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Online to Offline Retailing - China - July 2016

“The online retail market is slowing, becoming more competitive and has to become more integrated with offline retailing. Retailing has to include a combination of both, requiring redefining what the role of physical stores should be and using more mobile technology. Rising competition is already driving mergers and cross-investment deals as retailers look for online-to-offline synergies. This will also help them provide the higher-quality products and value-added services consumers want, and are willing to pay for. Online and offline retailers can no longer survive on being the cheapest, nor can they survive much longer without profits.”
– Matthew Crabbe – Director of Research, Asia Pacific

This report examines the following issues:

  • Is ‘peak internet’ around the corner?
  • It’s all just retail!
  • Tailoring the shopping journey to individual tastes

Online-to-offline (O2O) retailing (also known as Internet+, or omni-channel retailing) can be defined most simply as the integration of online retailing to traditional bricks-and-mortar retailing.

However, it covers a wide range of commercial and consumer activities, and aims to focus those online and offline activities into coordinated strategies as an integrated, multi-channel business plan designed to utilise online assets to re-establish in-store value, with a view to increasing overall retail revenue (both online and offline). This multi-channel approach is more two-way, from online-to-offline, and from offline-to-online.

It can also be seen as a business strategy that simply draws potential customers from online channels into physical stores, by identifying customers in the online space, via email, social media, online gaming, online retail channels and internet advertising, using a variety of marketing tools (both online and offline) to guide customers from those online spaces into the physical retail spaces. This approach is more one-way, from online-to-offline only.

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Table of contents

  1. Overview

    • What you need to know
      • What is covered in this Report
      • Executive Summary

          • The market
            • Online retail still growing fast, but slowing
              • Figure 1: China – Total online retail market value, 2011-21
            • Companies and brands
              • Figure 2: China – Leading online B2C retail portals’ share of market value, 2014/15
            • The consumer
              • Mobile persists, shops resist
                • Figure 3: Consumer purchasing of products by type of online or offline channel, April 2016
              • Shoppers still like shops
                • Figure 4: Consumer motives for shopping either online or offline, April 2016
              • Seeing is believing?
                • Figure 5: Consumer influences for shopping either online or offline, April 2016
              • Consistency of performance, quality of experience
                • Figure 6: Key motivators for consumers to shop either online or offline, April 2016
              • Online still holds practical advantage
                • Figure 7: Key motivators for consumers to shop either online or offline, April 2016
              • Ratings, reviews and recommendations
                • Figure 8: Key motivators for consumers to shop either online or offline, April 2016
              • The core consumer groups
                • Figure 9: Key consumer groups according to attitudes towards shopping online and in-store, April 2016
              • What we think
              • Issues and Insights

                • Is ‘peak internet’ around the corner?
                  • The facts
                    • The implications
                      • It’s all just retail!
                        • The facts
                          • The implications
                            • Tailoring the shopping journey to individual tastes
                              • The facts
                                • The implications
                                • The Market – What You Need to Know

                                  • Online growth still fast, but slowing rapidly also
                                    • Grocery retail the ‘next big thing’
                                      • Moving to mobile and reaching rural
                                        • The push for price parity
                                        • Market Size and Forecast

                                          • Online retail still growing fast, but slowing
                                            • Figure 10: China – Total online retail market value, 2011-21
                                          • Forecast methodology
                                          • Market Segmentation

                                            • The rise of B2C retail
                                              • Figure 11: China – e-commerce total value, by B2C/C2C split, 2011-15
                                            • Bigger than the US market
                                              • Figure 12: China/US – Total online retail compared, 2011-15
                                              • Figure 13: China/US – Total online retail compared to total retail, 2011-15
                                            • What consumers are buying online
                                              • Figure 14: China – Online retail sales by broad product category, 2011-15
                                          • Market Drivers

