Sample of assignment: Research on Customized Online-Shopping in China (full text)

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Research on Customized Online-Shopping

Marketing Strategy for D.Centex D2C# E-Commerce Website

 

1.        Background to the research problems

 

In China, studies have found out that the large-scale standardized manufacturing is slowly lost its customer preference. And consumers are involved in a high degree of enthusiasm to participate in the production process; it is expected to become a customized online-shopping direction (Auairs.com 2011). Different from the traditional E-Commerce mode such as B2B (Business to Business) and B2C (Business to Consumer), the new D2C mode which is short for Designer to Customer is a new trend in the customized online-shopping recently in China. The D2C mode integrates the designers into the E-commerce and focuses on satisfying the more diversified and customized online shopping needs. Here we will provide marketing strategies analysis to the construction of a D2C E-commerce website for D.Centex design center (http://d2c.icctcc.cn/) which is a new project located in Hang Zhou under the joint effort by ICCTCC and China Textile Clothing Mall.

 

2.        Problem Definition

 

The problem to be studied is what marketing strategies such as positioning, generic strategy and marketing mix selection could be adopted in the new D2C E-commerce website.

 

3.        Research Objectives

 

3.1    Find out the new trends of the consumer behavior: How strong the customized online-shopping need is and what are the features?

 

3.2    Does the macro environment and industrial environment support the growth of the D2C E-Commerce?

 

3.3    Identify the generic strategy and positioning strategy

 

3.4    Identify the marketing mix (4P’s) to be used in the D2C E-commerce website

 

3.5    Set the marketing targets and propose a marketing plan to achieve the targets.

 

4.        Literature review

 

According to Lee (2010), the fact that Internet stores in Taiwan seldom offer customized services has led to that customer cannot have the perception of customization or individualization. Another book “Creating a winning E-business” by H. Albert Napier (et al. 2006, p.10) also justifies for the online customized shopping by saying that because information is easier to customize than hard goods, companies could increase the online sales by creating custom options for buyers such as customized product catalogs. In a traditional view, customized online shopping would usually be mixed with personalized product recommendations and marketing which refers to the recommendation of a set of products and that are related to the customer interest and preference (Clarke & Flaherty 2005, p.294), techniques such as cross-sell, up-sell have been widely used to provide recommending products that could be interesting to the specific customers. But the idea of D2C website provides the customization from the most fundamental way: in the product level, by posting the designers’ unique designs in the website for customers’ browsing. Research objectives would also be achieved by applying the theories such as Michael Porter (1979)’s Five Forces Model, Porter’s generic strategy (1980), McCarthy (1960)’s 4Ps of marketing mix and other theories.

 

5.        Research methodology

 

Primary data will be obtained from my friend who is the marketing manager of this project (D.Centex) with authorization from the company and also online survey will be carried out to study the customer base of the D2C mode. Secondary data will be obtained by library books and internet report, studies and journals. The data will be selected based on the reliance of the data and will be analyzed by computer spreadsheet and presented by charts and follow-up discussion and other appropriate ways of presentation of the data.

 

6.        Analysis

 

6.1    Case background

 

This case study has targeted at the marketing plan for the construction of D2C E-commerce website of D.Centex design center which is under the China National Textile And Apparel Council (CNTAC) and it is in charged of an joint effort by ICCTCC and the China Textile Clothing Mall. The China National Textile And Apparel Council (CNTAC) is a national wide industrial union style association of the textile industry in China, it is a not-for-profit social institute with the aim to serve the industrialization and modernization of the textile relative business in China. With this industrial background, it is not difficult for us to understand that the initiative of setting up the D.Centex design center and its D2C E-commerce website has been supported by the industry and government departments in term of human resource support and policy preference.
The product offered by D2C E-commerce website of D.Centex design center is a platform for the trading between the individual customers and the designers’ ideas. To the individual customers, they will be able to find the clothing products (i.e. clothes, trousers, skirts) with the latest and professional designers’ design, and these products with special design would be for sale in limited numbers and hence the customers’ personality and taste in dressing would be highly expressed through making the choices to buy their preferred clothes. What’s more great customization is given to the customers as the website support the categorization by designers, product types and dressing seasons; to the designers the website provides an excellent chance to demonstrate their products and turn their ideas into substantial cash and income; and lastly to the cloth factory and manufacturers, they will be able to gain business opportunities from the commercialization of the designers’ products.

