Kaola.com Product Analysis Report

Kaola.com focuses on the cross-border e-commerce industry. In just six years, Kaola.com has occupied a very high share of the cross-border e-commerce market. How did Kaola.com grow so fast? The author of this article conducts an in-depth analysis of Kaola.com and understands the cross-border e-commerce industry. Let’s take a look together.

During the Double Eleven event in 2020, the number of Koala Black Card members increased by 104% year-on-year. After announcing its upgrade to a membership-based e-commerce on August 21, 2020, Koala's first annual promotion festival achieved remarkable results.

As an e-commerce brand that has only been established for six years, how has Kaola achieved such outstanding results in a field dominated by giants? What is the development of the entire import cross-border e-commerce industry?

This article will take "Kaola Global Shopping" as the entry point to give you an in-depth understanding of this company and the import cross-border e-commerce industry.

This article mainly analyzes from the following nine aspects:

1. Industry Analysis
2. Competitive product analysis
3. User Value Analysis
4. Business value analysis
5. Product Iteration Analysis
6. Product structure analysis
7. Operational Analysis
8. Summarize
9. Future Outlook

1. Industry Analysis

Import cross-border e-commerce refers to the commercial behavior of using the Internet as a platform to sell goods from outside China to users in China and reaching a product sales agreement with users.

A report from the E-Commerce Research Center of the China Internet Network Information Center shows that in 2019, the scale of my country's import cross-border e-commerce transactions continued to maintain a high growth trend. The transaction scale of the import cross-border e-commerce market reached 2.47 trillion yuan that year, a year-on-year increase of 30%.

Why has the development of import cross-border e-commerce been so rapid in recent years? This is an industry that is greatly affected by macro factors. Next, we will analyze it from the four aspects of PEST.

1.1 Policy level

In May 2015, the General Administration of Customs issued the "Notice of the General Administration of Customs on Adjusting Customs Operating Hours and Customs Clearance Time Limits for Cross-border E-commerce Supervision", which implemented the operating hours and customs clearance time limit requirements for cross-border e-commerce supervision of "no holidays throughout the year (365 days), and customs formalities are completed within 24 hours after the goods arrive at the customs supervision site", greatly improving the convenience of customs clearance and further promoting the rapid development of e-commerce enterprises.

In November 2017, the Ministry of Finance issued the "Notice of the Tariff Committee of the State Council on Adjusting the Import Tariffs of Some Consumer Goods", which reduced the import tariffs of some consumer goods in the form of temporary tax rates. The scope covers various consumer goods such as food, health products, medicines, clothing, shoes and hats, daily necessities, etc. The average tax rate was reduced from 17.3% to 7.7%. The decline in import trade tariffs has prompted cross-border e-commerce to better leverage its price advantage and further stimulate consumers' desire to consume.

In January 2020, the Ministry of Commerce and six other ministries issued the "Notice on Expanding the Pilot Program of Cross-border E-commerce Retail Imports", expanding the scope of the cross-border e-commerce retail pilot program from 37 cities to 87 cities (regions), further expanding the market scale, giving full play to market vitality, and effectively promoting the development of cross-border e-commerce retail import business.

In addition to the above policies, the State Council, the General Administration of Customs, the Ministry of Commerce, the General Administration of Quality Supervision, Inspection and Quarantine and other departments have repeatedly issued documents on improving efficiency, market regulation, tax-paid prices, experience promotion, etc., continuously improving and enhancing the security of my country's cross-border e-commerce, and playing a very positive role in promoting the development of the industry.

1.2 Economic aspects

(1) The increase in per capita income is the basis for consumption upgrading

Data from the National Bureau of Statistics show that my country's GDP was close to 100 trillion yuan in 2019, ranking it firmly as the world's second largest economy. The per capita gross national income was US$10,410, breaking the US$10,000 mark for the first time, an increase of nearly 140% compared with US$4,340 in 2010. The increase in per capita income has led to a continuous improvement in consumption levels. People need more diversified goods in their lives, and their demand for goods has shifted from simple material satisfaction to higher quality. Personalized high-quality goods from abroad have gradually entered the consumer's field of vision. For cross-border e-commerce, providing products with better quality assurance is its main competitive advantage.

(2) The increase in users in lower-tier markets is the engine for the development of cross-border e-commerce

According to the "China Import Market Consumption Research Report" jointly released by the China Chamber of International Commerce, Deloitte China Research Center and Alibaba Research Institute, the penetration rate of cross-border e-commerce in county areas has increased from 1% in 2014 to 7% in 2018. In terms of user share, consumers in 3rd to 5th tier cities and county areas account for 45% of the national user base. Among them, cross-border e-commerce users in county economies account for 23%, more than one-fifth of the national user base. This also shows that the domestic sinking market is gradually being opened up, and the number of cross-border e-commerce consumers will further increase.

1.3 Social level

(1) Improvement in cultural level leads to changes in consumption concepts

According to the latest data from the National Bureau of Statistics, in 2019, my country's nine-year compulsory education consolidation rate was 94.8%, the gross enrollment rate in high school reached 89.5%, and the gross enrollment rate in higher education reached 51.6%, far exceeding the level ten years ago. The improvement in education level has brought about a change in consumption concepts. Compared with their parents' generation, the new generation of young people are more willing to spend money to improve their quality of life. Therefore, foreign products with better quality (such as Apple mobile phones) are more likely to be favored by young people.

The improvement of cultural level will also lead to an increasing demand for people's spiritual needs. After dozens or even hundreds of years of development and operation, major foreign brands have accumulated a certain reputation and enjoy a high degree of popularity in the world. When people use their products, they can also feel a certain degree of psychological satisfaction.

(2) Consumers’ distrust of domestic brands creates a huge market for international brands

In recent years, some domestic products have had safety issues. Therefore, when choosing some important products (such as maternal and infant products), domestic consumers are more willing to choose overseas products with better brand safety. In addition, for some product categories, at the higher-end level, consumers are also more willing to choose overseas brands, such as big-name beauty products, high-end clothing and bags, etc. Currently, most of the brands appearing at major fashion weeks around the world are internationally renowned brands, and the domestic high-end beauty market is also mostly occupied by international brands. As domestic consumption continues to upgrade, many consumers will turn to major foreign brands, which is also a development opportunity for major platforms operating cross-border e-commerce.