                                            • More than half the population
                                                • Figure 15: China – Penetration of internet and online shopping use, 2010-15
                                              • The shift to mobile shopping
                                                  • Figure 16: China – mobile online users & revenues within total online retail, 2011-15
                                                • The opening of rural China
                                                  • Figure 17: Percentage of rural households by net household income level and percentage change, 2005-12
                                                  • Figure 18: Average rural & urban per capita disposable household income, 2010-14
                                                  • Figure 19: China – Rural/urban internet user population, proportion, growth and penetration rate, 2010/15
                                              • Regulatory and Legislative Changes

                                                • Government continues to support O2O development
                                                  • Changes in taxing overseas online shopping
                                                    • Price parity in online shopping
                                                    • Companies and Brands – What You Need to Know

                                                      • Market leaders increase their share
                                                        • More retailers focus on O2O integration
                                                        • Market Share

                                                          • The market leaders further flex their muscle
                                                            • Figure 20: China – Leading online B2C retail portals’ share of market value, 2014/15
                                                            • Figure 21: China – Top-4 online B2C retail portals’ share of market value, 2014/15
                                                          • Alibaba moves more to mobile
                                                            • Figure 22: Alibaba China commerce retail GMV total and mobile, Q1-4, 2015
                                                            • Figure 23: Alibaba China commercial retail division major operational metrics, March 31, 2015-March 31, 2016
                                                          • JD.com
                                                              • Figure 24: JD.com key financial data, 2012-15
                                                            • Suning
                                                                • Figure 25: Suning key financial data, 2012-15
                                                              • VIPShop revenue grows 65%
                                                                • Figure 26: VIPShop Holdings key financial data, 2012-15
                                                            • Competitive Strategies

                                                              • The national flag as retail banner
                                                                • Anchoring national online to local, physical stores
                                                                  • Alibaba buys into Suning stores
                                                                    • Walmart buys into Yihaodian webspace
                                                                      • New Look China’s rapid roll-out pays off
                                                                        • Ikea self-assembles its omni-channel plans
                                                                        • The Consumer – What You Need to Know

                                                                          • Mobile persists, shops resist
                                                                            • Shoppers still like shops
                                                                              • Seeing is believing?
                                                                                • Consistency of performance, quality of experience
                                                                                  • Online still holds practical advantage
                                                                                    • Ratings, reviews and recommendations
                                                                                      • The core consumer groups
                                                                                      • Products Bought

                                                                                        • Mobile persists, shops resist
                                                                                          • Figure 27: Consumer purchasing of products by type of online or offline channel, April 2016
                                                                                        • Are we reaching ‘peak online shopping’?
                                                                                          • Figure 28: CHINA – Online retail sales by broad product category, 2011-15
                                                                                          • Figure 29: Consumers’ online and offline shopping incidence in the last 6 months, April 2016
                                                                                        • Better engage the 40s
                                                                                          • Figure 30: Consumers’ online and offline shopping incidence in the last 6 months, by age group, April 2016
                                                                                        • Targeting the harder-to-reach shoppers
                                                                                            • Figure 31: Consumer purchasing of products by type of online or offline channel, by key consumer groups, April 2016
                                                                                          • Targeting the young shoppers
                                                                                              • Figure 32: Consumer purchasing of products by type of online or offline channel, by gender and age group, April 2016
                                                                                            • Targeting the lower income shoppers
                                                                                              • Figure 33: Consumer purchasing of products by type of online or offline channel, by monthly personal income group, April 2016
                                                                                          • Shopping Motives

                                                                                            • Shoppers still like shops
                                                                                              • Figure 34: Consumer motives for shopping either online or offline, April 2016
                                                                                            • Older men trust stores, young men trust online
                                                                                              • Figure 35: Male consumer motives for shopping either online or offline, by age group, April 2016
                                                                                            • The omni-channel approach as a tailored service
                                                                                              • Figure 36: Female consumer motives for shopping either online or offline, by age group, April 2016
                                                                                            • Lower income shoppers not persuaded either way
                                                                                              • Figure 37: Consumer motives for shopping either online or offline, by personal monthly income group, April 2016
                                                                                          • Key Shopping Influences