6.2    Situational analysis

 

6.3          Macro environment analysis through PESTLE analysis

 

Figure 1 PESTLE Analytical Model

Source: Marketingminefield.co.uk 2008

 

The PESTLE Analysis is a common approach for examining the general business environment in order to manage the future opportunities and threats from probable changes in the environment (Mullins 2002) by analyzing the Political and legal conditions, Economic conditions, social and cultural conditions, technological conditions and environment related issues. In the following we will execute a PESTLE Analysis on the related issues in Chinese market in which the D.Centex D2C E-Commerce Website operates. And as proposed by Neil Botten (2008, p.39) that there are no pure factors because these factors are interlinked.

 

6.3.1            Political and legal analysis

 

Political factors include government regulations and legal issues and define both formal and informal rules under which firm must operate. And it is claimed that the political force is probably the most turbulent force in the environment (Fahey & Narayanan 1986). In the past one decade, the Chinese government attaches great importance and focus to the development of e-commerce in the most populous country, for example, on issuing the Summaries of the Middle/Long Term Science and Technology Development Plans of China and the Development of Information Industry Plans in the Eleventh Five-year and Long Plan in 2020 Years in The Ministry of Information Industry, the “application of e-commerce platform technology” has been listed as a key point (Li 2010, p.260).

 

In term of the legal system, the Chinese legal framework for e-commerce is still in its nascent stage and has already experienced several problems. China has limited experience with drafting e- commerce legislation for issues such as transactional security, intellectual property rights protection and tax. And regulations supporting areas critical to the development of e-commerce such as the privacy, consumer rights, and validation of electronic contracts and recognition of digital signatures have yet to be written (Kariyawasam 2011, p.270). But the legal system of China does develop quickly to meet the needs of the e-commerce.

 

6.3.2            Economic analysis

 

Any development in the economic part of a country’s environment could have significant impacts on the SMEs and their activities. These factors include the total GNP trend, GDP per head, inflation rate, exchange rate, energy and raw materials availability and cost, employment level, interest rate, monetary and fiscal policies, banking policies an investment and so on (Analoui & Karami 2003, p.75).

 

Figure 2 Growth of China GDP per capita in the new century

Source: The World Bank Group 2011

 

Above is the growth trend of the GDP per capita of China in the new century, similar to the indicator GDP, the country has sustained a continual rapid growth in term of GDP per person, indicating that each people is creating more and more values to the society resulting in the increase of the individual consumers’ purchasing power. Though the economic situation is seems to be good, the economic development does slow down a little and also with worrying trends such as high inflation rate and high property prices. According to the most recent news, the consumer price index rose 6.1 per cent from a year earlier in September, down from a three-year high of 6.5 per cent in July. Politically sensitive food prices, however, increased by more than 13 per cent. The overall economy has now slowed for three consecutive quarters – largely the result of BeiJing’s efforts to cool growth and dampen inflation. The central bank of China, the People’s Bank of China, has increased interest rates five times over the past year and increased the reserve requirement for commercial banks for nine times, and at the same time also asking banks to reduce lending and imposing limits on home purchases to curb property and consumer prices (Anderlini 2011).

 

6.3.3            Social and cultural analysis

 

To understand the social and cultural environment involves close analysis of the society. Demographic changes such as population growth, movements and age distribution will be important, as will changes in cultural values and social trends such as family size and social behaviors (Dransfield 2005, p.60). Such factors could include:

  • Consumer lifestyles
  • Environmental issues
  • Demographic issues
  • Education
  • Immigration/Emigration
  • Religion

 

With the rapid economic growth, there are growing people having Internet access and use the Internet to do shopping. Many people have called themselves the Taobaoer by spending much of their monthly expenditure on Taobao, the largest B2C e-commerce website. In 2010, China’s online shopping industry had a turnover of $80bn, and grew 87% year-on-year. China’s 420 million Internet users spend around a billion hours each day online and last year, 185 million made at least one online purchase. According to Boston Consulting Group, the volume is expected to increase fourfold by 2015. And E-commerce has already been changing the way Chinese consumers think about shopping: online, it is more social than a hard sell. It’s a new engaging experience to savour (bbc.co.uk 2011). But like many other physical shopping, cheating and fake products are common in the online shops though the most populous shops tend to sell quality and price competitive products to the customers or will state clearly the possible quality problems of the products in the introduction of the products in the pages. And also according to Patricia Ordóñez de Pablos and Miltiadis D. Lytras (2009 p.406) In Chinese business there is often a need and expectation for face to face contact to exist in order to build up a sense of trust which is related to the Hofstede’s notion of individualism-collectivism in which the Chinese culture is considered as having a high collective scores (Hofstede 1997).