(3) The increase in the number of people entering and leaving the country has brought more people into contact with overseas products

According to iResearch Consulting data, the number of Chinese cross-border tourists, students studying abroad and returning home has been increasing since 2013. Since these people have access to a large number of overseas goods, some of them have formed the habit of using overseas products. As they return to China, they will continue to buy overseas products. This habit will also affect the people around them, constantly stimulating domestic cross-border consumption.

1.4 Technical aspects

(1) Rapid development of the Internet

In recent years, the application of 4G, the popularization of smart phones, and the development of mobile payments have enabled more people to access the Internet and be more willing to use it. According to the "China Internet Development Report 2020", as of the end of 2019, the scale of China's mobile Internet users reached 1.319 billion, accounting for 32.17% of the total number of Internet users in the world; the online payment transaction volume reached 24.988 trillion yuan, and the penetration rate of mobile payment was at the world's leading level. These data also fully reflect the rapid development of my country's Internet, which has greatly promoted the development of cross-border e-commerce.

(2) Development of warehousing and logistics technology

With the popularization of electronic waybills, the maturity of domestic equipment technology and the reduction of costs, commodity storage and retrieval systems, conveying and handling systems, picking systems and sorting systems have all been automated, and the process of warehousing and logistics informatization has been greatly accelerated. As an indispensable part of the cross-border e-commerce industry, the advancement of warehousing and logistics technology has effectively guaranteed the transportation of goods, allowing people to get goods more quickly, and effectively promoting the development of the entire cross-border e-commerce industry.

All of the above factors have jointly promoted the development of cross-border e-commerce in recent years. Next, with the formal signing of RECP and the advancement of technologies such as 5G, big data, cloud computing, and artificial intelligence, cross-border e-commerce will usher in greater development opportunities.

According to iMedia Research data, the scale of China's overseas shopping users continued to grow from 2015 to 2019. In 2019, the number of Chinese overseas shopping users reached 154 million, a year-on-year growth rate of 52.5%. iiMedia Research analysts believe that due to the impact of the epidemic, the growth of the overseas shopping market slowed down in 2020. However, with the continuous increase in policies and the gradual improvement of technology, the demand for overseas shopping still needs to be further explored.

2. Competitive Product Analysis

In recent years, the domestic comprehensive cross-border e-commerce platforms for C include Tmall Global, JD Global, Suning International and Kaola.com, and the domestic vertical cross-border e-commerce platforms for C include Xiaohongshu, Vipshop International, Jumei, Aomaijia and others.

Since there are great differences between comprehensive e-commerce and vertical e-commerce in terms of product types, supply chain, etc., this article only selects comprehensive e-commerce platforms for analysis.

According to iMedia Consulting data, in the third quarter of 2019, Tmall Global and Kaola.com accounted for 52.1% of the market share of China's cross-border e-commerce platforms, accounting for half of the market. During the same period, Haidun Global (later renamed JD International) accounted for 15.1% and Vipshop International accounted for 10.5%. The two together accounted for 1/4 of the market share of China's cross-border e-commerce platforms. In contrast, Suning International has a smaller market share in cross-border e-commerce platforms, only 1.5%.

In September 2019, Alibaba Group acquired Kaola.com, and the supply chain and logistics chains of the two platforms were further integrated. Therefore, this article selects JD International as a direct competitor of Kaola.com for analysis.

2.1 Kaola Global Shopping

• On January 9, 2015, NetEase's self-operated cross-border e-commerce platform "Kaola Global Shopping" was launched for public testing.
• On January 29, 2015, Kaola.com started selling Chilean cherries, marking the first cross-border e-commerce fresh food order. .
• On June 28, 2015, Kaola.com announced the establishment of a branch in Japan.
• On October 23, 2015, Kaola.com announced the launch of nine national pavilions.
• On November 11, 2015, Kaola.com participated in the “Double 11” promotion for the first time.
• On December 12, 2015, Kaola announced the launch of its first fresh food business.
• On December 30, 2015, Kaola.com laid the foundation stone for its new warehouse in Ningbo, which has a construction area of ​​over 250,000 square meters. After completion, the number of orders per day can reach 200,000.
• February 21, 2016 Kaola.com has started supporting Apple Pay, becoming one of the first self-operated cross-border e-commerce platforms to support Apple Pay.
• On March 29, 2016, Kaola.com announced its official launch, with a sales target of RMB 10 billion in 2016.
• On November 11, 2017, Kaola's sales reached four times that of 2016. It took Kaola.com only 28 minutes to achieve the sales volume of the entire day on Double 11 last year, 32 minutes to refresh the cross-border delivery efficiency, and 78 minutes to double the sales volume of last year.
• In June 2018, Kaola announced its entry into the comprehensive e-commerce market.
• On September 6, 2019, Alibaba announced a strategic partnership with NetEase. Alibaba Group acquired NetEase's cross-border e-commerce platform Kaola for US$2 billion.
• On September 6, 2019, the PC version of "Kaola" was renamed "Kaola Global Shopping".
• On August 21, 2020, the company officially announced a strategic upgrade to fully focus on "membership e-commerce"

2.1.1 Business model analysis

(1) Platform model

Kaola.com adheres to the concept of direct purchase and has established branches and offices in nearly 10 countries and regions, including San Francisco, Tokyo, Seoul, Sydney, and Hong Kong. It has set up professional purchasing teams to go deep into the origins of commodities to select high-quality global products, avoid multiple links such as agents and distributors, and directly connect with brands and factories, eliminating intermediaries and costs. It also adopts a large-scale centralized purchasing model to achieve lower purchase prices. In addition, Kaola has launched the Ant Blockchain traceability system to strictly control product quality. Logistics system

(2) Logistics system

After joining the Alibaba Group, Kaola has fully connected to Cainiao's global logistics system, integrating overseas sourcing, international transportation, customs inspection, bonded parks, domestic delivery and other links, opening up the entire industrial chain, completing the logistics standardization and transportation guarantee mechanism, and adopting better customized packaging boxes to ensure extremely fast logistics and enhance user experience.

(3) Delivery mode

Kaola's shipping modes mainly include bonded warehouse shipping and overseas direct mail, among which bonded warehouse shipping occupies a dominant position.

