In the third quarter, DiDi reported total revenues of RMB 51.4 billion, a notable 25.0% increase compared to the same period last year.

This surge is primarily attributed to the strong performance of its China Mobility segment, which brought in revenues of RMB 46.6 billion, marking a 26.6% year-on-year growth. The international segment also showed promising progress with a 27.7% increase in revenue, totaling RMB 2.0 billion.

A critical factor in this growth trajectory is the increase in core platform transactions, which rose by 33.9% year-over-year, reaching 3,579 million transactions. This uptick in user engagement also saw the Gross Transaction Value (GTV) climb by 36.7% to RMB 91.5 billion.

Despite these positive indicators, the company’s financial health presents a nuanced picture. While net income stood at RMB 0.4 billion, with RMB 0.1 billion attributable to ordinary shareholders, the Adjusted EBITA (Non-GAAP) showed a loss of RMB 0.3 billion.

This loss underscores the ongoing challenges DiDi faces in achieving operational profitability, especially in its international and other initiatives segments.

DiDi’s CEO, Mr. Will Wei Cheng, expressed optimism, highlighting the recovery in domestic demand and the company’s strategic focus on core mobility services. He also underscored the commitment to expanding the business and enhancing product capabilities, signaling a confident outlook for the future.

The quarter also saw significant strategic movements, including a focus on marketing and incentives in key international markets like Brazil and Mexico. Additionally, the completion of a transaction involving the sale of certain smart auto business segments to XPeng Inc. reflects DiDi’s strategic refocusing efforts.

As DiDi navigates its way forward, its robust revenue growth and strategic decisions, such as international market investments and business restructuring, are pivotal.

However, the challenge remains in balancing these growth aspirations with achieving profitability, especially in competitive international markets. The company’s next steps will be closely watched as it strives to maintain its momentum in the ever-evolving mobility technology landscape.

From the IaaS + PaaS market perspective, the first half of 2021 increased by 43% (vs. 48.6% in H1) year-on-year, down 6% from the first half of 2021, but still maintained the highest growth rate in the world.

In the next five years, China’s public cloud market will continue to grow at a compound growth rate of 30.9%. By 2026, the market is expected to reach US$105.76 billion, and the global share of China’s public cloud service market will increase from 6.7% in 2021 to 9.9%.

The competition in China’s cloud computing extends from focusing on infrastructure to the competition of comprehensive cloud platform capabilities. In addition to increasing investment in infrastructure construction at the IaaS layer, cloud vendors also continue to strengthen chip self-research capability, improve PaaS capability (data processing capability, cloud-native, low code development, etc.), build leading, fast, and perfect solution service capability and implementation and delivery ecology and develop a more comprehensive cloud platform.

The digital transformation of government and enterprises has fully entered the cloud era.

In the first half of 2021, the State Council put forward decisions on deepening the integrated development of new-generation information technology and manufacturing industry and creating new advantages of the digital economy.

Also read: the latest on China’s public cloud market

Local governments and regulators have issued relevant technical specifications and application standards of cloud computing platforms, actively promoted the all-around and in-depth integration of digital technology and social development, and accelerated the application and implementation of digital technology in various industries.

Cloud computing has become the basis and hub of digital transformation. Under this background, there is a huge demand and market space for cloud services in the field of government and enterprises.

Cloud vendors have released their own cloud-native strategies to seize the opportunity from the aspects of products, partners, standard-setting, talent cultivation, and so on.

Industry digitization and low-carbon development have become the mainstream trend. In terms of themselves, cloud vendors continue to improve product energy efficiency and promote the low-carbon development of the cloud industry by investing in innovative energy-saving technologies.

In terms of industry empowerment, cloud manufacturers invest in power electronics technology and integration and innovation with digital technology, promote the development of clean energy and the digitization of traditional energy, bring digital technology to each industry, and support all walks of life to promote low-carbon development through digitization.

In both IaaS and Iaas+PaaS markets, the competition is tight. The leading vendors Alibaba Cloud, Huawei Cloud, and Tencent Cloud have firmly taken the top three positions and jointly have 60% of the market share.