6.3.4            Technological analysis

 

Technological factors include areas such as new products being developed, new purchasing mechanisms (intranet, extra-net), new production technology, new distribution mechanisms (Internet) and new methods of working (e.g. mobile telecommunications) (Botten 2009, p.39). One technological problem that hinder the development of the Chinese B2C industry is the lack of a stable and secure online payment systems and this problem is further strengthened by the Chinese consumers’ preference for high Uncertainty Avoidance Index (UAI) and high Long-Term Orientation (LTO) (Hofstede 1997). What is more, based on the perspective of Ortolani (2005) there had been only 1 percent credit card penetration in China suggesting that the most widely used payment method had low acceptance in China and the payment system to support online credit card transaction is also facing low usage. And the lack of safe online credit card payment system is one of the key reasons behind this low usage and penetration.

 

6.3.5            Environmental analysis

 

Environmental factors refer to all the factors directly related, influenced or determined by the surrounding environment. This includes, but is not limited to weather, climate, geographical position, climate change and even insurance (Heldman 2011). Despite the fact that the environmental protection work is still low in China because the majority of focus and priority had been attributed to the alleviation of poverty and economic development which result in the low public participation in the environmental protection work, in the recent years, with the substantial economic advancement and raised living standard, income level and also the degradation of environment in the country, the Chinese government has started educate the public about the environmental protection. And with a joint effort from the non-governmental organizations (NGOs) and media such as newspapers, radio and tv, we are witnessing an increasing environmental awareness in the public resulting in changes in the consumer behaviors to put environment protection in a higher importance level (Heggelund 2004, p.157).

 

6.3.6            Conclusion of the PESTLE analysis

 

As proposed by Björn Möller (2010, p.6), with the help of the PESTLE, companies would have the possibility to understand the external macro-environment in which they operate and might operate in the future. Here based on the analysis we have above, we are able to draw some conclusions. Firstly, very stable political conditions and rapid economic growth has made the e-commerce industry in China attractive to investors and the increasing awareness of environment protection also promote the way of e-commerce as it creates less pollution and damage to the environment; secondly, there are also risks such as lack of trust, stable and secured online payment systems and lack of legal protection that create challenges and uncertainties to the players in the industry.

 

6.4    Micro environment analysis

 

6.4.1            Competitive analysis with Porter’s Five Forces model (1980)

 

Figure 3 Porter’s Five Forces model (1980)

Source: Adapted from Porter 1980 (The Free Press/Macmillan)

 

Around 1980, Michael Porter (1985) introduced his highly influential concepts of the five forces model and the value chain and the five forces model according to him could determinate an industry’s attractiveness by looking into five external forces:

  1. Competitive rivalry within an industry
  2. Bargaining Power of Suppliers
  3. Bargaining Power of Customers
  4. Threat of New Entrants
  5. Threat of Substitute Products

The five forces are also the five key players in most business markets, the interaction and bargaining between these five forces is believed to be critical and of great importance to the determination of the competitive extent of an industry or market. Below we will implement a competitive analysis using the Porter’s Five Forces model (1980) to see how intense the competition would be in the Chinese B2C market.

 

6.4.1.1      Competitive rivalry within an industry – medium level

 

Competitive rivalry among the existing firms in an industry is the extent to which firms respond to competitive moves of other incumbent firms (Stahl & Grigsby 1997, p.147). Various data and new reports suggest that with the further spread of Internet applications, B2C and other e-commerce model are in the booming in these few years in term of a dramatic growth. Based on the analysis think tank that recently released, “the third quarter of 2011, China’s B2C market quarterly monitoring” data demonstrating that during the third quarter of 2011, the Chinese B2C market transactions grew by 137%. Strong demand results in even stronger supply growth, based on the CNZZ data which suggested that during the calendar year of 2010 the number of B2C website grew in a surprising speed from 10,100 in early of December to 1.18 million, the growth rate of 20.45%, a growth rate that exceeds the overall industry growth speed of the e-commerce. What is more the CNZZ June data also show that, B2C industry, the total number of sites had totaled 12,200 and still with a more than 200 per month rate of growth (ixwebhosting.mob 2011).