For bonded warehouse shipment, the goods enter the country first and are cleared after the user places an order. The advantage is that the shipping cost for bulk purchases is lower and users can receive the goods faster, but it will also increase certain storage costs and the risk of unsold goods.

Overseas direct mail means that goods are mailed directly from foreign countries/Hong Kong to consumers. In the direct mail model, delivery will only begin after the user places an order, and customs clearance is required upon entry. The advantage is that it does not increase storage costs and there is no risk of unsalable products. However, due to the small purchase volume, the shipping cost will increase, and the delivery time will be extended due to shipping from overseas.

Kaola.com has more than 150,000 square meters of bonded warehousing space in four bonded areas in Hangzhou, Zhengzhou, Ningbo and Chongqing, ranking first in the industry. At the same time, the construction of a 250,000 square meter modern and intelligent bonded warehouse in Ningbo has started and will be put into use soon. At present, Kaola.com has become the largest cross-border e-commerce company with bonded warehouses. In the future, Kaola.com will gradually open bonded logistics centers in South China, North China, and Southwest China.

(4) Others

Kaola's main self-operated model has the right to independent pricing. It can adjust pricing strategies according to market environment and competition nodes by overall coordination of supply chain and warehousing, logistics, and operations. Kaola.com not only needs to reduce purchasing costs and control pricing, but also needs to control pricing strategies by controlling profit margins. It not only respects the brand's pricing strategy, but also pays more attention to Chinese consumers' sensitivity and preferences for prices.

2.2 JD International

• On April 15, 2015, JD Global Shopping, a brand under JD.com, was officially established.
• On July 30, 2018, JD Global Shopping announced that it had signed a strategic cooperation agreement with Japan's Kintetsu Department Store Group, and Kintetsu Department Store's overseas flagship store was officially launched on JD Global Shopping.
• On November 19, 2018, JD.com officially upgraded its global shopping brand to “Haidun Global”.
• On December 11, 2018, Haidun Global and AuMake signed an exclusive memorandum of understanding on cross-border direct mail cooperation between Australia and New Zealand. The two parties will carry out in-depth cooperation in the construction of Haidun Global and AuMake stores, brand incubation, and the establishment of a platform distribution cooperation ecosystem.
• On May 30, 2019, Haidun Global signed a cooperation agreement with Attent, a large Dutch supermarket chain. The two parties will be closely connected in the field of cross-border e-commerce and introduce European products to the JD platform.
• On November 22, 2019, JD.com Group announced that its import business Haidun Global was officially renamed JD International. Different from the previous scenario where imported goods were distributed in various categories and sold worldwide, JD International covers all imported goods on the JD platform.

2.2.1 Business model analysis

(1) Platform model

JD International adopts the platform model of "self-operation + overseas merchants" for direct overseas purchases, and has established a supply chain system of direct overseas purchases and direct supply from brand manufacturers. All products are produced or sold overseas, and contracts are signed directly with overseas merchants through the JD Hong Kong platform established by JD.com. Merchants opening stores on JD International must be foreign companies and authorized by foreign brands. Companies from Taiwan and Hong Kong are also acceptable.

(2) Logistics system

In terms of logistics, JD.com adopts a model of cooperation with large international logistics companies such as DHL, and reduces international logistics costs through packaging.

JD International has currently established multiple overseas warehouses and domestic bonded warehouses in the Netherlands, Hong Kong, Hangzhou and other places. At the same time, JD’s domestic logistics has also developed greatly in recent years. By strengthening seamless connection with the international supply chain and bonded warehouses, it ensures that goods can be delivered to consumers quickly.

(3) Delivery mode

JD International is similar to Kaola.com, and can ship goods through two methods: bonded warehouse delivery and overseas direct mail.

(4) Others

For merchants, the benefits of “platform + self-operation” are huge. Many large foreign brands have entered China through the cross-border e-commerce model, but they do not understand the local Chinese e-commerce environment and rules. Since the cost of opening a store directly on the platform is too high, they can cooperate with the platform. JD's platform can greatly reduce their huge store opening costs.

2.3 Summary

From the above analysis, it can be seen that Kaola and JD International each have their own advantages. Kaola is backed by Alibaba and has strong financial support. At the same time, it can make full use of Alibaba's supply chain and other resources on the original basis. JD International has formed the first consumer platform in China that is fully focused on large-scale import business by integrating the original Haitun Global and general trade import businesses.

In terms of specific business models, Kaola.com focuses on self-operated direct purchases, while JD International develops both self-operated and overseas merchants. Kaola.com has more bonded warehouses than JD International, which gives it an advantage. Finally, both Kaola and JD International have strong logistics system support and are currently in rapid development.

3. User Value Analysis

There are three main participants in the cross-border e-commerce industry: foreign product suppliers, domestic consumers, and cross-border e-commerce platforms. If the platform wants to achieve rapid growth, it must meet the needs of both foreign product suppliers and domestic consumers. Let’s explore the needs of these two aspects and how Koala Global Shopping meets these needs.

3.1 Foreign product suppliers

China has nearly one-fifth of the world's population, and its economic level has been continuously improving in recent years. It occupies a very large proportion in the world economic structure. Therefore, the Chinese market is increasingly valued by major foreign suppliers. Especially as China's reform and opening-up continues to deepen, the market has become more transparent and freer, and foreign commodity suppliers are becoming more and more eager to seize the Chinese market.

After a strong demand for the Chinese market, there are mainly the following channels for foreign goods to enter China:

3.1.1 Brands directly enter the Chinese market for sales

Foreign brands set up branches and subsidiaries in China and directly conduct brand marketing in China, such as Apple China and Estee Lauder China. In this way, they can better manage their own brands in China and further enhance their brand influence. However, the business involves a wide range of areas and requires an efficient and comprehensive team that is familiar with Chinese policies and ensures that marketing in China is conducted legally and in compliance with regulations. This requires a lot of time, energy and money.

3.1.2 Sales through distributors/agents

This method saves foreign suppliers from spending time and money on domestic marketing, and is generally used for large quantities of goods. After large quantities of goods are imported from abroad to China, they are distributed through multiple levels of domestic distribution companies and finally reach consumers. This method has disadvantages such as many links, lower profits, and slower capital turnover.