Cloud vendors in the network operator camp grew rapidly, with independent research and development and cloud network integration as their keywords.

The fourth ranked China Telecom Tianyi Cloud formed a full-stack cloud product system by the end of 2020, further deepened to the vertical industry and territory in 2021, sank the resource and service team to the local city, and the local cloud business grew rapidly, creating a new growth level for Tianyi Cloud.

Pricing only the 2nd most important in China for choosing cloud vendors

Xiaomi’s monthly active users (“MAU”) of MIUI reached 278.7 million, an increase of 34.7% YoY. AI assistant “ Xiao’ai ” had 49.9 million MAU; Xiaomi ranked 4th globally in terms of smartphone shipments; and, global shipments of its smart TVs reached 2.7 million units.

Xiaomi financial performance

In the second quarter of 2019, Xiaomi recorded RMB52.0 billion in revenue, representing an increase of 14.8% over the corresponding period of 2018. Gross profit margin increased to 14.0% from the 12.5% achieved in the corresponding period of 2018. Adjusted Net Profit increased by 71.7% to RMB3.6 billion. As of June 30, 2019, its total cash resources amounted to RMB51.1 billion.

The “Smartphone + AIoT” dual-engine strategy that Xiaomi adopted at the beginning of the year has borne fruit. Its user base has continued to expand and the number of devices connected to its platform has continued to grow.

In June, 2019, monthly active users (“MAU”) of MIUI reached 278.7 million, an increase of 34.7% over the corresponding period of 2018. The number of connected IoT devices (excluding smartphones and laptops) on its IoT platform reached approximately 196 million units as of June 30, 2019, representing year-over-year growth of 69.5%.

Meanwhile, its AI assistant “ Xiao’ai ” had 49.9 million MAU in June 2019, representing a year-over-year increase of 88.3%.

Xiaomi has won a number of international recognitions in 2019 to date. It took Xiaomi only 9 years to debut on the Fortune Global 500 list of 2019, becoming the youngest company on the list this year. Furthermore, Xiaomi made it into the 2019 BrandZ Top 100 Most Valuable Global Brands ranking for the first time, ranking 74th with a brand value of US$19.8 billion. Xiaomi has also been recognized as one of the 2019 Forbes China’s 50 Most Innovative Companies.

Xiaomi Smartphones

Its smartphone segment recorded RMB32.0 billion in revenue in the second quarter of 2019, representing an increase of 5.0% over the corresponding period of 2018. Its smartphone sales volume in the second quarter of 2019 reached 32.1 million units.

According to Canalys, Xiaomi ranked 4th globally in terms of smartphone shipments during the second quarter of 2019 and its market share in terms of global smartphone shipments increased from 9.5% in the second quarter of 2018 to 9.7% in Q2 2019.

Both its Xiaomi brand, which focuses on pioneering advanced technologies, establishing itself in the mid- to high-end markets, and building online and offline new retail channels, and its Redmi brand, which is positioned to pursue the ultimate price-performance ratio and focus on online channels have performed well.

After the launch of the new flagship model K20 series under the Redmi brand, Xiaomi has established a comprehensive Redmi smartphone product portfolio that covers a wide price range. In particular, the global sales volume of the Redmi Note 7 series reached 20 million units as of the date of this announcement, achieving this milestone in only around 7 months since its launch on January 10, 2019.

In addition, the global shipments of the K20 series already recorded more than 1 million units within the first month of its launch.

On July 2, 2019, Xiaomi launched the CC series under the Xiaomi brand, which includes Mi CC9, Mi CCe9, and Mi CC9 Meitu Edition. The CC series is positioned as a fashionable series targeting younger customers. The CC series places an emphasis on being visually appealing in terms of both form and function, offering stylish product design and enhanced photography experience.

Mi CC9 Meitu Edition is a joint development with Meitu Inc. which specifically targets the female user market. Leveraging its product development and supply chain management capabilities, as well as Meitu’s image-related algorithms and its deep understanding of female users, the Mi CC9 Meitu Edition offers outstanding photographic experiences and builds a solid foundation for its ongoing expansion into more diversified user markets.