 

Another factor that increases the intensity of the internal competition in the B2C industry is the existence of the large B2C websites such as the largest Taobao Mall, QQ Mall, Jingdong, Amazon and Dangdang. For example so far in 2011 many of the existing B2C websites have already raise campaign to compete with each other. The first moves of the QQ Mall launched the “million marketing resources in the run,” commitment to the business community to provide “an efficient, high quality, low-cost e-commerce platform”, and only pay 20,000 yuan deposit costs, eliminating fees for technical services. Dangdang is committed to continue to maintain the industry platform for business charges a lower level, such as business management platform to maintain about $500 per month, the same proportion of sales commissions, etc. Just on the line items together near grand network is launched at one go 12 incentives, including fee-free three-year technical services (5888 yuan per year), donated 50,000 yuan platform advertising resources (nikedeluxe.com 2011).

 

Chart 1
 The online shopping market growth in China

Source: iresearchchina.com 2011

 

But still two factors contribute to the medium level of rivalry within the exiting companies in the B2C market in China rather than a seeming high level of competition: the first factor is the on going increase the B2C market size. According to iResearch’s data as the chart shows, each segment of China online shopping market has the growth of different level and the fastest growth rate belongs to the B2C sector (including tmall.com and shop.qq.com) which has a growth rate of 19.5% (iresearchchina.com 2011). With an enlarging market size, it is expected that many B2C companies will focus on getting the attention of the new customers rather than gaining the competitors’ share by intense marketing efforts which means that the direct fierce competition among the existing players will be lowered to some extent; the second factor contributing to the medium level of rivalry rather than a high level within the exiting companies in the B2C market in China is the differentiation of the B2C business model. In a growth stage of the B2C industry, we can see that there are different models of B2C such as the raise of the D2C (designer to customer) model. When these sub market appears, differentiation will help avoid direct price competition because product are marketed and positioned differently.

 

6.4.1.2      Bargaining Power of Suppliers – low

 

The bargaining power of the suppliers can be shown in their ability to charge a high price in the supply demand relationship with the B2C companies. Based on the perspective of Robert P. Greenwood (2002, p. 128) since the suppliers wish to charge the highest prices for their products a power struggle arises between organizations and their suppliers, the advantage accruing to the side which has more choices or less lose if the relationship ends. To the B2C market in China, the supplier bargaining power is in a low level for the following three reasons: first of all, the input contributed by the suppliers is not indefensible to the B2C platforms. Most people who go the the B2C website are looking for products with similar functions and they probably would not name a specific brand which means the input offered by the suppliers is not a must to the B2C websites; the second reason is that there is little switching cost for B2C companies to change to other product suppliers since the products are not sold in a physical store, changing the suppliers would in most case equals to the changes of pictures and description in the websites. What is more, the fact that there are usually no substantial warehouses held by the B2C companies actually minimize the switching cost of the B2C companies and hence reduce the bargaining power of the suppliers; thirdly, the B2C companies are very important customers of the suppliers. Because of the usual large scale of the B2C companies in term of large volume of purchasing such as Taobao Mall, the importance of these B2C companies have at the same time reduce the bargaining power of the suppliers.

 

6.4.1.3      Bargaining Power of Customers – Medium

 

Buyers or customers have a great power if buyers are concentrated and there are few of them or if the product from the organization is not clearly differentiated from the product from other suppliers (Berger 2010). In the B2C market, the customers are the individual customers who tend to have medium bargaining power for the following four reasons: first of all, the individual customers are scattered in different places and they purchase products on line via the B2C website in different times and also they tend to have little communications with each other so that they are in most time alone and thus have little bargaining power with the large  B2C websites; secondly, the units purchased by the individual customers each time tend to be small in volume. As according to my online shopping experience and also some of my friends’ experiences, many individual customers go to the Internet time by time when they are looking forward for some products but the each time purchasing volume would not be large in most time because the demand are individual needs rather than group needs; thirdly the individual customer could have increased their bargaining power by choosing a different B2C websites since the switching cost would not be high either, the threat of changing to the competing websites will be strengthened by the current trend that the B2C websites are growing in numbers, there would be more choices to the individual customers; fourthly, the individual customer could have increased their bargaining power by using group purchasing which could be traced to China where tuángòu or team buying was executed to get discount prices from retailer when a large group of people and it has becoming more and more popular in the recent years. And with this trend, many B2C websites have already supported the group purchasing function and it will leverage the power of collective bargaining to provide incredible online deals that offer huge savings for consumers while also promising spectacular sales numbers to participating merchants (Tomuse.com 2010).