3.1.3 Settling in foreign e-commerce platforms, such as Amazon, eBay, etc.

Some well-known foreign e-commerce platforms have relatively fixed consumer groups. With the help of these platforms, foreign products can be exposed to a group of domestic users relatively quickly. However, since these foreign e-commerce websites are not popular in China, the number of Chinese consumers that can be reached through this method is relatively small, and shopping through these websites is not convenient for many Chinese consumers, so it is difficult to significantly increase the order volume.

3.2 Domestic Consumers

With the improvement of economic level, domestic consumers have higher requirements for the richness, quality and brand of goods. Therefore, some foreign products have gradually entered the field of vision of domestic consumers. The main channels for domestic consumers to obtain foreign products are as follows:

3.2.1 Direct purchase within the country

Some foreign brands have established branches and subsidiaries in China to sell their products, or have placed large quantities of products in China through agents and distributors. Domestic consumers can purchase directly through these channels. However, only a portion of the goods can be purchased in this way, and the goods entering the country through these channels are generally accompanied by higher taxes and fees, and these costs will ultimately need to be borne by consumers.

3.2.2 Overseas purchasing

In recent years, the number of Chinese people studying, working, and traveling abroad has been increasing. These people have greater access to foreign products and can provide purchasing services for foreign consumers. Although you can buy products of foreign origin in this way, there are certain risks: first, there is no guarantee that the purchasing agent will not buy fakes for profit; second, fakes also exist abroad, and the purchasing agent may buy fakes because of lack of knowledge; third, the logistics is slow, and you can only wait for the purchasing agent to return home before sending it out; fourth, there is no after-sales guarantee and returns and exchanges are not possible.

3.2.3 Personal Overseas Shopping

Domestic consumers purchase overseas products through shopping websites such as Amazon, but this method has certain barriers for ordinary consumers:

1. It is difficult to use. All foreign platforms are in English, which is not very user-friendly for domestic consumers who are not good at English.
2. Payment is not convenient. Amazon payment requires a dual-currency credit card, which many people do not have.
3. The logistics are slow. After purchasing products on foreign shopping platforms, some can be shipped directly to China, while others need to be transferred before returning to China, which takes a long time;
4. The cost is high. The logistics costs incurred when the goods are sent to the country and the tariffs incurred when the goods enter the country will be borne directly or indirectly by the consumers.
5. After-sales service is difficult. Once there is a problem with the purchased goods and they need to be returned or exchanged, the round-trip time and postage costs are high.

3.3 Cross-border e-commerce platforms

From the above analysis, we can see that for overseas suppliers, the main problems in the existing solutions for overseas products to enter the Chinese market are: high initial investment costs, complicated processes, many participants, slow capital turnover, and small target audiences; for domestic consumers, the main problems are: few product types, slow logistics, high product prices, inconvenient purchases, risks of counterfeit goods, and difficulties in after-sales service. How does the cross-border e-commerce platform Kaola solve these problems?

3.3.1 Providing nanny services to overseas suppliers

For overseas suppliers, Kaola provides a complete set of nanny-style services, including multinational logistics warehousing, cross-border payments, supply chain finance, online operations, brand promotion, etc., to solve the obstacles for overseas merchants to enter China and save them from the language, cultural differences, transportation and other problems they face in developing the Chinese market alone. At the same time, overseas suppliers only need to communicate with Kaola's purchasing staff instead of going through distributors at all levels, which reduces merchant costs.

3.3.2 Start the self-operated direct purchase mode

Kaola.com adheres to the concept of direct purchase and has established a professional purchasing team to go deep into the product's origin to purchase high-quality goods.

• By strictly reviewing the qualifications of all suppliers and setting up a strict review mechanism, we can eliminate counterfeits at the source and further ensure the authenticity of the products;
• Since it directly connects brands and factories, it avoids multiple links such as agents and distributors, and also adopts a large-scale centralized procurement model, achieving a lower purchase price, which can in turn reduce product prices;
• As a comprehensive cross-border e-commerce company, the products purchased from abroad cover all aspects of daily life, including beauty and skin care, maternal and child products, clothing, shoes and hats, nutritional health products, home appliances, digital technology, special food, etc., which greatly increases the richness of products;
• For consumers, domestic self-operated e-commerce platforms are more in line with their browsing and searching habits, and the payment process is convenient and smooth.

3.3.3 Taking advantage of bonded warehousing

At present, Kaola.com has become the domestic cross-border e-commerce company with the largest bonded warehouse, and there are more bonded warehouses under construction. After completion, there will be larger bonded warehouse areas available for use. Through the bonded model, we can achieve legality and compliance, reduce costs, and achieve fast delivery.

In addition, when consumers are not satisfied with the products and need to return or exchange them, they can directly contact customer service and send the products back to the domestic bonded warehouse, saving shipping costs and time costs and solving after-sales problems.

3.3.4 Improve the logistics system

Before joining Alibaba, Kaola.com had established a standard logistics system. Through cooperation with China National Foreign Trade Transportation Corporation, it integrated multiple links such as overseas sourcing, international transportation, customs inspection, bonded parks, and domestic delivery. After joining Alibaba, it has fully connected to Cainiao's global logistics system, further improving the logistics system and ensuring extremely fast logistics delivery.

3.4 Summary

Through the above research, we can find that compared with the way other foreign products enter the Chinese market, Kaola.com explains well why it has been able to continue to grow and develop in less than six years.

4. Commercial Value Analysis

Kaola.com is a comprehensive e-commerce company mainly engaged in cross-border business. Its core business is its own cross-border e-commerce business. Revenue is an important indicator for judging whether a business can develop healthily. Here we use GMV, the most commonly used data indicator in e-commerce, to analyze whether Kaola.com's core business is healthy.

GMV=number of users*conversion rate*average order value. An improvement in any of the indicators, such as the number of users, conversion rate, and average order value, will have a positive impact on the growth of overall revenue, so next we will focus on analyzing the means by which Kaola.com improves these three key indicators.

4.1 Increase the number of platform users

In order to achieve sustained growth in revenue, a steady stream of new registered users is the most basic guarantee. So how does Kaola.com attract new users?

There are mainly four ways: internal traffic conversion, advertising promotion, hot topics and community communication.

4.1.1 Internal Traffic Conversion

The traffic of e-commerce platforms is inseparable from strong exposure and promotion.