Its products have been strongly recognized by the market as a result of the successful implementation of its multi-brand strategy. The average selling price (“ASP”) of its smartphones has continued to increase, achieving year-over-year growths of 13.3% and 6.7% in mainland China and overseas markets, respectively. In Q2 2019, the revenue generated by smartphones sold for RMB2,000 or more accounted for 32.3% of the total revenue of the smartphones segment.

Following the granting of 5G business licenses in mainland China, 5G technology has officially started to be implemented for commercial use. The commercialization of 5G technology could potentially lead to a new smartphone replacement cycle and boost the overall demand of the domestic market.

Xiaomi established a research and development team back in 2016 for advanced research on 5G technology and are now well-prepared for the commercialization of 5G. The Mi MIX 3 5G, its first 5G model was already available in various European countries, and its second 5G smartphone model will also be launched in China in the second half of the year.

The gross profit margin of its smartphone segment increased from 3.3% in the first quarter of 2019 to 8.1% in Q2 2019. During the early transition period from 4G to 5G technology, Xiaomi will continue to invest in research and development of relevant technologies while remaining prudent with its cash flows and profitability.

IoT and lifestyle products

In Q2 2019, the revenue of the IoT and lifestyle products segment rose by 44.0% to RMB14.9 billion over the corresponding period of 2018. Its smart TV business continues to have a leading edge in both mainland China and overseas markets.

Global shipments of its smart TVs reached 2.7 million units, representing year-over-year growth of 41.1%. According to AVC, Xiaomi ranked 1st in terms of TV shipments in mainland China for the six months ended June 30, 2019.

Xiaomi ranked 1st in terms of smart TV shipments in India for five consecutive quarters as of the second quarter of 2019. With its efforts in expanding its smart TVs globally, Xiaomi achieved a top 5 position in terms of global TV shipments for the six months ended June 30, 2019, according to AVC.

Xiaomi has positioned large home appliances as an important element of its AIoT strategy. Xiaomi will focus on innovation and product design, offering intelligent user experiences and promoting the enhanced connectivity and compatibility of its smart home appliances.

For the six months ended June 30, 2019, the shipments of its air conditioners amounted to approximately 1 million units. At the same time, Xiaomi has also entered the smart kitchen appliances market.

In Q2 2019, Xiaomi continued to enrich its IoT product portfolio. The market share of its laptops has been steadily increasing following the launch of its new products. On May 28, 2019, the Redmi brand introduced its first 14” slim notebook and enjoyed widespread popularity.

According to IDC Consulting (Beijing), the market share of its laptops in mainland China in terms of shipments increased from 5.5% in the second quarter of 2018 to 8.7% in Q2 2019. Its Mi Band ranked 1st in the global wearables market in terms of shipments in the first quarter of 2019.

Meanwhile, the Mi Band 4 recorded shipments of more than 1 million units within 8 days of its launch on June 14, 2019. In addition, Xiaomi has also launched several new products, including its AI Translator “Xiao’Ai Teacher”, Mi Smart Door Lock and Mi Smart Combo Wash and Dryer Pro, which are supported by its AI assistant “Xiao’Ai”. These product launches illustrated its continuous
the pursuit of excellent product design and quality.

Xiaomi has continued to improve the device-to-device interaction and enhance its users’ smart home experience. For example, when a user opens the door through a Mi Smart Door Lock, its
AI assistant will welcome him/her home. At the same time, the Mi Air Purifier, Mi Air Conditioner, and other smart devices could be switched on automatically. The Mi Smart Combo Wash Dryer Pro can be operated by the voice control function through its AI assistant

Xiaomi Internet services

In the second quarter of 2019, its user base continued to expand. The MAU of MIUI rose by 34.7% year-over-year from 206.9 million in June 2018 to 278.7 million in June 2019. The MAU of MIUI in mainland China was 115.1 million in June 2019. The MAU of its smart TVs and Mi Box achieved 53.8% year-over-year growth, reaching 22.6 million in June 2019.

Revenue from its internet services segment grew by 15.7% year-over-year to RMB4.6 billion in Q2 2019. Advertising revenue slightly decreased by 0.6% year-over-year to RMB2.5 billion due to a soft mainland China advertising market, particularly due to reduced advertising spending from other internet companies which contributed a meaningful portion of its advertising revenue.