 

6.4.1.4      Threat of New Entrants – High

 

Threat of the new entrants depends for instance on the extent to which entry barriers are present in an industry (e.g. economies of scale, capital requirements, access to distribution channels and so on) (Lebel, Lorek & Daniel 2010, p.181). The threat of the new entrants in the B2C market in China will be in a high level for the following reasons. First of all, the capital requirements to open a B2C website are relatively low. B2C websites could be in large scale or in a smaller scale depending on the visiting volume of the customers, for example the investment of a large scale B2C website could begin with a smaller scale one because in the beginning the visitors are small in numbers. And to many companies that have their own products, they could also enter into the B2C market by adding the B2C functions into their official websites; secondly, many exiting successful C2C website with the current popularity could easily enter into the B2C market using their existing customer base. For example, Taobao has long been China’s large C2C website but its growth into the B2C experiences a rapid process. As an independent B2C platform, Taobao Mall (Tmall) on April 10, 2008 on the line, now attracts more than 70,000 brands to enter, the highest single-day turnover reached 936 million yuan. Research released in April 2010, top 30 online retailers, B2C rankings, Taobao Mall 30 billion in annual trade among the first in the absolute superiority over the other 29 combined turnover of B2C Web site. Last year, Taobao Mall occupies nearly 50% of China’s B2C market share, ranking Jingdong Mall Second, the market share of 18.1%, Dangdang only 2.2% (taobaotrading.com 2011). Thirdly, the distribution channel is not proprietary to the existing players. The distribution channels are the pathways that companies use to sell their products to end-users. Both B2C and B2B companies can sell through a single channel or through multiple channels that may include: direct/sales team, Internet, Value-added reseller and dealers and etc (marketingmo.com 2009). And to most B2C websites, Internet will be the major distribution channel and it would not be priertary to the B2C websites. What is more the logistic service is also open for all B2C companies and C2C shops.

 

6.4.1.5      Threat of Substitute Products – High

 

Substitute products refer to products in other industries. The threat of substitutes is higher, the stronger the supply of substitute goods affects the price elasticity. If the supply of substitute goods leads to a great change in demand and price of the substituted good, because the customer can switch easily to the other good, the threat form substitutes becomes very high (Mateo 2010, p. 36). Customers have several other choices when they do not choose to visit the D2C websites. First of all, they could choose to use the C2C platforms in which there could be thousands of online shops operated unofficially by the individual merchants and these merchants could usually provide even cheaper price than the product manufacturers because the manufacturers need to protect the wholesalers’ interest and keep the online retail price in a certain level; Secondly, the customers could straightly go to the physical stores and other various retailers to purchase the products rather than buying on line through which the customers could only view by pictures and descriptions but can not touch the product by their hands.

 

6.4.2            Customer analysis

 

6.4.2.1      Previous researches review

 

According to the Xinhua News, most online shoppers are students or white-collar workers aged 18 to 30, with a monthly income of 1,000 yuan to 3,000 yuan. And also more women shop online than men. Clothing and home-use products are the most popular goods bought online (Chinadaily.com.cn 2010). And based on the “Survey on China’s Online Consumers for 2011,” released by China Intelli Consulting Corp, 16 percent of consumers surveyed said that their online shopping experience is better than offline shopping experience, which marks an increase of about 3 percentage points than that of a year earlier. Around 85% of consumers said that their online shopping experience is not worse than offline shopping experience, an increase of nearly 10% points from a year earlier. And regarding the advantages of online shopping, 56% of the consumers surveyed prefer convenience, higher than the percentage of those preferring cheaper prices. Even if online goods lose their price advantage, about 49% of consumers would still prefer online shopping (Peopledaily.com.cn 2011).

