…
Bottom line: Fresh food sellers Yiguo and FruitDay could see strong growth and go public in the next 2-3 years, banking on strong partnerships with Alibaba and JD.com and growing consumer willingness to buy groceries online.
Yiguo in big new funding
Fresh fruit and other grocery items are the latest hot ticket in China e-commerce, with 2 up-and-coming players receiving big new fundings of $100 million or more. The larger of the pair has e-commerce leader Alibaba (NYSE: BABA) and global private equity giant KKR helping online fresh food seller Yiguo raise about $260 million in new money. The other has an online fruit specialist called FruitDay, whose backers include Alibaba arch-rival JD.com (Nasdaq: JD), raising its own $100 million.
This particular trend is really a sub-trend of a broader movement by China’s e-commerce giants into the grocery business over the last few years, encroaching on traditional supermarkets and also Wal-Mart’s (NYSE: WMT) Yihaodian that found early success in the space. Even Amazon (Nasdaq: AMZN) China has gotten into the business, though many of these companies specialize in more traditional packaged foods rather than fresh products. Read Full Post…
Bottom line: Wanda Group founder Wang Jianlin and other major Chinese entrepreneurs intent on building wide-ranging conglomerates should look to the western failure of such firms instead focus on their core business areas.
Wanda’s Wang buys Carmike Cinemas
Billionaire deal maker Wang Jianlin was back in the acquisition headlines last week, when his increasingly diverse Wanda empire announced it would buy US-based Carmike Cinemas (Nasdaq: CKEC) as part of it its dream of building the world’s biggest theater chain operator. But theaters are just one of a growing number of items on Wanda’s recent list of mega-projects, which has also included plans for a multibillion-dollar European theme park, a major e-commerce venture, and investments related to sports and its core real estate products and services.
The sudden diversification looks similar to ones by other cash-rich Chinese companies, most notably e-commerce giant Alibaba(NYSE: BABA), and reflects a desire to move beyond their original businesses into new growth areas. While such a strategy seems logical, western experience has shown that such rapid diversification more often results in dysfunction rather than synergies, and frequently ends with the eventual break-up of such companies into smaller units focused on individual areas of expertise. Read Full Post…
Bottom line: Wal-Mart’s discussion of plans to open 115 new China stores and several new local initiatives look like mostly PR to show its commitment to the market, following its announcement of a major global overhaul earlier this month.
Wal-Mart discusses commitment to China
Just a week after announcing a major retrenchment for its global empire, retailing giant Wal-Mart (NYSE: WMT) is saying it will continue to open new stores at a brisk pace in China. The vast and somewhat unique China market also looks set to become a testing ground for new concepts, with Wal-Mart discussing plans to open its first shopping center format and also to expand its cross-border e-commerce business in the country.
The latest developments are discussed in a local media interview with a top Wal-Mart China executive, which is probably timed to quash any potential buzz that the company is planning a similar retrenchment in China to the global plan announced earlier this month. That plan saw Wal-Mart announce it will close 269 stores this year, representing just over 2 percent of its global count of 11,600. Read Full Post…
Bottom line: The recent case involving criticism of Alibaba by Washington and Beijing over piracy should form a template for how the 2 governments can collaborate on commercial issues where they have common interests.
US warns Alibaba over fake goods
Washington and Beijing showed a rare sign of collaboration on commercial issues last week when the US sternly rebuked e-commerce giant Alibaba (NYSE: BABA) for widespread trafficking of pirated goods on its websites, reinforcing a similar message delivered by China at the start of this year. While it’s doubtful the US Trade Representative’s (USTR) office and China’s State Administration for Industry and Commerce (SAIC) consulted each other in their separate actions, the parallel moves showed just how effective the 2 governments can be when they work together in some of the many areas where their interests overlap.
That contrasts sharply with a more clashing style on many other issues like high-tech hardware security and new energy products, where both sides have similarly common interests but more often take actions that result in trade wars and angry verbal exchanges. Read Full Post…
The following press releases and media reports about Chinese companies were carried on December 19-21. To view a full article or story, click on the link next to the headline.
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Apple (Nasdaq: AAPL), Samsung to Enter China Payments Market With UnionPay (English article)
Qihoo 360 (NYSE: QIHU) Enters into Definitive Agreement for Going Private (PRNewswire)
Microsoft (Nasdaq: MSFT) Unveils Plans for China Joint Venture (English article)
Amazon (Nasdaq: AMZN), Oriental Pearl in Cloud Computing Partnership (Chinese article)
BOCI (HKEx: 3988) Sells Nanyang Commercial Bank to Cinda for HK$68 Bln (HKEx announcement)
Bottom line: The lack of news or attendance by major worldwide executives at China’s global Internet conference this week shows the country’s Internet remains relatively closed and under strict government control.
Global Internet pow-wow takes place in scenic Wuzhen
I had big hopes for the second edition of China’s World Internet Conference happening this week in the picturesque town of Wuzhen, as all of the country’s top executives are in attendance at an event intended to showcase the country’s online prowess. The list of domestic executives in attendance certainly hasn’t disappointed, and many are undoubtedly there to network with China’s top Internet bureaucrats and President Xi Jinping, who gave this year’s opening speech.
But a look at some of the comments from names like Alibaba (NYSE: BABA) founder Jack Ma and Baidu (Nasdaq: BIDU) founder Robin Li turns up mostly empty talk, mixed with the expected self-promotion. What’s more, I also find the near-absence of any major foreign names from the conference somewhat puzzling, since China is trying to bill this as a global conference. Read Full Post…