• Before September 2019, Kaola.com was backed by NetEase and could obtain huge traffic from internal products such as NetEase Mail, NetEase News, NetEase Cloud Music, portal resources, and game terminals.
• After September 2019, Kaola.com was acquired by Alibaba and further gained Alibaba's support. The huge user base of Alibaba products also provided Kaola.com with an important user growth channel. In addition, one month after joining Alibaba, Kaola signed strategic contracts with more than 30 international brands, further enhancing the richness of its products and laying the foundation for obtaining more traffic.

4.1.2 Advertising

Since its establishment, Kaola.com has placed advertisements on major domestic variety shows and Internet platforms, such as:

• In 2017, it sponsored the third season of the popular variety show "Flowers and Youth" and released a poster with a copy based on "Flowers and Youth", which received rave reviews;
• In 2018, it dominated the screens of many popular TV variety shows such as "Running Man" and "Longing for Life 2", and the number of APP downloads reached a peak during the broadcast period;
• In 2019, we promoted our brand on iQiyi in the form of information flow ads, and delivered targeted ads to target users.

In addition to online platforms, Kaola.com has also placed a large number of advertisements offline (such as subway stations), impressing customers with humorous copywriting and gaining user growth.

4.1.3 Hot Topics

• In August 2015, CCTV launched a special report on the “Belt and Road Initiative” titled “Numbers Telling a Community of Shared Future” and broadcast the first episode, “Packages from Faraway Places”. With the program's continuous broadcasting at important broadcast nodes such as "Hourly News", "Lunchtime News", and "News Broadcast", Thailand's LAYTEX latex pillows have quickly become popular.
• In September 2015, Kaola launched its “European Tour” and entered into strategic partnerships with Kraft Heinz, Nestlé Wyeth, and European supermarket chain giant Delhaize. For the first time, Kaola invited users to experience the overseas direct purchasing process and to visit the factories and headquarters of European food companies.
• In April 2016, Kaola.com and 58.com jointly launched the "Life Cleaner" campaign on social media, which sparked heated discussions online.
• On September 6, 2019, Alibaba Group acquired NetEase's cross-border e-commerce platform Kaola for US$2 billion, once again putting Kaola in the spotlight.

Through the above hot topics, Kaola.com has further enhanced its brand awareness and played a good role in promoting user growth.

4.1.4 Community transmission

In 2020, Koala launched a new column - Tree Climbing TV, which has a core entrance on the homepage of the Koala App, showing the rich and diverse global life in the form of live broadcasts and short videos.

Following Pashu TV, Kaola.com also launched the "Like Community". Both are positioned as content communities for user sharing, focusing on the grass-planting economy.

Tree-climbing TV and Like Community are new moves by Kaola.com to compete in a younger and differentiated way, and they can increase the number of users through community communication and sharing.

4.2 Improve conversion rate

After guiding users to the platform through various means, as long as users generate purchasing behavior, that is, convert into paying users of the platform, the platform will be valuable. So how does Kaola.com improve its conversion rate?

For cross-border e-commerce websites, users will go through a series of processes including placing an order for the first time, browsing around, and making a clear purchase. Therefore, users are divided into two categories: users with clear goals and users with unclear goals.

4.2.1 Users with unclear goals

For users who mainly browse, their purchase path may be a series of repeated processes such as browsing products - viewing details - browsing products - viewing details... - adding to favorites - adding to shopping cart, etc.

Koala mainly creates a shopping atmosphere through corresponding activities to guide users to generate purchasing desire. We have launched today's event area, daily low-price area, hard-core subsidies, product pre-sales and other forms to stimulate user consumption through price advantages; we also stimulate consumption by pushing products that users may like through recommendations for you, guessing you may like, etc.

4.2.2 Target users

For users with clear goals, the purchase path is generally: search for products - product list page - product details page - add to shopping cart - payment. Next, we will take the purchase of eye cream as an example to analyze how Koala Global Shopping improves conversion rates.

(1) Product list page

After entering eye cream in the search box, the product list page will appear. From this page, you can clearly see the product appearance, price, name, discount details, reviews, praise rate, store/brand and other information.

Among them, the most prominent is the product picture. Based on the picture, users can quickly identify whether this is the product they want to buy; the second most prominent is the product price. Users can immediately judge whether it meets the psychological price range; then there is whether it is self-operated, product name, comments, praise rate, and the store/brand it belongs to. These factors can further help users make quick decisions.

Kaola.com adds common eye cream brand names and logos to product images, which can help most users quickly find the brand products they want to buy.

This page also features price sorting, sales volume sorting, brand, and filtering functions to help users make purchasing decisions based on their herd mentality, price preference, brand preference, and other aspects. Below this line, information such as Koala's own operations, functions, skin suitability, and texture are also added to help users better filter out products they want to buy and that suit them.

(2) Product details page

After users initially select a product through the product list page, they need to click on the product details page. The product details page is the user's consumption experience page, and the quality of its design will have a direct impact on the user's purchasing behavior. On this page, Kaola helps users make quick decisions and add items to the shopping cart through the following methods.

1) Establish consumer protection

The biggest pain point for overseas shoppers is the guarantee of authenticity, so it is very important to display the commitment to authenticity, product source, and after-sales guarantee system on the product details page. This will allow users to buy with confidence and solve after-sales problems without any worries!

2) Create consumption scenarios

Restore offline usage scenarios and create a good consumption experience of real goods! Make users feel that this is the product they want.

3) Create a popular and word-of-mouth atmosphere

By asking everyone and users for comments, we can build trust on the one hand, and create a strong consumer popularity atmosphere on the other.

(3) Shopping cart page

The shopping cart page displays the taxes and discounts of the products, so consumers can clearly know the prices they should pay.

4.3 Increase Average Order Value

The average order value is affected by two factors: the single purchase amount and the purchase frequency.

Because users require a wide variety of goods with a large price range, and because competition on e-commerce platforms has been fierce in recent years, users' single purchase amount and purchase frequency are not fixed. Therefore, we analyze from these two aspects:

4.3.1 Increase single purchase amount

(1) Distribute coupons

The platform encourages users to buy by distributing coupons, which not only saves users money but also drives sales of platform products.