Over the course of the last few quarters, Xiaomi has continued executing its strategy to diversify its advertising customer base. Through expanding into more vertical industries, such as finance and small and medium-sized enterprises, Xiaomi is developing a more robust and healthy advertising business to capture more future growth.

Revenue from gaming decreased by 4.1% year-over-year to RMB675.1 million. However, its gaming gross profit increased to RMB408.2 million in Q2 2019 from RMB212.5 million in Q2 2018, representing an increase of 92.1%. Its gaming gross profit margin increased from 30.2% in Q2 2018 to 60.5% in Q2 2019 as Xiaomi optimized its gaming distribution and had higher gaming revenue growth from content providers with a high gross profit margin. Its other internet value-added services grew by 89.9% year-over-year to RMB1.4 billion, primarily due to the strong growth in revenue from its fintech business and Youpin e-commerce platform.

Introduction to Xiaomi’s e-commerce platform Youpin

Xiaomi has been focusing on enriching its internet services and content to strengthen its advertising business. Many of its internet services are leading on its smartphones, its Mi App Store, Mi Browser, Mi Security, and Mi Music ranked 1st and Mi Video ranked 2nd in their respective categories in mainland China in terms of MAU on its smartphones in June 2019.

Furthermore, its news feed service ranked 1st in terms of MAU on its smartphones in mainland China, reaching 71.0 million MAU in June 2019, representing a year-over-year increase of 31.0%. Its search service also ranked 1st on its smartphones in mainland China in terms of search query volume in the second quarter of 2019.

Xiaomi developed various entry points for its search function, including browser, negative one screen, launcher searchbox, and its AI assistant. Leveraging its increasingly diversified services and
multi-dimensional data, Xiaomi is able to further improve its algorithm and enhance its users’ experience. Services like news feed and search allow Xiaomi to diversify its advertising customer base.

Internet service revenue outside of advertising and gaming from mainland China smartphones, including those generated from the Youpin e-commerce platform, fintech business, TV internet services and overseas internet services, increased by 108.8% over the corresponding quarter in 2018, accounting for 36.0% of the total internet service revenue in the second quarter of 2019.

For the six months ended June 30, 2019, the gross merchandise volume (“GMV”) of its Youpin e-commerce platform grew to RMB3.8 billion, an increase of 113.9% YoY. In June 2019, more than 65% of Youpin’s GMV came from non-Xiaomi smartphone users.

Revenue from its fintech business increased to RMB792.0 million in Q2 2019, representing year-over-year growth of 62.7%. Its current fintech business focuses on consumer loans and supply chain financing. With its sophisticated risk management model and technology capability, and extensive user base and supply chain partners, Xiaomi had a solid business foundation and potential to grow. In the meanwhile, Xiaomi is also actively exploring other fintech business opportunities.

Its TV internet services are also fast-growing and increasingly diversified. TV internet services revenue is mainly generated from advertising, paid subscription, and app distribution. In June 2019, Xiaomi had over 3 million paid subscribers, representing a year-over-year increase of 83.1%. Xiaomi offers a variety of membership services, including video membership, sports memberships, and children membership. Its subscription services have expanded to other non- Xiaomi TVs to serve a wider user base.

Xiaomi’s Overseas markets

With the overseas expansion of its smartphone business, its overseas internet service revenue also increased significantly. Xiaomi continued to build and strengthen its service offerings in overseas markets. In June 2019, its browser ranked 1st among all browsers in India in terms of MAU on its smartphones. In the second quarter of 2019, the average revenue per user (“ARPU”) in overseas markets recorded a year-over-year increase of 133.0%.

Xiaomi has maintained strong growth in the overseas markets in the second quarter of 2019. Its revenue from the overseas markets grew 33.1% year-over-year to RMB21.9 billion in the second quarter of 2019.

Xiaomi will continue to build and expand its new retail channels in the overseas markets. As of June 30, 2019, there were a total of 520 Mi Home stores overseas, representing a 92.6% year-over-year growth, of which 79 stores were located in India. Furthermore, in India, Xiaomi had more than 1,790 Mi Stores that cater to tier two and rural areas of India as of June 30, 2019.

