Taobao, China’s largest online retail shopping destination, has released figures which show that e-commerce has reached a level of penetration where it is dealing with the wide-ranging daily needs of consumers in China.
To put this into perspective compare with other countries. When online shopping started in Australia, it was very much the exception not the rule. Now the reverse applies. And so stores, specializing in very narrow areas such as fountain pens and fountain pen ink either have a web presence or do not exist.
A substantial portion of Australian households do their major shopping with the supermarket shopping online.
For that they pay a small extra premium for delivery but, in compensation, do not have to trawl the aisles of a supermarket. It is a true and major revolution in shopping and keeps growing and growing.
In China, it is happening in the same way but at an earlier place on the curve. But already Taobao is creating significant opportunities for domestic manufacturers to build new brands on the internet platform as well as for established international and Chinese domestic brand name products to make them available to consumers in ways not easily done through traditional channels.
According to sales statistics for the half-year ending June 30, household goods have become the top selling category by total sales transaction value for the first time. Which is what happened in Australia. It signals a shift in consumer perception of Taobao as a primary destination for essential daily products in addition to high-value goods such as laptop computers and cameras.
In the first half of the year, Taobao merchants sold an average of 438 household items per minute.
It also creates new markets.
An example is Qilong Trading Company in Hangzhou, which had long served as a textile manufacturer supplying famous American and European labels. Qilong has since launched Top Kor, its own original brand of female apparel targeting professional women in their twenties and early thirties that is sold exclusively on Taobao.
By June 2009, dozens of corporate online retail stores on Taobao Mall were reporting average monthly sales exceeding RMB1 million (US$146,000). In July, the official Lenovo flagship online store achieved record sales of more than RMB10 million (US$1.5 million) for the month.
Sys-Con Media reports Jonathan Lu, president of Taobao, said, “What is most interesting is the level of mainstream acceptance of using online retail channels to shop for everyday items, a trend that both prominent global brands and small businesses have recognized. The convenience of online shopping, coupled with consumers’ price-consciousness in today’s economic climate, has prompted continued expansion of Taobao’s reach, not just in terms of popularity among consumers, but also the way in which traditional retailers and brands access these consumers.”
What is not mentioned in this report is the growth of "own brands".
More and more, online supermarkets in other countries are developing their own brands of major bulk consumer items. These are significatly cheaper than national brands, although typically, they are the same components. The rule in Australia is with any product: "Use home brands twice, stay forever."
This does not bode well for all manufacturers where brand name is all.