The global market for consumer electronics is shaping up as a battlefield between two or three ecosystems. As competition intensifies, the battle expands to new fronts and draws into it industries and segments that were once disparate.In China, where competition in hardware as well as in e-Commerce is most intense, this process is accelerated. Examining recent developments in the Chinese retail market provides clues for the future of related industries in other markets.
Let’s start at the top. Alibaba, China’s largest e-Commerce group now has its own online payment platform, smartphone operating system and hardware brand, online gaming platform, mobile sales app(s), group buying site, social network, and a courier service, including special delivery by beautiful models. Tencent, China’s largest social media group, has its own online payment platform; gaming platform; social network; mobile music service; mobile messenger; a variety of C2C, B2C, group buying, and social buying sites; and it is now developing its own courier service. Tencent does not have its own smartphone brand and OS (yet), but it has access to mobile user location, contacts, and interests through its popular mobile messaging apps and it recently signed a strategic cooperation with Xiaomi, China’s hottest homegrown smartphone brand.
One or more steps under Alibaba and Tencent, a variety of other Chinese companies are developing their own ecosystems or, as we like to call them, e-Co-systems. Baidu, China’s leading search engine, has an immensely popular online and mobile mapping service, music service, smartphone brand and (Android-based) mobile operating system. Baidu also made a few attempts to venture into e-Commerce, so far with very modest results. Amazon, the world’s largest e-tailer has a strong presence in China, coupled with (currently) superior fulfillment capabilities. It has not yet made a significant mark on China’s mobile market, but its ambitions and capabilities in mobile devices make it worth keeping an eye on.
Meanwhile, China e-Commerce giants 360Buy and DangDang are developing their own courier companies, their own apparel brands, and are pushing deeper into social media and the mobile commerce. DangDang, for example, is launching a Pinterest-like mobile application that allows users to post images of products they like and interact with other users based on location, preferences, or social circle.
The rise of China’s e-Co-systems is not limited to top-down integration. Two of China’s leading courier and logistics companies recently launched their own e-Commerce platforms. Shentong Express launched AiMaiWanChang and Shunfeng Express launched YouXuan. Currently, the two couriers focus on high end produce and wet goods, but the vegetables might be only an apéritif. On the other side of the fresh goods market, giants like CarreFour and Walmart are incresingly active in the local e-Commerce scene, the former through its own online supermarket, and the latter through its stake in Yihaodian, a similar venture.
It is still not clear if the courier companies are truly interested in e-Commerce or are merely responding to Chinese e-tailers’s increasing investment in proprietary logistics platforms. Either way, it is evident that the old definitions and divisions are no longer valid. The border between Chinese e-Commerce, traditional offline retail, and social networking is dissolving. China has a strong manufacturing sector and it does not have mature logistics and payment processing industries. It has a vibrant e-Commerce scene where the key players enjoy protection from foreign competitors (through censorship). As a result, the Middle Kingdom is likely to produce hardware-software-media alliances on a scale not yet seen in other markets.