According to Canalys, in the second quarter of 2019, Xiaomi ranked among the top five in over 40 countries and regions in terms of smartphone shipments. According to IDC, its smartphones have ranked 1st in India in terms of shipments for eight consecutive quarters. In addition, according to Canalys, in Q2 2019, Xiaomi ranked 4th in terms of smartphone shipments for Western Europe, representing a year-over-year increase of 53.2%.

Xiaomi ranked 2nd in open market channels in Spain in terms of smartphone shipments in Q2 2019. Xiaomi has been developing operator channels in Europe. Its flagship smartphones, such as Mi MIX 3 and Mi 9 series, have been launched in operator channels in the United Kingdom, France, Spain, Italy, and Switzerland.

AIoT

In Q2 2019, Xiaomi continued the implementation of its “Smartphone + AIoT” dual-engine strategy and its AIoT platform continued to maintain its leading position. As of June 30, 2019, the number of connected IoT devices (excluding smartphones and laptops) on its IoT platform reached approximately 196 million units, representing a year-over-year increase of 69.5%.

The number of users who have five or more devices connected to Xiaomi’s IoT platform (excluding smartphones and laptops) increased to approximate 3 million, representing a year-over-year increase of 78.7%. In the six months ended June 30, 2019, the shipments of its AI speakers exceeded 4 million units.

In June 2019, its AI assistant had 49.9 million MAU, making it one of the most used AI voice interactive platforms in China. In June 2019, 45% of its AI speaker MAU used voice control to interact with their IoT devices at least once that month.

Xiaomi continued to open up its AIoT platform to build a more vibrant AIoT ecosystem. Its Mi Home app had 30.4 million MAU in the second quarter of 2019 and more than half of the MAU in mainland China were from non-Xiaomi smartphone users. Xiaomi will continue to invest in the development of its open AIoT platform to attract more third parties and users to join this AIoT platform.

The Group’s AIoT Strategy committee will further enhance the development of its AIoT technology, by building a comprehensive AIoT ecosystem, strengthening its research and development, and realizing synergies across business units to improve its smart devices’ connectivity and user experiences.

For example, Xiaomi continues to develop technologies for files to be seamlessly transferred between its smartphones and laptops, as well as for intelligent projection to be enabled between its smartphones and smart TVs.

Xiaomi’s Investments

As of June 30, 2019, Xiaomi invested in a total of over 270 companies with an aggregated book value of RMB28.7 billion, representing year-over-year growth of 20.8%. Xiaomi also expanded its investment into supply chain companies to strengthen its partnership with key component suppliers and to enhance its abilities in advanced technology sourcing and manufacturing.

As of the date of this announcement, Xiaomi invested in 12 supply chain companies. Among those, three of the investee companies were listed on the STAR Market in China. Xiaomi believes its investments not only allowed Xiaomi to establish close partnerships with the investee companies but also provided Xiaomi with recurring investment income.

In the second quarter of 2019, Xiaomi generated net gains on disposal of investments (after tax) of RMB551.8 million.

A Gartner research shows Database Management Systems (DBMS) cloud services are already $10.4 billion of the $46.1 billion DBMS market in 2018. And, the overall DBMS Market grew at 18.4% from 2017 to 2018 – its best growth in over a decade. Cloud DBMS accounted for 68% of that growth.

Amazon Web Services and Microsoft combined account for 75% of the growth from 2017 to 2018. AWS is 100% cloud and Microsoft DBMS growth (Gartner believes) was almost 100% cloud. Cloud growth is dramatically changing vendor rankings.

Alibaba (9), Huawei (11), and Tencent Cloud (13) made it to the top 15 of Gartner Total DBMS Market Share Ranks 2018.

Internet users and market overview: China vs. the U.S.

Leading smartphone brands have tightened their grip of urban China market. In the three months ending October 2017, the top five brands – Huawei (including sub-brand Honor), Xiaomi, Apple, Vivo and OPPO – made up 91% of smartphone sales in urban China, compared to 79% a year earlier, according to the latest smartphone OS data from Kantar Worldpanel ComTech.