(2) Free shipping on orders

(3) Recommend other products

4.3.2 Increase purchase frequency

(1) Guarantee of authenticity

Kaola.com focuses on direct purchases from its own operations, and authenticity is its core competitiveness. Therefore, in order to maintain its brand and ensure repeat purchases from users, it must ensure that its products are authentic and of good quality. Kaola.com strictly reviews the qualifications of all suppliers and has set up a strict review mechanism with a high entry threshold to eliminate counterfeits at the source. At the same time, Kaola has also launched the Ant Blockchain traceability system to strictly control product quality.

(2) Black Card Member

Koala.com has a reminder for activating the black card on every page (home page, today's activities, shopping cart, my Koala). The eye-catching discount numbers can more easily stimulate users to become members. Users who purchase memberships and continue to consume on the platform can enjoy numerous membership benefits, thereby increasing user stickiness, repurchase rate, and thus increasing the average order value.

5. Product Iteration Analysis

In order to deeply analyze the version iteration rhythm of Kaola.com and explore the product iteration logic, all core version iterations of Kaola.com from V1.0.0 to V4.36.4 are summarized as follows:

According to the curve distribution of the cumulative downloads on Kuchuan, it can be seen that before June 2017, Koala Haigou maintained a relatively stable growth trend. After that, the downloads began to grow rapidly, especially after September 2019, there was a sharp increase in a short period of time. Then it began to decline in April 2020 and continued until August 2020. After that, the downloads quickly rose to a new height.

According to the different iterative contents in the product growth process, Kaola Global Shopping can be divided into three stages for analysis.

5.1 Startup Phase

From March 2015 to January 2016, versions V1.0.0 to V2.4.1 were the start-up phase of Kaola.com. During this phase, the focus was on improving the basic functions of the product, verifying user needs, and polishing the product experience.

During this phase, the first thing to do is to display the existing basic functions on the PC through the mobile terminal. A series of essential functions of the e-commerce platform, such as navigation, search, product details, and payment, are gradually reflected on the mobile terminal. In order to further attract users to place orders using their mobile phones, Kaola has also set up some new functions, such as exclusive prices for certain products on the mobile terminal, issuing mobile-exclusive coupons, etc.

In order to further facilitate users to browse and understand products, Kaola has optimized product categories, added horizontal channel navigation, and added a video function to the product details page. Through the video, users can further understand the product details and buy with confidence. For the favorite products that users encounter during the browsing process, a one-click collection function is added, and they can be added to the wish list with one click; at the same time, a good product recommendation function is launched online to personalize product recommendations and increase the probability of users placing orders. For problems encountered during browsing, an online customer service function has been added, and you can consult customer service at any time.

In order to improve users' shopping experience and efficiency, Kaola.com has added a combined payment function and WeChat payment function, launched self-service order query and cancellation functions, added logistics arrival notifications, order reminders and other warm reminders, and supports the issuance of invoices for domestic orders, gradually meeting the various needs of users during the purchasing process.

In order to meet users' demand for sharing good things and acquire a certain number of new users, Koala.com has developed a product activity card-style sharing function, and supports order sharing by sending coupons. It has also launched and gradually improved the various functions of Koala Beans, such as sharing products to get Koala Beans, and Koala Beans can be used to scratch cards to get coupons.

During this stage, Kaola.com focused on improving functional processes and polishing user experience, laying the foundation for winning a large number of users in the future.

5.2 Growth Stage

From January 2016 to May 2018, the version was updated from V3.3.2 to V3.16.0, which was the growth stage of Kaola.com. The goal of this stage was mainly to increase the number of users. It can also be seen from the download curve that the actual user growth rate during this stage continued to rise. In terms of retaining old users, Kaola.com continues to optimize basic functions, such as: details page optimization, product classification structure optimization, online customer service function optimization, etc. At the same time, it upgrades video live streaming and adds a red envelope rain function to the live streaming to enhance user stickiness.

In order to further enhance the user experience and resolve various concerns of users during the payment process, Kaola.com began to support installment payments to solve the troubles caused by large-value goods to users' daily lives and increase product sales; and began to launch logistics selection functions for some products. If users need them urgently, they can choose logistics such as SF Express Next Day Delivery.

In terms of attracting new users, Kaola has broadened its sharing channels. It not only invites friends to place orders to get rewards, but also launches a group buying function. By starting at one yuan and displaying group buying information on the details page, it attracts users to invite their friends to join the group. This method of users actively attracting new users reduces operating costs. At the same time, in order to retain new users, it distributes red envelopes to new users to further improve conversion rates.

In addition, Kaola.com has also launched membership cards, which attract users to apply for membership through discounts on membership cards and member-exclusive products, thereby increasing the frequency of user purchases; and by issuing tax and postage coupons, it reduces user costs and attracts users to place orders; it has launched the AR claw machine function, which allows users to simulate the surprise experience of grabbing a physical doll through AR technology and have the chance to win a mysterious prize, thereby increasing user activity.

During this period, in order to further seize market share, Kaola.com significantly accelerated its operating pace and sponsored a number of popular variety shows (such as: Flowers and Youth, Running Man, etc.), continuously increasing brand exposure.

5.3 Mature stage

After July 2018, from version V4.1.0 to V4.36.4, Kaola.com has had a large number of users. According to the "2018-2019 China Cross-border E-commerce Market Research Report" released by iMedia Consulting, Kaola.com ranks first in market share in cross-border e-commerce and has successfully won the trust of consumers.

At this stage, Koala Haigou continued to continuously optimize basic functions at the product level, adding functions such as directly modifying product specifications, collecting product price reduction prompts, checking refund progress at any time, and sending videos in the grass planting community; at the same time, the annual bill is launched, and users can view their annual bills and have the opportunity to receive red envelopes, effectively improving user experience and activity.

In addition, Koala Haigou also equipped exclusive customer service for black card users to quickly respond to the problems of black card users; launched LIKE community and tree climbing TV to increase user activity, increase marketing efforts, create and participate in various activities, such as: 515 Good Products Festival, 99 Weeding Festival, Double Eleven, Black Friday, Double Twelve, etc., further improving user activity and thus increasing product sales.

