 My name is Ray Tsuchiyama with Think Tech Asia, and we'll be delving into e-commerce in Asia, particularly in China and Japan. We have Russell Liu, our co-host in Beijing, in a very rainy period during spring, June of this year. And he's going to be really expressing insights and more analysis of e-commerce, and particularly mobile commerce, in the People's Republic of China, which it has a population now of over 1.3 billion citizens, as opposed to Japan, which is kind of stalled at about 129 million citizens. So is Russell on, Russell Liu from Hadean District? Hello, Ray, all the fellow Hawaiians and everybody back in the U.S. Welcome to Think Tech. We're live in Beijing with our co-host, Ray, who's in the beautiful Honolulu, sunny Honolulu. It's rainy here in Beijing, but overall it's a very nice day here. And I'd like to kind of tell you the biggest trend right now, or the biggest evolution in e-commerce, really, is what we call e-commerce. And it's a very big phenomenon out here in China, but not really a phenomenon, Ray. It's something that's taken off and it's going to be here to stay. With smartphones, people are doing things online. They're buying things over the Internet. They're using their smartphones to buy everyday groceries, going to the store, buying a soda. Nobody cares cash gifts. Nobody is into e-commerce. And so we're going to explore that topic today. When you first arrived in Beijing, Russell, a dozen, 15 years ago, how did people in Beijing buy things? Did they go to malls, to small stores? How did people buy things like CDs or clothing or food? Well, Ray, that's a really good question because, you know, when I first got to Beijing nearly 14 years ago, I lived on the suburbs, right next to the farming country. I was at a university and people carried cash everywhere you went. You carried cash. And sometimes if you were going to buy an electronic, something more expensive, you don't have to think wads of cash. It reminds me of the Japanese visitors in Honolulu about 30 years ago carrying thick wads of cash saving up to buy this particular item. But today it's changed. It's totally a revolution because nobody carries cash. Your bank account is tied to various e-commerce platforms. And you could be in your office, nobody knows it, but you've just bought something and you will buy it and the transaction will take a few seconds and it will take a debit against your bank account. It's tied into your bank account so the merchant is happy and the sale is made. So what I'm hearing from you, Russell, that in barely 15 years you saw a transition from cash-driven economy to mobile online e-commerce without credit cards that so dominated the United States and Japan for decades. Ray, that's a really good observation because what's happened is that I think these are new global platforms and the U.S. is really behind here. There's new legislation coming soon. But it's incredible the amount of e-commerce sales that happens here in China. For example, in 2017 mobile e-commerce sales was U.S. $630 billion. Now think about that. That sounds big, but you compare that with the U.S. and the U.S. mobile e-commerce sales was $96 billion. So we're seeing a seven to eight times amount of greater e-commerce sales in China. And what we're seeing is that of the total retail sales in China, it's about 13.5% growing. In the U.S., e-commerce mobile sales accounts for 1.9% of total retail sales. So what does that mean? It means that we have a platform in the U.S. where retailers are still in the brick and mortar stage, expensive malls, expensive retail costs, operating costs. In China, you don't have that. You have the e-commerce vendors who will get the different vendors. And there's no motor brick. So the sales, the price can be a lot less, much more affordable to consumers. In Japan, there are sites like Rakuten, which is very big e-commerce, mobile commerce center. There's Amazon Japan, Apple, Yahoo Japan Shopping. In the U.S., of course, Amazon, eBay, many, many lands and seers dominate the e-commerce landscape. Why is the biggest e-commerce site in China right now? Yes, and like Japan, we're seeing the phenomenon all over Asia, particularly Japan, China, and Korea. You know, the question is, why should we care in the United States about e-commerce in Asia, particularly China and Japan? Well, let's look at it. In the U.S., retail sales across the globe will reach $22 trillion, okay? By 2020, it's expected this will reach to $27 trillion. So this is a new global platform. We're going to be doing business by e-commerce. We're seeing that in the U.S. through Amazon.com and so forth. Again, it's interesting because I understand Apple, the new Apple phone will design so that platform can be used in Asia for e-commerce using WeChat pay, AliPay, and so forth. So that's very interesting. But why is China important? Because a bulk of retail sales e-commerce comes in China, where it's expected that