LSQHA Blog Reviews

Last September, China's most successful consumer-to-consumer online marketplace, Taobao.com launched a massive online promotion. By offering exorbitantly low prices on a series of brand name consumer electronics by Lenovo, HP, Philips and others, the site attracted 1.8 billion visitors (non-unique) - the equivalent of every single person in China visiting the site at least once. With 145 million online shoppers expected by the end of 2010, e-commerce in China has come a long way since it began about a decade ago. What types of business models exist? Who's shopping online and what are they buying? And where do we go from here? Sponsor Guest author Joel Backaler writes The China Observer , an award-winning blog focused on Chinese technology trends and consumer culture. His writing has appeared in and he has been quoted by the Wall Street Journal China Journal, BusinessWeek, and Seeking Alpha. Joel is a Mandarin-speaking former Fulbright Fellow who has worked and lived in Taipei, Beijing and Singapore with Frontier Strategy Group. Follow Joel on Twitter . How did it all begin? Jack Ma and his partners launched Chinese e-commerce in 1998 with Alibaba.com , a business-to-business online platform. Like the Web firms of Silicon Valley, Chinese firms felt the shockwaves of the Internet bubble bursting in early 2000 - but in China the Internet industry continued to grow. 2003 was a turning point for Chinese e-commerce with the release of Alipay, Alibaba's version of PayPal, which provided a secure means for online payment. 2003 also marked the first entry of Western multinationals in the Chinese e-commerce market - first by Ebay taking a controlling stake in Eachnet, and then with Amazon subsequently doing the same with Joyo.com in 2004. Roles reversed in 2005 when Alibaba Group gained control over Yahoo!'s Chinese search platform. A period of explosive growth began in 2008 as China's e-commerce market grew to 100 billion RMB, with 80 million online shoppers. Where are we today? In 2009, China's e-commerce market totaled 263 billion RMB (approximately $38.5 billion) with growth equivalent to about 105% increase year-on-year. Currently, consumer-to-consumer (C2C) represents the largest segment of China's e-commerce market; however, business-to-consumer (B2C) is increasingly growing in importance due to two trends. Traditional Retailer to Online Retailer : Traditional retailers are developing e-commerce platforms as additional channels to get consumers to buy their products. From brand name domestic retailers to state-owned enterprises, there is a major push to go online. It has even been reported that Wal-Mart is set to release its own e-commerce platform for the Chinese and Japanese markets . Individual Seller to Online Retailer : Due to the extreme success of particular sellers on existing C2C sites like Taobao.com, online shops that began with a single college student or a small family have been forced to seek out additional support to satisfy market demand. As a result, these one-time, single-person operations have been incorporating into formal enterprises stepping into the B2C space. What types of business models exist? China's e-commerce platforms can be classified by the following three models: marketplace model, online retail model and traditional retail model. Marketplace Model : The marketplace model connects buyers and sellers, whether it is business-to-business or C2C. The company provides a platform to facilitate business between two parties but has no products of its own to offer. It maintains a searchable database of information for buyers and seller to connect, and a secure means to facilitate payment between both parties. Top B2B players : Alibaba.com, HC360.com, Myekoo.com Top C2C players : Taobao.com, Paipai.com, Eachnet.com Online Retail Model : The online retail model is where a company has no formal real-world storefront. It provides both products and a channel to sell directly to end customers. Top B2C Online Retailers : 360buy.com , Joyo.com, Dangdang.com Traditional Retail Model : The traditional retail model is similar to the online retail model; however, in addition to the online website the company also has real-world retail outlets. Top B2C Traditional Retailers : Gome (electronics), COFCO (state-owned: food and beverage), Lining (athletic apparel) Who's shopping online and what are they buying? Shanghai-based iResearch estimates that by the end of 2010 there will be 145 million online shoppers in China. Online shoppers are relatively young - the majority are between the ages of 18 and 35. While this number is split roughly evenly, slightly more women shop than men. In the early days of Chinese e-commerce, products such as software and DVDs were the top purchases. Currently clothing, books and cosmetics are the top sellers. Additionally, as we have seen in the U.S. with sites like Etsy, companies that focus on niche markets are also sprouting up. For example, 21Cake.com is a popular made-to-order online cake company that sells custom-made cakes online and delivers to China's major cities. Where do we go from here? China's e-commerce market is yet to fully mature, but it is entering a period of high-speed growth. C2C sellers that are growing more successful will begin to establish more formal companies, leading to an increase in the number of companies in China's B2C space. While many view the Internet as a sensitive area subject to regulation by the Chinese government, the government supports e-commerce due to its economic benefit and potential for job creation. One example is Xinjiang, a remote province in western China which recently experienced social unrest. Most websites and email there are blocked - but you can still access Alibaba.com and Taobao.com. Of China's e-commerce companies, Alibaba Group will remain the company to watch in this space for many years to come. However, there is still a lot of room for niche operators to capitalize on the growth potential of China's e-commerce market. Image by Kim2402 . Discuss