5.4 Summary

Overall, the pace of Koala's ocean shopping is very good. In the early stage, it continuously improves the basic functions of the product, polishes the user experience, and provides certain new measures. After the demand is verified, it begins to carry out large-scale operation and promotion, sponsors popular variety shows to gain exposure. At the same time, it is constantly improving and upgrading product functions to bring better experience to users; after the product is mature, it retains old users and attracts new users through new directions such as "Climbing Tree TV" and "LIKE Community".

6. Product structure analysis

In the iterative analysis, we analyzed the iterative steps of Kaola.com's product functions. Next, let's take a look at what user needs these functions meet and how they are distributed throughout the app.

The following figure is the product structure mind map of Kaola Haigou V4.40.0:

For the convenience of analysis, the following table can be obtained by sorting out the product structure of Koala Haizhuang from four aspects: users, scenarios, needs and functions:

Overall analysis:

Because the main users of the mobile terminal are consumers, we focus on meeting the potential needs of consumers. We divide the complete process of users purchasing goods into the following three scenarios:

• Before purchasing, learn about platform and product information through the App;
• Place an order through the shopping cart page while purchasing;
• After-sales service through my koala after purchase.

6.1 Scenario 1: Before purchasing

What needs did the user have before purchasing and how did Koala Ocean Shopping meet these needs?

6.1.1 Consumers with clear purpose

Consumers with clear purpose generally find their target products through the search box, and then choose to determine the specific products to purchase based on factors such as product prices and product evaluation.

6.1.2 Consumers with no clear purpose

Consumers who have no clear purpose usually browse at will when they come to the platform, slowly discover the direction of the product they are interested in, and develop the desire to buy. This version is coming online at Double Twelve, and Koala Haigou launches the "Koala Global Expectation Festival" event on the main menu. On the homepage, users can find affordable products through the "Koala Global Expectation Festival", hard-core subsidies, daily affordability, etc.; through the tree climbing TV, you can see the recommended products from major live broadcasts; through the like community, you can see the products recommended by other users, and are equipped with usage scenarios and usage experiences; there are pushes you may like on the selection column, etc. These functions can help users of untargeted products quickly find the direction of products they are interested in and stimulate consumption.

6.2 Scenario 2: Purchasing

What are the needs of users during purchases and what is Koala Ocean Shopping that meets these needs?

During the purchase, users generally want to reduce the purchase price of the product and check the product name, quantity, price, consignee and address. These can first reduce the price of the product through order-making, coupons, black cards, etc. on the shopping cart page, and then check the product name, quantity, price, consignee and address on the settlement page, and check whether there are red envelopes, whether invoices can be issued; at the last Koala cashier, users can also choose payment methods such as Alipay, WeChat or Huabei installment based on their payment habits and payment ability.

6.3 Scenario 3: After purchase

What needs do users have after purchasing and what is Koala Ocean Shopping that meets these needs?

After purchasing, users want to know the current status of the product and hope to ship it as soon as possible. These can be viewed and reminded through my order; if they find that the information is filled incorrectly, they can return the product through the order details or contact customer service to modify the information; while waiting for the arrival, they can understand the current progress of the product by checking logistics; after receiving the product, they can comment on the product by posting their own evaluations, and if they are not satisfied with the use, they can also contact customer service to return the product, which greatly improves user satisfaction.

Through the above analysis, the function of Koala Haigou V4.40.0 pays great attention to any possible details that users may have before, during and after purchase. The function design is mature, and the user experience process is very comfortable and user-friendly.

7. Product Operation Analysis

The saying "Products are responsible for giving birth, and operations are responsible for raising them" also indirectly reflects the close relationship between products and operations. So how did Koala Haigou operate this product to achieve rapid growth? According to the AARRR model, the main operating activities of Koala Haizhuang since its establishment are sorted out as follows.

7.1 Attracting new customers (A)

In order to attract new products, Koala sea shopping mainly uses the following methods.

Method 1: Internal drainage

In the early stage of development, Koala Haigou was backed by NetEase and obtained huge traffic from internal products such as NetEase Email, NetEase News, NetEase Cloud Music, Portal Resources, and Games, which can attract new users at a lower cost.

• December 5, 2017: When Fantasy Westward Journey players take part in the imperial examination, there is a certain probability that additional bonus questions will be triggered. If you answer the additional reward questions correctly, you can get a 15 yuan coupon provided by Koala Haigou;
• October 30, 2018: You can get a full year of NetEase Yanxuan Super Member + NetEase Cloud Music Vinyl VIP + NetEase Email Member + Koala Hai Shopping Black Card Member for a whole year;
• December 5, 2018: Purchase the Fantasy Westward Journey App Store recharge card through Koala Haizhuang and enjoy a 10% discount;
• August 21, 2019: You can purchase NetEase Cloud Music Vinyl VIP + 10 yuan Koala Hai Purchase No Threshold Coupons for 3 months at 99 yuan.

Method 2: Advertising traffic

(1) TV advertising

• In July 2015, Koala Haigou joined hands with the popular variety show "Extremely Perfect" to recruit goddesses global beauty makeup;
• In June 2017, Koala Haigo sponsored the third season of "Flowers and Boys" and became a special partner of "Ode to Joy 2";
• In September 2017, Koala Haigo sponsored "The Flowers Blooming That Year" and combined the plot task design to produce and place advertisements;
• In October 2017, Koala Haigou sponsored Hunan Satellite TV’s Mid-Autumn Festival Gala;
• In March 2018, Koala Haigou named Mango TV's homemade variety show "Mom is Superman" season 3;
• In April 2018, Koala Haigou named Zhejiang Satellite TV's ace variety show "Running Man" season 2;
• In April 2018, sponsored the second season of Hunan Satellite TV's slow variety show "Longing for Life";
• In October 2018, Koala Haigo sponsored the popular variety show "Star Detective 4";
• In January 2019, Koala Haigou sponsored the popular variety show "Youth With You".

(2) Other Advertising

• In May 2017, Koala Haigou cooperated with Everbright Bank to conduct a wave of subway advertising promotion at the Hangzhou Wulin Plaza Metro Station;
• In March 2018, Koala Haigou launched advertising through multiple building screen-splashing machines in China, promoting activities such as the 328th anniversary celebration and the 3.8 goddess celebration;
• In June 2019, Koala Haigou launched a 618 event advertisement on iQiyi, using information flow advertisements to promote brand promotion.