this year it's going to reach $900 billion in e-commerce sales in China alone, almost 40%, 7% of the total worldwide e-commerce sales. And that's a big number. That's something that's impressive. Now, in Japan, when I mentioned Daktan, it's a local Japanese site. Amazon, Japan is from the U.S., Amazon. In Japan, what's interesting is that one out of four buys or purchases are in electronics. But also, there's a very big fashion, fashion industry going on, led by a site called Zozo Town. And it's very big, and a lot of young people, young women, young men buy fashion through Zozo Town. And there's other areas like toys, games, small things and so forth, not huge, I guess, furniture and so forth. And of course, books and CDs. What are the areas that Chinese consumers buy in categories? Is it also fashion, CDs, electronics, food? What is the categories in China? Yes. But the big category, about 47% of all e-commerce sales are electronics. I'll give an example. This is how I think as a Westerner, and I really, I caught myself because I lost my Samsung TV controller, I somehow lost it in my apartment. And first thing as a Westerner, as an American, I kept thinking, where's my booklet? I've got to find the address and phone number for the service facility. That's how we do in America. So I went back to the service facility, and I couldn't find it. So I went to my secretary and asked her, how can I get this issue easy? We're going to go to the e-commerce vendor JD.com, and she pulled up the website and she found my controller, third-party vendor. It cost me 30 Kwai, 30 remb, which is about $4, and she punched the order in. I got it two days later, and that's how quick it is. So there's a lot of efficiency logistics here, the electronic issue is a big one. But I see another area that's coming up very quickly. It's lifestyle. People are buying a lot of lifestyle things. And so I wonder why the Japanese retailers Uniglo, Muji, it's very big in China, very big. And I'm pretty soon, we'll see them, I'm sure, on the online e-commerce sales. That's very big. And so that's what I'm getting into. Why is China important? Because China is a retail destination for e-commerce, whether it's vendors inside China or outside China, cross-border transactions. But let me give you a little history of how this really boomed. In 2009, the Alibaba Group, which is one of the largest e-commerce platforms, created a date called the Singles Day on November 11th every year. It's equivalent of a Black Friday. And so just in that one day, on November 11th in 2016, they netted in $17.8 billion US dollars, online e-commerce sales for one day, largest e-commerce sales in a single day and anywhere. Now let's compare. This was four times greater than the 2016 Black sales, I guess they call it Black Friday sales in the US. So you can tell that there's tremendous opportunity here if you're tied into e-commerce, even if you're cross-bored in the US. No, Black Friday, right after Thanksgiving, is still huge in the US. And that's when people go to malls, they fight over all kinds of electronics or toys and so forth. Also, people go online now. And there's been a huge boom, even in the US, online shopping. There's also been simultaneously a decline in what you referred to as the brick and mortar malls. There's been a lot of malls going out of business in the United States. It's really hard to conduct business when people are going through their laptops or mobile phones to buy products and get them shipped to them. Now, is that a trend in China? Did the malls come up and then disappear or they never got built? Or there's still some shopping in Nanfu Jinlu or Wangfu Jinlu or all these big shopping places in major urban centers. Are they still doing well? Well, the malls are still doing very well, extremely well. Two functions of malls. First of all, more of the lifestyle stores are appearing in malls. Whether it's Coffee for Starbucks or Muji, the lifestyle store, whether it's Bose Entertainment or Haagen-Dazs Ice Cream, it's a lifestyle type of thing. Second of all, it also could be a market loss leader because when people get a chance to see the products and try it, you know what they're going to do? They're going to jump back on e-commerce because they've seen it and they know the quality, and that's very important. But again, tying back to the US e-commerce. So I think the Americans have to start to think global. For example, Black Friday in November 2016, Alibaba created to connect the Chinese consumer with American retail institutions. Macy's went live online using a virtual reality tool. So people on e-commerce could see Macy's like they're buying things. We also saw... And we're going to hold that thought and we're going to return in just a minute. Shrinks. Did you ever want to get your head shrunk? Well, this is the best place to come to pick one. I've been doing this. We must have 60 shows with a whole bunch of shrinks that