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Chinese E-Commerce Tops $38.5 Billion; What Comes Next?

Back when I was in graduate school getting my masters in journalism and mass communication, I worked on various "lab projects" which were challenges faced by media organizations that they wanted to tackle but didn't have the means or the resources to do so. So basically, the students at my school were a think tank for the local media. One of the first issues we were tasked with investigating was finding a new way to allow comments for online news stories to be more efficient and less offensive. Sponsor The problem faced by most online news sites is that the anonymous nature of the Internet makes it very easy for vulgarity and off-putting comments to be posted, and for some sites, these types of comments pervade their site. Many of today's popular sites with comments have integrated systems to where readers can vote down bad comments while promoting good comments, which helps the bad stuff to be filtered out. Others have tried blocking fowl language with asterisks or by deleting the comment automatically, but this has only lead users to find unique ways of spelling their beloved curse words. Some startups, like Disqus , have made it much easier to manage comments, and identity tools like OpenID and Facebook Connect have helped to lower the amount of anonymous commenters on the web, but anonymity is a fundamental cornerstone of Internet culture. Or is it? In a recent New York Times article about how many news sites are starting to remove anonymous commenting, Arianna Huffington of The Huffington Post said she thinks that anonymity is losing its once exalted position atop the foundation of the Web. "Anonymity is just the way things are done. It's an accepted part of the Internet, but there's no question that people hide behind anonymity to make vile or controversial comments," says Huffington. "I feel that this is almost like an education process. As the rules of the road are changing and the Internet is growing up, the trend is away from anonymity." Fred Wilson of Union Square Ventures says there is plenty of room for innovation within comment boards. Wilson uses Disqus on his blog and has some suggestions for features they could include to make the commenting experience better, but he believes one of the ways to innovate in the space is to introduce game mechanics into commenting. "Game mechanics will reward the kind of behavior the community wants and will punish the kind of behavior the community does not want," writes Wilson on his blog. "The anonymous commenter who has valuable information but can't publish in their own name will be rewarded. The anonymous commenter who leaves a hostile name calling piece of crap will be punished. And the comment thread and community will be better off for it." Entrepreneurs that strive to create a truly innovative product usually first start with a problem that needs solving, and comment systems are certainly a problem that needs solving. Therefore by some transitive property, innovation in the commenting space seems to be an open door of opportunity for startups to walk through and offer a solution. Are there other companies like Disqus that may be looking to disrupt the traditional comment system, or do you have an idea for making the process more user friendly? Let us know your thoughts on the state of comments and how you would change them in our very own comments section below! Disclosure: The New York Times is a syndication partner of ReadWriteWeb. Discuss

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Comment Innovation: An Open Door of Startup Opportunity?

