I would like to take couple of minutes to introduce myself and the research topics I’m working on. I came to Forrester through the acquisition of Springboard Research and specialize in helping Vendor Strategy Professionals understand trends in IT services and outsourcing in Greater China.
With my latest research paper, “Driving Outsourcing Success In China,” I want to help vendors raise awareness on the Chinese outsourcing market, which will grow at 17% CAGR over the next five years. Nonetheless, entering this lucrative market will pose several challenges for international newcomers. In my research, vendor strategists will find insights about:
Introduction to the market dynamics with drivers and inhibitors.
Possible go-to-market approaches for outside vendors entering into China's IT services market.
I'd love to hear from you. Feel free to share your own experiences and ideas with me. Are there other questions that you would like me to address in my upcoming research?
Mobile banking adoption among US online adults more than doubled in the past two years. However,Forrester’s Technographics® data shows that 85% of online adults in the US have never used mobile banking. When we look more in depth at the reasons why, we get answers such as “don’t see the value,” “don’t believe it’s safe,” and “don’t want to pay for fees.”
US consumers have plenty of alternatives they can use, like ATM machines, online banking, and retail branches. For them, the benefits have to outweigh the hurdles. Yet it’s a different story in other parts of the world. Due to a lack of existing banking infrastructure, we see mobile finance penetration picking up quickly in developing markets like China, India, and even Africa, fueled by the growing cellular penetration and mobile Internet penetration in these regions. In fact, in the most recent World Economic Forum’s Digital Asia panel that Forrester CEO George Colony moderated, Michelle Guthrie, JAPAC director of strategic business development at Google Asia Pacific, stated that for the next hundred million users coming onto the Internet in Asia, primary access to the Internet will be on mobile, and maybe only on mobile due to the infrastructural challenges (and costs) of fiber and broadband.
Companies like Coca-Cola, Nike, Unilever, Procter & Gamble (P&G), McDonald’s, and Johnson & Johnson have done a great job converting their brands into household names in Metro China, mainly by investing big in advertising and promotions. Having pockets deep enough to put these messages in front of the Chinese people is great, but if your firm is interested in entering this market of 1.37 billion people but doesn’t have access to the advertising financial resources of a Coca-Cola or P&G, what do you do?
Start thinking about word-of-mouth (WOM) campaigns. Due to historic events and their family teachings, Chinese people tend not to trust content coming from strange sources. However, Chinese people are known to be loyal to their friends and family. Forrester Technographics® data shows that “recommendations from friends and family” (44%) is the primary source of content people trust in Metro China. Interestingly, among the top five sources, we also see “email from people you know” (40%) and “social networking site profiles from people you know” (25%). These are both forms of word of mouth that have transitioned from the offline world to the online world.
Last week I joined a few of my colleagues in China to meet with a variety of eBusinesses in both Beijing and Shanghai. We met with online retailers, technology companies, and other players in industry. For those used to selling online in countries other than China, some of the takeaways included:
Multichannel remains in its infancy. With the leading online retailers in China being pureplays, multichannel remains at very early stages. In-store pickup or returns are not widespread – however, there are emerging multichannel initiatives. In a recent, high-profile online-to-offline expansion, for example, Taobao opened a new furniture showroom in Beijing to enable consumers to experience different furniture brands sold on the site. The furniture sellers rent out space in the showroom to display their products. We had an opportunity to visit the huge showroom, which was somewhat quiet when we were there – terminals stationed throughout the showroom (see below) enabled consumers to insert a card and select products online, then proceed to checkout to pay.
Last week a lone blogger broke the news that not one but three fake Apple stores had sprung up in the city of Kunming in China, though it appears the problem is fast becoming a worldwide one for Apple to deal with.
It’s no secret that counterfeit goods are commonplace in China, and there are moves afoot to attempt to tackle this issue, at least online. However, this is a very different beast. There has been an explosion of commentary in the press about these fake stores, mostly focusing on the fact that they exist, and mostly failing to draw any comment for Apple.
Action has been taken. According to China Daily, “A local authority had previously said that two of the stores were suspended for not having business licenses. But the local industrial and commercial bureau confirmed to the Shanghai Morning Post on Tuesday that one of them had in fact obtained a license on June 22 and thus could stay open.”
The general tone of the various reports is that the stores are selling genuine Apple products bought wholesale through genuine channels, and that the only reason they would be closed down is because they didn’t follow local laws to obtain a retail license. Not because of any IPR infringement. This will be an interesting story to watch play out -- because if that turns out to be true, it sets a gloomy precedent for other retailers who may be suffering the same challenge.