China, a market once overrun with new challengers, is maturing.

“Chinese challenger brands like Meizu, LeTV, Coolpad, ZTE, and Lenovo were once on the same trajectory as like of Xiaomi, but any momentum they once had has abruptly stopped, with many struggling to get past a 1% share,” said Dominic Sunnebo, Global Business Unit Director for Kantar Worldpanel ComTech. “Samsung’s performance in China continues to deteriorate, with its share now down to just 2.2% of that market.”

Kantar Worldpanel ComTech carries out monthly panel surveys among Chinese urban mobile phone users to monitor the market share changes of various brands. In China, the panel size is 22,000. Panellists were recruited from tier-1 to 5 cities and each year more than 260,000 surveys were conducted. The nature of the research methodology means it can cover the influence of smartphones sold in other countries ended up in China and avoid the confusion caused by unsold phones stocked at warehouses of distributors.

Digging deeper into the data, we can see that Xiaomi and Honor both realized significant growth in August – October period. Xiaomi’s sales market share jumped to 20.1%, 1 percentage point higher than in the May – July circle. However, due to its previously lacklustre performance, currently only 13.8% of all urban smartphone users are using Xiaomi, 2.1 percentage points lower than a year ago.

Honor’s share was 11.7% in August – October, also 1 percentage point higher than in May – July circle. Among all urban smartphone users, 9.8% are using Honor, 1.3 percentage points higher than a year ago.

Among the top 20 best-selling models during August – October period, eight are from Xiaomi or Honor.

Even though “price” is the biggest advantage of both brands when people making their purchasing decision, Xiaomi and Honor have both managed to achieve higher selling prices. Between August and October, the average selling price of Xiaomi models is 1,640.32 yuan, 321.96 yuan higher than a year ago; that of Honor phones is 2,136.66 yuan, 506.53 yuan higher than a year ago.

It’s a bittersweet period for Apple. Urban China remained a bright spot for Apple, with its share edging up 0.5 percentage point in the latest three months to reach 17.4%.

But globally, iOS share fell in key markets, making clear the impact of the flagship iPhone X not being available to buy in the month of October.

Dominic said: “It was somewhat inevitable that Apple would see volume share fall once we had a full comparative month of sales taking into account the non-flagship iPhone 8 vs. the flagship iPhone 7 from 2016. This decrease is significant and puts pressure on the iPhone X to perform.

“Considering the complete overhaul that the iPhone X offers, consumers may be postponing their purchase decisions until they can test the iPhone X and decide whether the higher price, compared to the iPhone 8, is worth the premium to them,” he said.

He added: “As of October 2017, 35.3% of Apple’s installed base customers across Europe and the United States had owned their iPhones for more than two years – up from 30.1% a year earlier and signifying considerable pent-up demand within Apple’s base. In pure value terms, it is likely the iPhone X average selling price will more than make up for a dip in sales of older iPhone models.”

China smartphone market in Q3 2017; 4 out of 10 using Huawei or iPhone

In 2025, e-commerce will represent 10% of all FMCG spend. China and US will lead in volume growth while China and Korea will be fastest growing markets.

Sales of fast-moving consumer goods through e-commerce platforms grew by 30% in the 12 months to March 2017, equivalent to 4.6% of all FMCG sales globally during this period, according to the report “The Future of E-commerce in FMCG” recently published by Kantar Worldpanel.

Whilst the e-commerce channel is growing, the FMCG market as a whole is sluggish, increasing just 1.3% during the same period. E-commerce now contributes to a record 36% of global FMCG growth and will continue to outpace growth in offline FMCG retail. “Our projections show that in 2025, online FMCG will be a US$170 billion business and hold a 10% market share,” says Stéphane Roger, Global Shopper and Retail Director at Kantar Worldpanel.

Whilst the e-commerce channel is growing, the FMCG market as a whole is sluggish, increasing just 1.3% during the same period. E-commerce now contributes to a record 36% of global FMCG growth and will continue to outpace growth in offline FMCG retail. Our projections show that in 2025, online FMCG will be a US$170 billion-dollar business and hold a 10% market share.