They seem to be becoming less popular lately, but not too long ago "stealth" startups were a growing fad in the Internet entrepreneurship sector. A team with a big idea would insist on keeping their business a secret from the public and even from investors until the last possible moment in an effort to ward off any fast moving idea vultures that might swoop in and copy their idea. Others went stealth to create a buzz around their mysterious and unknown project. Some argue, however, that being stealthy limits a startup's opportunities for funding and feedback, among other things, so is there a better way to go about this? Sponsor Investor and Hunch co-founder Chris Dixon wrote Tuesday about his idea that instead of going into "stealth mode," startups should instead just try to "underhype" themselves , a process I'm going to call "flying under the radar." I call it this because "stealth," like "stealth bomber," implies the ability to be undetectable and virtually invisible, while "flying under the radar," means you are perfectly visible, but are strategically flying in a manner as to go unnoticed. "The companies I'm referring to ... are publicly launched, acquiring users and generating revenue," writes Dixon of "underhyped" startups. "They are modeling themselves after Groupon, where the first time the VC community / tech press gets excited about them, they are already so successful that it's hard for competitors to jump in." Startups that can fly under the radar get all of the benefits of stealthiness but without the costs. By quietly building a stellar product and garnering a loyal audience without tipping off the press or major VCs, startups can be assured that they are providing the best product while protecting themselves from a quick copycat company. Instead of closing your company off to a select group of individuals, these startups can be completely open to public feedback and user testing, as well as VC scrutiny, something most stealth startups can't do. "Unless you are extremely lucky or extremely brilliant your product won't be a great match for your customer's needs until you have spoken to them about it and iterated a bunch of times," wrote Nic Brisbourne of DFJ Esprit last December . "With regard to VCs in particular, being stealthy stops them from letting you know if they have seen many other startups in your space and the extent to which your plan might or might not need to morph to become an attractive investment." It would seem that the costs outweigh the benefits when it comes to going stealth. In a 2006 OnStartups post , Dharmesh Shah argued that going stealth could unintentionally convey to investors that the company lacks focus, commitment, solutions, or direction. So before you decide to keep your super secret project under lock and key, think about hiding in plain sight by flying under the radar instead. Discuss

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Is Flying Under the Radar Better Than Being Stealth?