                                                                                            • Seeing is believing?
                                                                                              • Figure 38: Consumer influences for shopping either online or offline, April 2016
                                                                                            • Youngsters online, oldsters offline
                                                                                                • Figure 39: Consumer influences for shopping either online or offline, by gender and age group, April 2016
                                                                                              • Shopping influences versus retailer performance
                                                                                                • Figure 40: Consumer influences for shopping either online or offline, by aspects online retailers perform better than physical stores (A), April 2016
                                                                                                • Figure 41: Consumer influences for shopping either online or offline, by aspects that online retailers perform better in than physical stores (B), April 2016
                                                                                            • Key Shopping Motivators

                                                                                              • Consistency of performance, quality of experience
                                                                                                • Figure 42: Key motivators for consumers to shop either online or offline, April 2016
                                                                                              • Consumer motivation versus retailer perceptions
                                                                                                • Figure 43: Key motivators for consumers to shop either online or offline, by consumer perceptions of shopping online or in-store (A), April 2016
                                                                                                • Figure 44: Key motivators for consumers to shop either online or offline, by consumer perceptions of shopping online or in-store (B), April 2016
                                                                                            • Channel Perceptions

                                                                                              • Online still holds practical advantage
                                                                                                • Figure 45: Key motivators for consumers to shop either online or offline, April 2016
                                                                                              • Older men prefer shopping online
                                                                                                • Figure 46: Key motivators for male consumers to shop either online or offline, by age group, April 2016
                                                                                              • Women’s shopping habits shift with age
                                                                                                • Figure 47: Key motivators for female consumers to shop either online or offline, by age group, April 2016
                                                                                              • Channel perceptions versus consumer attitudes
                                                                                                • Figure 48: Key motivators for consumers to shop either online or offline, by consumer attitudes towards shopping online and in-store (A), April 2016
                                                                                                • Figure 49: Key motivators for consumers to shop either online or offline, by consumer attitudes towards shopping online and in-store (B), April 2016
                                                                                            • Consumer Attitudes

                                                                                              • Ratings, reviews and recommendations
                                                                                                • Figure 50: Key motivators for consumers to shop either online or offline, April 2016
                                                                                                • Figure 51: Consumer attitudes to online/offline shopping, April 2015
                                                                                              • Give men an incentive to go shopping
                                                                                                  • Figure 52: Key motivators for male consumers to shop either online or offline, by gender and age group, April 2016
                                                                                                • Emphasise social shopping to women
                                                                                                    • Figure 53: Key motivators for female consumers to shop either online or offline, by gender and age group, April 2016
                                                                                                • Key Consumer Groups

                                                                                                  • The core consumer groups
                                                                                                    • Figure 54: Key consumer groups according to attitudes towards shopping online and in-store, April 2016
                                                                                                  • Shopping haters
                                                                                                    • Who they are
                                                                                                      • What they like
                                                                                                        • How to market to them
                                                                                                          • Word-of-mouth (WOM)-shoppers
                                                                                                            • Who they are
                                                                                                              • What they like
                                                                                                                • How to market to them
                                                                                                                  • O2O shoppers
                                                                                                                    • Who they are
                                                                                                                      • What they like
                                                                                                                        • How to market to them
                                                                                                                          • Reticent shoppers
                                                                                                                            • Who they are
                                                                                                                              • What they like
                                                                                                                                • How to market to them
                                                                                                                                    • Figure 55: Key consumer groups according to attitudes towards shopping online and in-store, by demographics, April 2016
                                                                                                                                • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                    • Abbreviations
                                                                                                                                      • Consumer research methodology
                                                                                                                                      • Appendix – Market Size and Forecast

                                                                                                                                        • Total market size and forecast
                                                                                                                                          • Figure 56: China – Value sales of Online to Offline Retailing by segment, 2011-21
                                                                                                                                        • Forecast methodology

                                                                                                                                        Companies Covered

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                                                                                                                                        Online to Offline Retailing - China - July 2016

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