you can look at. I'm here on Tuesdays at 3 o'clock every other Tuesday. I hope you are too. Aloha. We all play a role in keeping our community safe. Every day, we move in and out of each other's busy lives. It's easy to take for granted all the little moments that make up our every day. Some are good, others not so much. But that's life. It's when something doesn't seem quite right that it's time to pay attention. Because only you know what's not supposed to be in your every day. So protect your every day. If you see something suspicious, say something to local authorities. We are back on Think Tech Asia with Russell Liu all the way in Beijing. We're talking about e-commerce. It's a great wave that's going all over the globe to make shopping easy electronically through the laptop, through the PC, or through the mobile phone, what we call M-commerce, or mobile commerce. And that's going to be really driving sales in the future. We're talking about the people of Super Bowl of China. We're talking about Japan. We also will be thinking about, in the future, new economies coming up, new emerging economies like India, South America, and Africa. And it's quite possible we're going to skip, like China, a whole generation of credit cards and go directly into electronic buying, purchasing in the future. So this is a harbinger of emerging markets and economies, one that was driven by Japan, the United States, and Western Europe, and now by China that's leaping into this whole space without going through an evolution of credit cards and malls that are perforated throughout Western Europe and North America. We're going to return to Russell how he's seeing the compare contrast between the Chinese boom and acceptance of very easy purchasing through e-commerce and M-commerce and how the United States and its companies, the Fortune 250, can really be part of this wave in this new economy, the electronic economy in China and also part of Asia Pacific, like countries in Indonesia, Vietnam, India, and others that are coming up economically. So Russell, do you want to continue what you were just saying about how you see American companies behind the curve, that they're not seeing what's really exciting in Asia and they should be part of this big boom in e-commerce and M-commerce? Yes, you're great. Thank you very much. We're seeing American companies starting to make their entry to the e-commerce channels here in China. Working with a giant e-commerce platform such as Alibaba, for example, T-Mall Global, which is a Chinese e-commerce platform, has recently linked up with major retail execs, the US-based Costco. So it's interesting because we have Costco warehouses type of setups in the US. We're probably going to bypass it here in China. We're going to have this virtual reality e-commerce sales that you just go online, and particularly with your smartphone. So that's convenient. You don't have to be at home sitting behind a desk, going to the computer and selecting items. You can be at your smartphone. And I think this is another reason why e-commerce differs in China because the technology here with the use of smartphones and the tie-ins with the e-commerce, e-pay platforms are making this a 24 shopping reality. Whereas in the US, we have to go, for example, amazon.com, maybe we can use our smartphone who typically would go to the computer, look at it, think about it. The Chinese are looking real-time 24 hours on their smartphone. They don't have to be at home. They can be anywhere. If they want something, they'll order. I'll give you an example. My friend, a colleague of mine, what likes to eat seafood? And so what she does is she goes on her smartphone, she orders seafood, and it comes from Tianjin, which is a city to the north. And one of the hopes, she orders in the morning, it's at a doorstep at 6 o'clock in the evening, and it's packed with cooled ice, and it's fresh. And again, the reason why it's taken off in China is not only the technology, but also the logistics. They've got it wired down. They developed the high-speed trains. For example, a city between Tianjin and Beijing, simply the trains run every few minutes. The train takes the high-speed train takes a half-hour ride that quick, and it comes into Beijing. And it's interesting that the logistics are very important. So again, that's the difference to the U.S. I think we lost Russell just for a second, but to really add to what Russell was saying, logistics in e-commerce, M-commerce, is the key for customer service and customer satisfaction, because unless you have a logistics system that brings the product to your door in a very efficient and timely manner, the consumer just won't be satisfied with the expectations of a seamless ordering and receiving a process in the delivery. So in Japan, Saga-Cubing, Kuro-Neko, Yamato were companies that were like the platinum standard in delivery of products to your door. In fact, when I was living