In China, e-commerce channel evolved rapidly and in the latest year, approximately 60% of urban families shopped in e-commerce channel. According to Jason Yu, General Manager of Kantar Worldpanel Greater China, e-commerce giants gradually moved offline and started to transform the entire retail infrastructure. This helps to provide consumers with a better shopping experience and enable brands to achieve incremental growth.

In terms of absolute value growth, the top six contributors are all leading power economies, led by China and the United States. The other top performing countries are South Korea, the UK, Japan, and France. Last year, value increased by 52% in China, 41% in South Korea, 8% in the UK, 7% in France and 5% in Japan and in the US.

Kantar Worldpanel projections show that by 2025, online FMCG will be a USD 170 billion-dollar business, and hold a 10% total market share.

South Korea and China will continue to lead the way and Asia in general remains at the cutting edge of online adoption. The big global uplift will come from the USA, predicted to rise from a 1.5% e-commerce share in 2017 to 8% in 2025. This can be attributed to the successful rollout of click and collect, delivery and subscription models, and the acceleration of disruptive models.

This article was originally published on Kantar.com

Online banking in China has suffered badly at the hands of online and mobile payment providers over the past few years. In the second quarter of this year, transaction volumes fell for the first time ever.

After several quarters of lackluster growth, the total value of online banking transactions in China dropped by 6.8% in Q2 2017 to 503.1 trillion yuan (US$76.34 trillion).

Despite banks’ introduction of new services to their online platforms, they have proven unable to compete with the flexibility and utility of online and mobile payment services and have steadily lost market share. One bright spot for banks has been business services, which have grown steadily despite the intrusion of third-party payment providers.

Within this market, ICBC remains the market leader, accounting for 28.5% of all transactions by value, followed by CCB at 14.9% and Bank of Communications at 11.2%. ICBC is a leader in business services and has innovated in the retail banking sector with the introduction of an AI customer service interface to maintain its lead even as the market as a whole suffers.

China’s B2C apparel market reached 307.74 billion yuan (US$46.37 bn) in Q2 2017 with an increase of 47.3%.

Tmall has 80.7% market share in China’s B2C online clothing market in Q2 2017, followed by JD (8.7%) and Vipshop.

The online retail market in China reached 1.59 trillion yuan (US$244.6 billion) in the second quarter of 2017 (up 31.2% over Q2 2016), with B2C sales accounting for 860.5 billion yuan (US$132.4 billion), an increase of 32% over the second quarter of 2016. Read more »

Also read: China cross-border e-commerce market 2017

China online dating market totaled 1.207 billion yuan (US$180 million) in Q2 2017 with a growth rate of 39.2% YoY or 21.9% QoQ.

The top four online dating platforms (Zhenai, Youyuan, Jiayuan and Baihe) account for 80.1% total market share, 2.3 percentage higher than Q1 2017.

China’s online dating user spend an average of 2.45 hours in Q2 2017. Jiayuan user spent the longest, 4.9 hours per quarter.

China online accommodation market totaled 39.38 billion yuan (US$5.97 billion) with an increase of 27.1% YoY according to data from Analysis.

Ctrip leads China’s online accommodation market in Q2 2017 with 46.7% market share, followed by Qunar, Meituan and Alitrip.

While China’s more affluent consumers increasingly favor independent travel, the online holiday and group tour booking market is still showing rapid growth, likely driven by continued expansion of the middle class in China. China online holiday booking market overview Q2 2017 »

China online tourism market analysis 2017

While China’s more affluent consumers increasingly favor independent travel, the online holiday and group tour booking market is still showing rapid growth, likely driven by continued expansion of the middle class in China.

In the second quarter of 2017, China’s online holiday booking market grew to 21.77 billion yuan (US$3.26 billion), equating to year-on-year growth of 28%.

While this figure is slightly lower than that for Q1 2017, this is common as the second quarter in China lacks any long public holidays and opportunities for travel are more limited; traditionally, the first and third quarters are peak season for group tour bookings.

