(*) This is the BAT service summary as at April 2017
(**) Some of products are owned directly. They do have a shareholding.
In some cases they have created new services e.g. Taxis booking service like Uber. This resulted in only been able to get a taxis on-line for a while in Shanghai. In turn the software companies purchased the taxis companies. Many new companies were created using venture capital raised in the Chinese markets. Now there are many on-line taxis applications and too many taxis.
Form this example there are a few points of interest;
- The BAT companies have a great power in the China. If they move into a market, change will quickly follow
- Do not enter into a market area in China where the BAT companies already have control of the market
- The BAT companies have great financial resources like and Google or Microsoft. These resources can be used to purchase most businesses if and when needed.
In histrionic rest of world about 75% of on-line purchases are performed directly on supplier websites. This is changing with growth of Amazon where one company is supplying the end to end purchasing, payment and shipping service. Amazon opening up their third party shopping platform suppliers has enabled greater growth.
This is the case in China. The BAT companies have created these store platforms from the outset which enabled Chinese business to sell to the end consumer and international business to sell the Chinese market. Somewhere between 60% to 70% of on-line business is traded through the BAT Company’s platforms.
An opportunity exists currently for new website entering into the Chinese on-line market. As a general point the costs selling in the BAT distribution channels is a lot higher than it is in European for the suppliers.
Often people see European products been sold on-line in China at 100% plus higher price. This may look like a good opportunity for overseas suppliers. In the on-line e-Mall stores in China is the net price show which includes, but limited to
- All local and international shipping
- Import duties
- Sales tax
- Bonded warehousing storage
- e-Mall transaction fees
- e-Mall listing fees
Also the costs of the BAT companies store cost are high. This drives the price up further
Our view, there is not a large additional margin to be made in the Chinese market. There is a large market return based around volume of sales.
The exception to the view is where your business is the wholesalers or manufacture of the overseas product. As many overseas products in the Chinese e-Mall stores are purchased from overseas retail shops that is where additional margin is available.
We are now seeing a change in China. More consumer website are been successfully operated. These are in the made at this stage large business or companies with a USP. The common point with all these new on-line servers they are operating in markets where the BAT companies do not offer services.