While it is no news that China leads the world’s online population, hitting 477 million users as of March 2011, it is interesting to look at the uptake of mobile Internet in urban China and see how that compares with other regions. Forrester’s Technographics® data shows that urban China is chasing Japan closely, with 43% of mobile phone users reporting they access the mobile Internet at least monthly. This number doubles that of the US (although the US number represents all Americans, rural and urban), which ranked as the third market in this study. While my gut feeling tells me that urban China’s mobile Internet adoption is comparable to that of the developed markets, this result is still striking because the smartphone market in China did not kick off officially until the end of 2009.
Just last month, China Mobile, the dominant mobile service provider with 60% national market share, announced its plan to lower rates for both calls and data plans by an average of at least 15%. And on Monday, China Daily reported that the number of China’s microbloggers was forecast to reach 100 million this year and will increase to 253 million by 2013.*
The booming popularity of microblogging in China, coupled with the fact that mobile Internet is becoming more affordable, means that urban Chinese will not forgo the convenience that mobile Internet provides. We know another wave of growth is approaching. It is just the matter of how high the wave can reach.
After years of looking at how the online markets of Asia Pacific are emerging from an online shopping perspective, we are thrilled to announce our first online retail forecast for China, Japan, South Korea, India and Australia.* Some findings from the forecast:
Japan still takes the top spot in the region. Japan retains its dominance in the region with some $45 billion in online retail sales this year. Indeed, while China’s combined B2C and C2C spending surpasses B2C spending in Japan, Japan is still the leader in traditional online retail sales. And despite the fact that online consumers in Japan are purchasing across a wide variety of categories, some category purchases like beauty have shifted online in Japan in a way they have not in the US or Europe.
China’s growth rates will propel it ahead of Japan in the very near future. China’s combined B2C and C2C sales — the two are nearly impossible to separate** — are poised to reach $49 billion in 2010. China’s CAGR will be double that of the US, Western Europe and Japan, and it’s clear that China will be the eCommerce market most likely to rival that of the US.
Australia’s robust growth will be driven by an increasingly vibrant online retail sector. The online marketplace in Australia is marked today by a large number of cross-border transactions, but there is growing momentum among local players. Though less than half the size of the online retail markets in Japan and China, Australia’s growth rates are slightly higher than those of Japan and its US and Western European counterparts.
International orders grew 34% for HP . . . not this year but actually back in 1964 when non-US orders accounted for 23 percent of HP’s revenues. While the growth of non-US tech revenues is in the news today, HP’s international orders first exceeded domestic orders not recently but as far back as 1975.
In my research on market entry and market opportunity assessment (MOA), I recently spoke to strategists at HP about how they evaluate markets. As I was leaving the building, I stopped in to the HP museum and spent some time with the HP archivist. The highlights of the visit include seeing the first HP device built in the now famous Palo Alto garage and a calculator that brought back memories of my father in his overstuffed chair “figuring out how to pay for college.” I was not only impressed by the history embodied in that room but also with the value that HP places on recording and memorializing its “life” as an organization. Not to sound too sappy but it really brings the company and the industry to life.
I’ve spent the last few weeks reading through some documents on the history of HP’s entry into international markets. There are valuable lessons to be gleaned from their experiences. I’ve written about many of those lessons in reports and blog posts but thought I'd draw out a few of them here.
Forrester’s survey of over 1,000 IT decision makers in North American and European enterprises, only 12% of firms officially support or manage Palm devices. In comparison, 70% of enterprises support BlackBerry smartphones, and 29% support Apple iPhones. Android devices, the newest entrants in the mobile OS wars, have strong momentum and are officially supported by 13% of firms.
Well, that got me wondering how Palm had fared in emerging markets. We know that device preferences are different globally. So, I thought, maybe there are some Palm fans outside of North America and Europe. I checked Forrester’s Global Technology Adoption data from last summer (new survey expected back from the field very soon) in which we surveyed 1,412 IT executives and technology decision-makers across 15 countries. Here is what I found out about PalmOS support across enterprises in a few of the countries:
Last December I wrote about Building B2B Technology Markets, looking at how to penetrate a market with almost none of the traditional characteristics of a mature technology market? As technology vendors increasingly look to emerging markets as a significant opportunity and source of growth, this question becomes more pressing. The report explored some of the elements of Cisco’s Country Transformation initiatives in order to identify steps in the process of building market infrastructure:
For example, the report looked at partnering with governments to encourage market-friendly policies and investment in the necessary technology infrastructure to support market development and overall economic growth. And, from a sales perspective, trade associations provided an alternative channel to reach small and medium businesses in markets where distributors and resellers weren't available.
But, another element critical to successful market development is the ecosystem of partners developing solutions specific to the particular market, or even just contributing local innovation for new approaches to broader global issues. Building B2B Technology Markets discussed finding local organizations to act as partners in the market, and even investing in educational initiatives, but missed the next step of how to help create these new local ecosystem partners.