 

6.4.2.2      An original online customer investigation through questionnaire

 

In one original online customer survey done for the sake of this study to investigate the attitude of the online customers concerning their attitude toward the online shopping especially in the new Designer to Consumer (D2C) platform, 200 Chinese Internet users are invited to participate the survey), 73% (146) of them expressed that they had online shopping experiences suggesting the surveyed samples have a high usage frequencies of Internet, and the majority of them have an income level ranging from 2000 to 4000 CNY every month. And in term of the products preferred in their online purchasing, 86.97% (127 out of 146) of those who have made online purchasing suggested that they had purchased clothing products online which ranks the no.1 among the ten listed categories of most frequent purchased products suggesting that the majority of the Internet customers would accept the online purchasing of clothing products. But while answering the question “When you shop on line, what kind of platform you will use?”, only 32% (47 out of 146) of them suggested that they had used the B2C trading platforms. This means that compared to the widely accepted C2C transactions, the B2C markets are still under development. And regarding the B2C platforms awareness among Internet consumers, as the pie chart shows, Taobao Mall has dominated the B2C platforms while 360buy.com and Suning.com are following resulting in fierce competition among the established players. And about the D2C trading platform, only a small proportion of the surveyed Internet consumers knows about the concept of D2C and has the purchasing experience in a D2C website. But a high interesting rate (85.4 percentages) to try the new business mode and a high willingness (76 percent) to pay more for the professionally designed clothing products and also 27% of them even suggested that “price is not an issue so long there are better products reflecting their personalities”. This survey shows that though the concept of D2C is still new to most online customers but they are highly interested and willing to try the new e-commerce mode.

 

Chart 2
The income level of the 200 participants

 

 

Chart 3 Products preferred in online purchasing

 

 

Chart 4 B2C platforms awareness among Internet consumers

 

Chart 5 D2C platforms awareness among Internet consumers

 

 

Chart 6 Preference of D2C shopping in buying clothing products than C2C shopping

 

 

 

6.4.3            SWOT analysis

Strength

Unique product design

Popular design

Large pool of famous designers

Weaknesses

High cost

Low branding awareness

Lack of customer loyalty

Opportunities

Large and growing demand for high end customized clothing

Changing customer style

Threats

Entry of new players

 

Table 1 SWOT analysis of the B2C industry
The most obvious strength that D.Centex D2C E-Commerce website would have is the designer resource that the D.Centex Group has to support the D2C business of the website. To a designer to customer website, there is no doubt that the quality of the designers will determine the attractiveness of the website to customers who seek to find clothing styles that they would love to buy. And as the Centex design center which is under the China National Textile And Apparel Council (CNTAC) and it is in charge of an joint effort by ICCTCC and the China Textile Clothing Mall, this would be a great advantage of the D.Centex Group to start a D2C website. And in term of the weakness, when answering the following questions regarding the “Preference of D2C shopping in buying clothing products than C2C shopping” as we can seem from the result below the majority of them are still price sensitive and if the price should exceed 200% than the normal B2C and C2C competitive goods only 27% of them are still willing to pay for the stylish clothing products that they like.

 

18. Will you prefer to purchase on a D2C website that provides stylish clothing products designed by designers even the price would be expensive than the normal B2C and C2C goods?

 

A. No. (24% of the surveyed people selected this option)

B. Yes, but price should not exceed 30% than the normal B2C and C2C competitive goods (5%)

C. Yes, but price should not exceed 50% than the normal B2C and C2C competitive goods (15%)

D. Yes, but price should not exceed 70% than the normal B2C and C2C competitive goods (10%)

E. Yes, but price should not exceed 90% than the normal B2C and C2C competitive goods (6%)

F. Yes, but price should not exceed 150% than the normal B2C and C2C competitive goods (7%)

G. Yes, but price should not exceed 200% than the normal B2C and C2C competitive goods (6%)

H. Yes, price is not an issue so long there are better products reflecting their personalities (27%)

 

But still the opportunity of the D2C business mode is large because of the high interest rate of the customers but the threat is also great with the threat from the entry of the new competitors and exiting players’ possible entry into the D2C segment.

 

7.        Company targets and the short term objectives of the D.Centex D2C E-Commerce Website

 

The initiatives of the setup of the D.Centex D2C E-Commerce Website will share the business vision of the D.Centex design center which is targeting at establishing the bridge between the designers and the end customers and becoming the best designer center in China.

And the marketing objectives of the D.Centex D2C E-Commerce Website in the next three years will include:

 

a). Become the top five largest D2C platforms in China

b). Grow the number of contractual designers by four times

c). Increase the website visits by ten times

 

8.        Marketing strategy

 

8.1    Porter’s generic strategy (1980)

 

According to the Porter (1980), the term “generic” refers to a system of classification into which we can slot the competitive strategies of real-world firms, and there are three potentially successful generic strategic approaches to outperforming other firms in an industry, they are: overall cost leadership, differentiation and focus strategy (Botten 2008, p. 275). And as suggested by Porter (1980), companies with strategies falling outside of these three generic strategic approaches will be in uncompetitive and disadvantageous positions.

