Alibaba Case

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2.2 The Chinese online retail market

The Chinese market is highly heterogeneous, with great variations in wealth between the coastal cities, and China inland. Growth in the latter is far lower than the former, and even in the richest areas of China, there are massive differences in relative wealth and income. Thus, the market for high value-added products is still restricted to a small segment of the country. 2 Furthermore, Dickson, etal. (2004), argue that the increase in the income in China, and accordingly in the ability of the population of the market to buy new high value branded goods, is not generalized among the whole country and imported clothing is available to specific niches of the population. This makes the Chinese market, not
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By the time Asos announced it exit from the Chinese market, Asos had completed four consecutive years with negative profits, in which the company failed to attract clients from its main competitors. 4
According to iResearch, a Chinese market research company, Alibaba is currently the main competitor, with a 57.8% share of the B2C market, followed by JD.com with 23.3%. Alibaba is a firm that provides online platforms in which others can trade. They own Tmall.com (its B2C platform), Taobao.com (its C2C platform), Alipay (its online payment platform) and Aliyun (its cloud computing business), which gives a strong presence in the market and great awareness among Chinese customers. Another key player, JD.com is the leader in direct sales in the retail clothing market, shipping and marketing its products directly to its customers and keeping direct control of its supply chain. Together, Alibaba and JD.com, account for 81% of the total B2C market which represents a strong concentration of the market and a big barrier for Asos to grow. 13 Other already stablished competitors are also finding ways to have a stronger presence. Meilishuo.com, a fashion retailer backed by Tencent, decided to merge with its rival Mogujie.com to gain
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Fast fashion brands, such as Tom Tailor and GU, entered the market in 2015, focused as well as Asos in online sales, rather than offline stores. Other premium brands, such as Gate G1 One and Beanpole, decided to enter the market with online sales, as well as, collaborating with high-end department stores, to increase brand awareness and have higher impact on consumers’ shopping experience. 4
From their home market, other British brands are already present or currently entering the Chinese market. Selling through Alibaba’s Tmall website, Sainsbury’s began to sell its products in 2016, after more than five years exploring the entry. Marks & Spencer, for many years, also used this channel to sell its products, exploiting the Chinese shopping phenomenon Singles Day, a celebration that produces as many sales as Black Friday, if not more. Finally, the UK retailers, such as House of Fraser, are also entering the Chinese market, after having been bought by Chinese owners to take advantage of its brand across multiple

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