Method 3: Brand cooperation

• In March 2015, Koala Haigou reached a cooperation with South Korea's L&P Co., Ltd. Co., Ltd. and obtained the official authorization of South Korea's Kleis Facial Mask;
• In July 2015, Koala Haigo signed a cooperation agreement with E-mart, the largest chain supermarket in South Korea, and reached a cooperative relationship with South Korea's Goryeo Yada;
• In January 2016, Koala Haigo officially signed a direct procurement cooperation agreement with @cosme in Tokyo, Japan, and brought the @cosme list to China.
• In October 2017, Koala Haigo signed a strategic cooperation agreement with the American brand Garden of Life;
• In April 2018, Guigoz, a French century-old scientific milk powder brand, was officially launched on Koala Haizhuang;
• In May 2018, Koala Haigou upgraded its strategic partnership with New Zealand's national brand Heshouli;
• In October 2018, Koala Haigou joined hands with Kangcuile, the global leader in probiotics, to sign a strategic cooperation agreement in Hangzhou;
• In May 2019, Koala Haigou signed a strategic cooperation agreement with Johnson & Johnson China to join forces;
• In September 2019, Koala Haigou and Abbott milk powder started the American decryption journey of "Abbott HMO";
• In May 2019, Koala Haigou signed a strategic contract with Little Freddie, a British national treasure-level complementary food brand;
• In December 2019, Koala Haigou reached a cooperation with global strategic cooperation brand ISDIN China.

Through brand cooperation, Koala Haigou further ensures the authentic quality of the product and can effectively attract users with these brands' preferences.

7.2 Stimulate activity (A)

There are several ways to stimulate activity in Koala sea shopping:

• Live broadcast and community operation, climb the tree TV and Like communities, attract young users through live broadcasts and short videos that young people like, and increase their activity;
• Daily activities such as daily lottery, koala paradise, koala treasure hunting, etc. increase user activity through games and other methods;
• Daily affordable prices, hard-core subsidies, etc. attract users to use in a daily discount;
• Improve user activity by manufacturing and participating in various festivals, such as: 515 Good Things Festival, Double Eleven, Black Friday, Double Twelve, etc.

7.3 Improve retention (R)

After promoting user activity, it is also necessary to improve user retention rates in order to continuously create value for the platform. In order to improve user retention rates, Koala Haigou mainly does the following things:

• To receive koala beans, you can collect koala beans every day by completing tasks specified by the platform, which are used for shopping payment, redemption coupons and benefits;
• Black card members, black card members have coupons for low prices, taxes and postage for black card products, which attract users to use Koala to order when they need to purchase goods.

7.4 Share Communication (R)

In order to guide users to spread spontaneously, Koala Haigou mainly uses flip cards to receive cash, and users can get flop opportunities through sharing, and the amount of flops can be withdrawn if they reach 50 yuan;

7.5 Increase revenue (R)

We have introduced in detail the methods to increase revenue in the business value analysis section, so we will not repeat them here.

8. Conclusion

Through the overall analysis of the cross-border e-commerce market and koala ocean shopping, we can draw the following conclusions:

(1) Common factors of policies, economy, society, culture, technology and other factors have promoted the great development of the cross-border e-commerce industry in recent years. With the signing of RECP and the further expansion of reform and opening up, a certain high growth rate will continue to be maintained in the next few years.

(2) In this industry, Koala Haigou enjoys a high reputation and has obvious advantages in user scale (with Tmall International together accounted for 52.1% of the market share in 2019 Q3). After joining Alibaba, Koala Haigou has added great advantages in terms of financial support, supply chain system, logistics system, technology operation and maintenance, bonded warehousing, etc.

(3) In the cross-border e-commerce market, there are three main participants: foreign commodity suppliers, domestic consumers, and cross-border e-commerce platforms. If the platform wants to grow rapidly, it needs to meet the needs of domestic consumers and foreign suppliers, so as to continuously generate user value;

(4) Koala Haizhuang makes full use of marketing psychology, attract new products on a large scale, and increase conversion rate and customer unit price. Make users depend on the platform, promote swing users to become loyal users, and improve user stickiness.

(5) Overall, the pace of Koala's ocean shopping is very good. In the early stage, it continuously improves the basic functions of the product and polishes the user experience; after the demand is verified, it begins to carry out large-scale operation and promotion, and continues to improve and upgrade product functions to bring better experience to users; after the product is more mature, it opens up new directions such as "Tree Climbing TV" and "LIKE Community" to retain old users and attract new users.

(6) The target users of Koala Haizhuang are consumers, so all functional designs are focused on meeting the needs of consumers. Koala Haizhuang focuses on any possible details that users may have before, during and after purchase. The overall functional design is mature, and the user experience process is comfortable and user-friendly.

(7) Operation is crucial to the development of a product. It can be seen that Koala Haizhuang has done a lot of work in attracting new products, promoting activation, retention and self-dissemination, and the results are also good at present.

Above, the author systematically analyzed the reasons behind the rise of Koala Haizhuang from seven parts, including industry, competitors, user value, commercial value, product iteration, product structure, and operation. It can be seen that no product can be successful casually, which must be the comprehensive role of internal and external reasons such as "time, place, and people".

IX. Future Outlook

After analyzing the various reasons for the rapid development of koala ocean shopping, this article will also conduct a systematic analysis of its future development based on the SWOT model, hoping to draw effective conclusions from it.

From the above analysis, we can see that if Koala Ocean Shopping wants to continue to grow, it should do:

1. Ensure that the product is genuine and avoid negative news in this regard. What consumers care about is the issue of authenticity when it comes to cross-border products. Koala Haizhuang should further ensure the authenticity of the products at the source to avoid negative news; at the same time, for some negative comments on the Internet, personnel can be arranged to regularly view, reply and answer consumer questions and confusions.
2. Make sure every function is fully functional. The LIke community is a newly launched function in recent years, focusing on the grass planting economy, but the number of active people at present is not very ideal. The operation of this section should be further strengthened and its role should be fully played.
3. Serving the target group well. Koala Haigou’s member-based e-commerce targets the new middle class. These people are relatively less sensitive to price, but they pay more attention to the experience of the entire purchasing process from product selection to after-sales service. Therefore, serving the target group well and improving their satisfaction can ensure high repurchase rate and user retention.

Author: Bai Lu Morning Light

Source: White Dew Morning Light