Figure 4 Porter (1980)’s Generic Strategies

Source: Mindtools.com 2010

In the case of D.Centex D2C E-Commerce Website, it will be positioning to the differentiation focus which focuses on making products or services different from and more attractive those of the competitors in a narrow competition scope in term of a sub market for instance.. The reasons are listed as following: in term of the source of competitive advantage, the website with the unique resource of the intellectual knowledge could utilize a differentiation rather than a cost focus which is the source of competitive advantage of the most existing C2C websites; and in term of the scope of competition, the website is focus on providing the clothing products rather than a full product categories and also these clothing products will not cover the low end markets, in this way, we can conclude that the D.Centex D2C E-Commerce Website will not be competing broadly and rather it will be serving a narrow strategic target more effectively than the major rivals who are competing more broadly.

 

8.2    Market segmentation and positioning

 

Markets comprise many buyers who differ from on another in respect of their nature, habits, tastes or interests, income, age, mode of buying, and other attitude. And market segmentation consists of taking the total heterogeneous markets for a product and dividing it into several sub-markets or segments, each of which tends to be homogeneous in full significant aspects (Bose 2006, p.513). Based on the previous survey in which the income level of the participants could be divided into six classes as following:

A. 1000 and below

B. 1000 – 2000

C. 2000 – 3000

D. 3000 – 4000

E. 4000 – 5000

F. 5000 and above

 

According to our findings, more than 75% of the surveyed participants who had expressed interests in the D2C platforms have an income level of more than 3000 CNY per month, hence we will target at those who have an income level of more than 3000 CNY per month as the market segments that the website will attend to serve.

 

8.3    Marketing mix

 

The 4Ps marketing mix can be used as a model to determine on what basis the firm will compete in the market place (Pride & Ferrell 1993). In following we will see into the 4Ps of the D.Centex D2C E-Commerce Website to find out how it could compete in the market.

 

8.3.1            Product and services

 

The first Ps is the product mix, as analyzed above, the D.Centex D2C E-Commerce Website would adopt a differentiation focus generic strategy, hence the products and service that the website offers should make the targeted customers feel that there is an uniqueness in the products and services. Here are some product and service strategies. First of all, the website would have to establish cooperation or contractual relationship with designers who have the fame of producing the designs that are welcome among the targeted customers to increase the product focus and differentiation within the narrow competitive scope; secondly, the website design should exhibit features of energetic, free and stylish which suit the theme of customization; and thirdly, the website would need to change the current complex and hard to remember domain name which is http://d2c.icctcc.cn/ to another more easy to remember domain name and also it is better in the form of .com rather than .cn. A good domain name will encourage the visitors to remember and revisit again in the future and also it would be easier for the spreading of the website through customers’ mouth.

 

8.3.2            Price

 

As proposed by Frederick E. Webster (1991, p.192), two strategic decisions must be made before the determination of the price of the products and services. The first is the macrosegmentation decision regarding the customers to be served and the second strategic decision required before developing the pricing strategy is the definition of the product strategy. As mentioned above, the website will target at those who have an income level of more than 3000 CNY per month and adopts a differentiation focus strategy in the product strategy. Based on these understanding and positioning, here are three major pricing strategies that could be used in the price mix. The first pricing technique is the penetration pricing which is most commonly associated with a marketing objective of increasing market share or sales (Talloo 2007, p. 151), the D.Centex D2C E-Commerce Website at the beginning could negotiate with the designers to provide some quality but priced competitively to implement the penetration pricing to expand the market share as a priority. The second pricing strategy is the psychological pricing which attempts to increase the customers’ value-to-price ratio through an optical illusion (Heshmat 1993, p.123). Numbers with special meanings in the Chinese culture could be used to implement this strategy such as 99.9 and 88.88. One more pricing strategy is the premium pricing which happens when the price is set higher than the competition or in the case when there is no competition through which the companies skim the market and the premium pricing is considered to be very successful when companies offer unusual, one-of-a-kind product or provide hart-to-get-services where the pricing strategy can be used to create a high perceived value (Tyson & Schell 2008, p.194). Though at the beginning of the business, it is recommended that an penetration pricing strategy should dominate the pricing mix but in some best designed clothing products, a premium pricing would help to increase the perceived value of the customers and also remind the customers of the high to medium positioning of the website.

