Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
E-commerce vendors are paving the way for Western brands to enter China's booming e-commerce arena.
Just as in Marco Polo's day, China's riches are luring Western merchants. And e-commerce service and software providers are building a current version of the Silk Road to make it easier than ever for Western brands and retailers to sell directly to Chinese consumers via the web.
For example, Asos Plc, the U.K.-based online-only fashion retailer, needed only five months to launch a Chinese e-commerce site that went live in November. The retailer took advantage of e-commerce software localized for China from hybris, along with established ties between hybris and companies that provide help with regulations, fulfillment and customer service. While that project was underway, SAP AG, a major global provider of business software, acquired hybris.
It took Groupe Clarins, a France-based skin care brand, less than six months to launch its Chinese e-commerce site in September 2012. Clarins uses e-commerce technology from Demandware Inc. tailored for China and a Chinese company to handle logistics, customer support and payments.
While entering online retailing in China is still not simple, it is getting easier, says Zia Daniell Wigder, a Forrester Research Inc. analyst who specializes in global e-commerce. "You no longer have to solve the question entirely on your own."
And that's important, because most global brands are considering selling online in China, Wigder says. "Most brands that truly have a global footprint offline are looking at the e-commerce opportunity in China, because it is so massive," she says.
Manufacturers of high-end goods are especially keen on China, hoping to satisfy the demand among China's rapidly growing middle class for such prestigious brands as Coach, Clinique and Nike. And Western e-commerce technology vendors that serve those brands are responding by building a base in China. These vendors are not only translating their software into Chinese and mastering Chinese Internet regulations, they are identifying local partners that can handle fulfillment, customer service and payments. That in turn is spawning the growth of Chinese companies geared to work with Western clients, companies likely to play a bigger role in the years ahead as more North American and European retailers and brands begin selling online in China.
Those Western companies are drawn to what may well be the world's largest market for e-retail sales. China likely eclipsed the United States last year in e-commerce, as online retail sales in China totaled $305.74 billion in 2013, representing 42% growth, estimates Beijing Internet research firm iResearch Consulting Group. U.S. online retail sales reached $262.51 billion, up 16.9% from the previous year, according to the U.S. Commerce Department.
What's more, affluent Chinese consumers seek out foreign brands, both for their cachet and quality and because they're deemed less likely to be dangerous or contaminated, an important consideration in a country where there have been many scandals involving tainted goods. Those sentiments show up in a Forrester Research survey of Chinese online consumers who prefer at least one foreign type of product: 73% say they prefer foreign brands because their quality is higher than Chinese brands, and 65% say because foreign brands tend to be safer than domestic products. Plus, Chinese consumers buy more luxury goods than any other nationality, and 73% of Chinese luxury shoppers look to the Internet for product information, according to a 2013 survey by consulting firm Bain & Co.
China was top of mind for Benefit Cosmetics LLC when it embarked on a global e-commerce expansion five years ago using technology from hybris, says Valerie Hoecke, senior vice president of digital at the U.S.-based luxury brand. "We made it our top priority, due to the luxury consumers coming online in China," Hoecke says. "They know digital, and especially younger consumers are very comfortable online."
Benefit Cosmetics entered China before most Western brands, and when it surveyed software providers hybris was the only mid-tier e-commerce platform it could find at the time that handled Chinese characters, Hoecke says. But several U.S.-based e-commerce technology and service providers are joining hybris and Demandware in investing in China. For example:
- PFSweb Inc., a logistics and customer service provider to online retailers, has entered China in partnership with transcosmos Inc., a Japanese company that operates Chinese distribution centers and call centers. PFSweb CEO Mike Willoughby says he expects to sign his first client, a luxury goods manufacturer he declines to name, early this year, and for that company to be selling online in China by mid-year.
- Web marketing company ChannelAdvisor Corp. opened an office in Hong Kong early in 2013 and in December hired James Huang as its managing director for Greater China, which includes mainland China, Taiwan and Hong Kong. Huang, a U.S.-educated native Chinese speaker, founded MerchantRun Holdings Ltd., a Shanghai company that developed software to help retailers in China and other countries sell on eBay sites. The company was acquired by 4PX Worldwide Express Co., Ltd., a global logistics service provider, in 2012. And ChannelAdvisor announced in March that its platform will start supporting sellers on Tmall Global, Alibaba Group Holding Ltd.'s web site that lets international merchants sell directly to Chinese online shoppers.
- Export Now, a 3-year-old company, helps Western brands sell on Tmall.com, the more brand-friendly of the two big online marketplaces operated by Alibaba Group. Export Now was founded by Frank Lavin, who as an undersecretary of the U.S. Commerce Department negotiated trade deals with China and India. The company claims to have launched more than 100 clients on Tmall, including rainwear brand Totes, Italian coffee company Lavazza Premium Coffees Corp. and backpack maker Osprey Packs Inc.
But hybris and Demandware stand out as two companies creating a base in China and developing relationships with both Chinese and Western partners that can help foreign companies get started selling online in China.