Software giant 'sees great potential in China's e-commerce market'

Microsoft Corp has launched its flagship online store on Tmall.com, China's largest business-to-consumer website, to tap the nation's e-commerce boom.

The launch of Microsoftstore.tmall.com follows the debut of the Microsoft Online Store, which opened in October.

Analysts said this indicates China's e-commerce market has become a focal point for the world's leading software company.

Kevin Eagan, vice-president of e-commerce for Microsoft Retail Stores, said: "Microsoft sees great potential in China's e-commerce market. Through our joint efforts with Tmall.com, customers have a trusted and secure shopping experience of Microsoft and other complementary products such as Surface, Office, Windows PCs, Windows Phones and accessories.

"Unlike many companies who treat China as a market where their products will be launched sometime after the introduction, we are taking more of a 'China-first' approach," Eagan added.

In a statement, Microsoft said the flagship store on Tmall.com will extend the availability of the products and services it offers, while Microsoft will continue to operate Microsoft.tmall.com, an e-store dedicated to offering consumers computer accessories through Microsoft resellers.

According to the 2012 annual Chinese consumer report from McKinsey, the global management consulting firm, the Internet is increasingly being used as a medium for Chinese consumers to buy goods.

Twenty percent of respondents said they have used the Internet to buy goods, up from 12 to 14 percent in surveys conducted three years earlier.

China's e-commerce market is developing rapidly as a result. Alibaba's research has forecast that China may overtake the US in terms of online spending this year, and it is expected that Chinese consumers will spend $265 billion shopping online in 2013.

Eagan said: "The future of e-commerce will come from China. The future of the successful multinationals will take more of an approach that Microsoft is taking, which is to put their best people, build their best products and to launch their best products first in China."

Xue Qiuzhi, associate dean of Fudan University's School of Management, said e-commerce will gradually encroach on the market share of conventional stores.

"We are seeing more physical stores, from bookstores to electrical retail outlets, losing profits because customers only use them as showrooms for decision-making reference during online shopping," Xue said.

Sales revenue from e-commerce increased at an annual rate of more than 50 percent in Shanghai in recent years, and last year rose by more than 70 percent over 2011, said Qi Xiaozhai, director of the Shanghai Commercial Economic Research Center.

Eagan added: "Consumer loyalty, lower return rates, high recommendation referral rates and customer satisfaction the company has received lead to the expansion of investment in China."

Microsoft has built partnerships with a number of local companies.

They include: Baozun Technology Co Ltd, a subsidiary of the Alibaba Group with strong ties to many brands in getting their stores launched in China; Alipay, China's leading electronic payment platform; and logistics companies such as Shunfeng and EMS, according to Brandon Yoon, Microsoft principal program manager and online lead for Microsoft China.

Although it is expanding investment in the e-commerce market, Microsoft does not rule out the possibility of opening physical stores in China.

Eagan said: "We would say our entry strategy is online; our long-term strategy is multi-channel. And our strategy is driven by wanting to serve the customers with a seamless experience regardless whether they are buying via mobile, via their computers, in local stores, in flagship stores, or even through partners."

Zhou Qun, managing director for China with research company GfK, said more than 80 percent of durable consumer goods sales are achieved by physical stores, whether such sales be electrical home appliances, mobile phones or IT products.

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