in Japan, there were trucks, especially designed to be just holding very fresh vegetables from the north, from Hokkaido, or Northern Almorri, and so forth, or seafood that would come in from the Sea of Japan or from Kyushu coming in Tokyo through very monitored, environmentally-friendly processes. And so we are trying to get Russell back online right now. And so the delivery system is part of that whole e-commerce ecosystem that really is vital to e-commerce. The other part that I want to say is that Alibaba, that Russell mentioned, is a firm that has become a global standard in e-commerce. And its founder is a very interesting character named Jack Ma, who in a book published by a friend of mine, Duncan Clark earlier this year, really emphasized how he struggled through life to be the king of e-commerce. And that's what his dream and his objective was to really get an ecosystem of e-commerce in China. Jack Ma started out and, as he said, failed at university, failed at a job, failed at many, many things, and yet he had this dream, and now he's at the top of a multi-huge billion dollar empire in China that is the standard for e-commerce in the world right now, and it dominates e-commerce in the People's Republic of China. Similarly, there's a man named Hiroshi Murikitani in Japan who heads Rakuten, and he's a Harvard MBA graduate, and he's really focused on not only in developing e-commerce and e-commerce in Japan, but also bringing Rakuten overseas to some other Asian countries in Southeast Asian and other regions. So he is also working on to really expand the experience of e-commerce, e-commerce globally. Finally, we're still working on Russell or come back to us. I did a survey a few years ago on the best-selling Japanese products in China through e-commerce. It was an interesting exercise because a lot of products, some of them were quite cheap, others were kind of expensive to products, Chinese products on the market. One of the most interesting products was powdered milk, and of course there was a huge scandal in powdered baby milk at that time. They had an industrial chemical called melanin, and that opened up a whole world of Chinese families, parents ordering powdered milk from Japan through e-commerce. Another one was diapers, of course, and they saw diapers as having less allergic kind of chemicals on them. Another one was, of all things, a tobacco filter that sold for four yen, very cheap, like almost 40 cents, and it was a filter they thought would cut down on the chemicals. Of course, who knows what happened when they smoke. They should stop smoking, but it's a huge market because there are 600 million smokers and the people from the Republic of China. So that is the market itself. There was another one, herbal shampoo, was another big seller, and an anti-insect repellent patch. Again, Chinese consumers were really thinking about sprays and didn't like the chemicals and so forth. So you can see that consumers are worried about environmental or chemical kinds of effects on their children or powdered milk that would be pure in the manufacturing process. So that's the kind of quality issues Chinese consumers deal with, and so they order Japanese goods online. So it's not like it's all Chinese goods. There is a large export market into China driven by Chinese consumers. And the Chinese consumer market, of course, in a country of 1.3 billion people is enormous, enormous. And when you see the evolution of payments and logistics, you can see the future of e-commerce and M-commerce in China driven by the numbers, and numbers is what China is all about. And that's where Japan, although Japan percentage-wise is much more of a wealthier country, a middle-class country, but with 129 million people. So it's a much smaller demographic. Yet about 80% of the people in Japan deal with e-commerce through their phones and laptops. So it's a larger percentage of online purchasing and involvement in this e-commerce world. I talked about fashion and that's an area where I think there's a lot more development. And so, unfortunately, we lost Russell, the difficulties the internet is well-known, and we'll work on it to bring him back in our next show continuously. But you saw how Russell was really at the trenches and really trying to show that China for U.S. firms in the internet space, they really should focus and also bring products that would appeal to Chinese consumers. And like I say, it's not like the Chinese want only Chinese products. They are a force to reckon with because they take their time to try out things and really look for quality, look for environment-friendly products. They really are consumers that are focused on getting the best products out there in the globe. So I will end here as we come to really exciting discussion on e-commerce in Asia Pacific. And this is Ray Tsuchiyama of Think Tech Asia. Until next time, we'll bring Russell Liu back from Beijing. Thank you very much.