Recently, I spoke to a crowded room of senior marketers at a CPG retailer, one of the executives asked “What’s an indicator a company is advanced in the social space?”.  I gave three answers, and one of them was “Developing a thriving advocacy program to fight your battles”.  The executives, which were used to traditional advertising and direct marketing had a lightbulb go off as I showed them this framework. Companies unable to scale into social channels –hindered by traditional thinking Companies are unable to respond quick enough to the masses of customers complaining on social channels, they simple can not hire enough community managers and Social CRM systems are still being developed.  The old school thinking of traditional marketing putting the sole focus on voice of corporate communications, and sanctioned executives only.  Yet now, as social tools are pervasive (take a look at all the people accessing Facebook from their mobile phones) the gateways of public communication have been opened. Brands must extend their strategy to the outside rings. In order to scale in both time and mass, corporations must now extend their communication strategy beyond just corporate communications and sanctioned ‘company representatives’ to include others in the mix.  In the following graphic of the “Rings of Influence” I’ve mapped out how other individuals can and should be used in the communications strategy.   I’ve worked on trust research at my former employer, and found that in most cases the closer in the rings (corporate) there’s less trust.  Independent studies, like Edelman’s 2010 trust barometer indicate similar findings, figures 7 & 8 are telling in this PDF . Inversely, the further out in the rings (prospects and customers) the greater the levels of trust. Framework: Rings Of Influence As brand embrace the larger circles, the greater opportunity for reach, trust  –and risk.  I hope you use this graphic in your planning docs and presentations, it’s licensed under creative commons as Attribution-NonCommercial-ShareAlike Creative Common.  Graphic assistance by Christine Tran, @christineptran Role and Description The Opportunity: Who’s Doing It Right: What no one tells you: Prospects : Those that are not yet customers. Engaging soon-to-be-customers during their problem and pain stages and focusing them on your solutions is the goal. Build lifestyle communities to engage them in a ‘bigger-than-brand’ discussion such as CVS’s community for caretakers . You’ll really need to let go of hard marketing styles and focus on what IBM’s senior marketer Sandy Carter calls “light branding”.  Make sure you have a community kickstart plan. Customers : Existing buyers, some which are super engaged and vocal in the space. Enabling the voice of the customer has been a mainstay belief for product development, but most companies have not harnessed them for marketing and support. Build an active advocacy program that encourages them to fight your own battles like Intel Insiders , Microsoft MVP , Wal-Mart’s 11 moms program. Bazaarvoice enables companies like BestBuy to have ratings and reviews on their site –increasing flow through funnel Customers will love and hate you alike. If you harness their voices, expect to let both types of information come through in a strategic way. The trick? Use complaints as an opportunity to show openness and customer response in public. The savvy brands will trigger advocates to deal with detractors, use this checklist to get started . Employees : Rank and file as well as ‘approved employees’ who are enabled to use social. Regular rank and file customers that are knowledgeable about products and are close to customers are likely to be more trusted than veneered executives. Give your own rank and file the opportunity to voice their opinion like Premier Farnell gave many of their employees the ability to publish their own videos on a community like Element 14 . Employees need guidelines, training, and processes. Don’t leave your company or your employees exposed, develop internal training programs, regular communications, and a place to share. See how Intel has created a light weight ‘certification’ program for employees who participate in social Corporate : The traditional and centralized communications group and sanctioned company representatives Corporate comms can benefit from social tools that allow the spread and sharing of company messages, and they can also build a social platform to stand on in order to fend of critics See how SouthWest Airlines has built a corporate blog for years, which gave them the standing power to fight back against detractor Kevin Smith. Also, see how Domino’s President used online video to respond in a human and more trusted way during an employee health crises. Lots of retraining when it comes to rethinking the approach in this space. Stop and breath, develop a measured set of steps a framework, control is not completely lost if you have a balance. This is an opportunity more than a threat. Harness All The Voices In Your Ecosystem –Not Just Corporate Communications Brands should stop focusing on the corporate ring alone –and benefit by using all the rings in a coordinated fashion.  I’ve broken down the roles into subsets in the above matrix, yet there are some key baseline considerations as your deploy, remember to: Recognize that greater opportunity is abound at outer rings –but comes with increased risk. Brands are most comfortable operation in the inside rings, like ‘Corporate’, yet the greatest opportunity to leverage trust and reach happens at the outer rings of influence with ‘Customers’ and ‘Prospects. Map the  rings to your existing customer experience timeline. These rings aren’t unlike traditional marketing funnels, except that there’s a focus on role and trust, over cycle. In most cases, prospects are in the outer mouth of a funnel, but customers, employees, and corporate can also participate in every step of the marketing funnel. Analyze which roles are needed in what aspects of the customer timeline –and map your strategy accordingly Be pragmatic, and develop a roadmap: start with smallest ring and move out. Don’t jump on the largest ring of prospects without first getting grounded. Start at the inner circle and work you way out, building a foundation at the core and building on success and safety in experience. Companies that try to address prospects but lack the internal resources and ethos to deliver may find themselves offering false promises. This single graphic represents an entire presentation I’m developing for internal client workshops or keynote presentations at marketing and business conferences.  I love to share, and want to get your feedback in the comments below.   Update: Mitch has also extended the conversation in the Social CRM pioneers Google Group, watch it unfold and participate in the group.

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Framework: Rings of Infuence

Today Google introduced two new elements to its popular advertising system, a Search Funnel and something it is calling Ad Innovations . The company's VP of product management, Susan Wojcicki, described the Search Funnel as a "set of reports describing the Google.com search ad click and impression behavior leading up to a conversion." Sponsor The idea is that users of the Sales Funnel will, over time, tighten and focus their use of Google Ads to such a degree that they will be able to sell a grommet to an Albanian from outer space. "The data you see in Search Funnels can help you understand how users search for your products before converting so that you can optimize these conversion paths." Ad Innovations is a specialist website Google has set up to "work closely with advertisers on what comes next." They intend to use the space to debut ad-tech ideas and solicit user feedback. Photo by Danny Sullivan. Discuss

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Google Introduces Search Funnel, Ad Innovations