E-commerce in industrial products the next “blue ocean”
January 21, 2020 Category China News Round-up, Weekly
Buying and selling of industrial products via online platforms could well be the “next blue ocean” in China’s e-commerce sector and drive digitalization of global business-to-business (B2B) sales, a new report said. The market value of industrial products’ e-commerce is expected to hit CNY2.3 trillion in 2024, up from CNY700 billion last year, global consultancy Bain & Co said in a white paper jointly released with 1688.com, Alibaba Group Holding’s B2B trading arm for domestic trade. That represents a 25% to 30% compounded annual growth rate during the period, when the e-commerce penetration rate of B2B industrial products is forecast to rise from the current 2% to 5% in four years. The next wave of e-commerce will come from the B2B end, said Li Congshan, General Manager overseeing industrial brands at 1688, which hosts over 10,000 industrial brands from home and abroad. “The process is inevitably much more complicated compared with consumer-facing businesses, such as settlement, logistics, local installments and after-sales service,” said Zhao Liqiang, Partner at Bain and Chair of its manufacturing practice.
B2B e-commerce sites have become established avenues for information sharing, with 72% of surveyed companies reporting that they leverage online channels to compare prices, and 55% use the platform to check key product parameters. They are shaping up to be brand promoters, with companies indicating that browsing of daily products has risen by 58% on average on 1688. The transaction volume for these companies is also 2.5 times higher than industry average. For multinational industrial conglomerates, online channels offer much broader contacts with prospective buyers, who are typically small- and medium-sized companies in remote places in China, said Zhu Wenhui, who is responsible for e-commerce channel development at Schneider Electric. Zhu said the French company has seen the number of clients from third- and lower-tier cities increase by 60% since its flagship store and reseller stores opened in 2018, while the number of orders secured jumped 80%.
“The online site has helped us better penetrate the lower-tier markets with much lower costs and higher efficiency that would not have been attainable just by ourselves,” Zhu said. The so-called customer-to-manufacturing trend, featuring tailored production based on customer preferences, is also picking up momentum, the China Daily reports.
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