 

8.3.3            Promotion

 

There are various ways that companies can communicate with potential customers. Promotional strategy includes advertising, publicity, sale promotion, personal selling, and public relations. According to Stephen C. Harper (2002, p.108), the promotional strategy needs to address the who, what, when, where and how much money to spend issues that will affect the business’s ability to create and maintain customers for a profit. In the case of D.Centex D2C E-Commerce Website, online and off line advertising, sale promotion and public relations could all be used as part of the promotion mix to help introduce the website into the market.

 

8.3.4            Place

 

Place is largely where and when the target audience will be encouraged to perform the desired behavior and/or obtain tangible products or services associated with the campaign. As in commercial marketing, place can be regarded as the delivery system or a distribution channel for a social marketing campaign (Cheng, Kotler & Lee 2009, p. 22). In term of placing strategy for D.Centex D2C E-Commerce Website, its products will be made by the contracting clothing factories and be sent to the customers by the various logistic companies that the customers could choose by themselves.

 

 

 

9.        Implementation, budgeting and control

In thousands (CNY)

ActivitiesJanFebMarAprMayJunJulAugSepOctNovDecBudgeting
Designer maintenance      1,000
Promotion    2,500
Distribution      500
Website operation      500
Public relation      1,000
Marketing research      500
Research and development      1,000
In total            7,000

Table 2 The marketing plan and budgeting Gantt chart for year 2012

In thousands (CNY)

ActivitiesJanFebMarAprMayJunJulAugSepOctNovDecBudgeting
Designer maintenance      2,000
Promotion    5,000
Distribution      1,000
Website operation      1,000
Public relation      2,000
Marketing research      1,000
Research and development      2,000
In total            14,000

Table 3 The marketing plan and budgeting Gantt chart for year 2013

In thousands (CNY)

ActivitiesJanFebMarAprMayJunJulAugSepOctNovDecBudgeting
Designer maintenance      2,000
Promotion    5,000
Distribution      1,000
Website operation      1,000
Public relation      2,000
Marketing research      1,000
Research and development      2,000
In total            14,000

Table 4 The marketing plan and budgeting Gantt chart for year 2014

 

In thousands (CNY)

 

ActivitiesJanFebMarAprMayJunJulAugSepOctNovDecBudgeting
Designer maintenance      4,000
Promotion    8,500
Distribution      2,500
Website operation      2,500
Public relation      4,000
Marketing research      2,500
Research and development      4,000
In total            28,000

Table 5 The marketing plan and budgeting Gantt chart for year 2015

10.    Recommendations

 

10.1              Focus on the building of trust between the website and the customers

 

As mentioned above, in Chinese business there is often a need and expectation for face to face contact to exist in order to build up a sense of trust which is related to the Hofstede’s notion of individualism-collectivism in which the Chinese culture is considered as having a high collective scores (Hofstede 1997) and also because one key problem not the e-commerce industry faces is the lack of trust built between the service providers (shops and the websites) and the customers, the first recommendation given to D.Centex D2C E-Commerce Website would be to focus on the building of trust between the website and the customers. To achieve this target, the company could focus on the development of the below three tasks: firstly, the website should continue to strengthen the security and stability of the online payment system and the website trading systems; secondly, build up a chatting and communication platform similar to Taobao’s Aliwangwang, on which the customers and the sale assistants could talk about the products, delivery, payment related issues and so on to enhance the trust between the website and the customers; thirdly, the company should invest more on the public relation activities to facilitate the communications with the public and promote the website as reputable and well known online shopping center for high end and customized clothing products.

 

10.2              Setting up official shops in the major C2C platforms

 

As concluded above, our own survey shows that though the concept of D2C is still new to most online customers but they are highly interested and willing to try the new e-commerce mode, hence it is important to promote the website and the new idea of D2C to the Internet customers. And obvious the most widely used C2C platforms will be the best media to attract and educate the potential D2C customers. To achieve this, the D.Centex D2C E-Commerce Website could set up official shops in the major C2C platforms such as Taobao Mall, QQ Mall, Jingdong and Amazon and also other platforms. The set up of the official shops in the major C2C platforms will help direct the customers to visit the new D.Centex D2C E-Commerce Website and also the cooperation with these C2C platforms is also good strategy to promote the website and increase the visiting and popularity.

 

 

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