During 2017, the National Tourism Administration has taken measures to combat group tours with unrealistically low prices, believing that these are likely to be low-quality and rely on forcing tourists to engage in activities and shopping for added fees in order to recoup costs.

This policy has come as part of a comprehensive effort to revamp and improve the quality of group tours in China and make high-quality travel more accessible to the burgeoning middle-class, as well as to restrain monopolistic practices and anti-competitive pricing.

Travel e-commerce platforms including Tuniu and Ctrip have responded with their own efforts to increase quality and standardize customer experiences. Ctrip released a new “diamond standard” rating system and released a new high-end line of tours.

Lvmama’s “Happy Donkeyback Travel” line also received an upgrade, wherein the platform began enforcing a “no forced shopping, no hidden costs” program and worked to make sure tour operators weren’t receiving kickbacks and commissions from local sites and retailers.

In addition, market trends towards independent travel are forcing tour providers to move in the direction of greater personalization and more authentic experiences for tourists. Themed tours are becoming more common, including food and minority culture tours.

Capital is continuing to flood the market, with startup “Travel Book” completing A round financing for more than 10 million yuan (US$1.5 million). Travel Book is a building a travel planner and tour guide platform which will help travelers put together optimized itineraries and daily plans for travel on tours and independent trips.

Regarding market share in the second quarter, Tuniu (with 26.83%) and Ctrip (with 22.84%) remain the top two players in the market, sharing half of the market between them. Tuniu has been able to strengthen its supply chain and improve member services, and has earned customer approbation with its strong customer service and professional tour guides.

It’s innovative review system allows customers to compare hotels, sites, and experiences from inside and outside packaged tours to better choose tour packages for themselves. Ctrip is leveraging its acquisition of Qunar to build a better e-commerce platform for tours, and totaled 4.92 billion yuan (US$ 737.6 million) in tour revenue in Q2.

Below the top two, LY.com and Lvmama maintained market shares of  14.52% and 14.35%, respectively. They, too, worked to improve quality and standardization, with Lvmama in particular trying to build a set of personalized and highly diverse tour packages for its customers.

Analysys analysts believe that online holiday market will continue to expand and customer habits continue to develop, as resort packages are being accepted by a wider range of markets.

Given the demand for personalization, enterprises are working to optimize operational efficiency, and continuously drive product and service segmentation and personalized upgrades. Enterprises are moving from business development towards a deeper cultivation of their customer bases, pointing towards a healthy trend of development within the overall market.

During 2016, the online tourism market in China maintained steady growth over the year prior, growing much more quickly than GDP growth while increasing its overall penetration into the tourism industry as a whole.

Overall, online booking of hotels and plane tickets maintained leading positions within online tourism sales, and individual travel bookings dominated the industry (as opposed to group tours). The trend towards individual, independent travel is beginning to dramatically affect the market, mostly in ways which are beneficial to the online travel booking industry.

Tourism industry revenue trends

The tourism industry in China has maintained a growth rate far above GDP growth for several years, growing at over 10% year-on-year every year for the past five years. In 2016, the total market reached 4.69 trillion yuan (US$ 703 billion), having grown by 13.6% from 2015.

This growth rate is also slightly higher than 2015, when growth over 2014 was 11.0%. Tourism accounted for 6.3% of China’s GDP in 2016, also a slight increase over 2015 (6.0%).

Meanwhile, the online tourism market is growing much more rapidly than the tourism market overall; in 2016, online tourism revenue reached 739.42 billion yuan (US$110.85 billion), representing 56.1% growth over 2015. As a result, online tourism has increased its market share from 11.5% of the market in 2015 to 15.8% in 2016 (up from 6.6% in 2012).

Online tourism market overview

From 2015 to 2016, there were minor changes in the structure of the online tourism market in China. In 2016, as before, online booking of transportation (plane, high-speed rail, conventional rail) dominated the market, with total revenue of 538.5 billion yuan (US$80.7 billion), followed by accommodation booking with 125.1 billion yuan (US$18.8 billion).

Group tours and tour packages made up the remainder; market share shifted in favor of transportation, which rose from 70.2% to 72.8% of the market, taking equally from accommodation and tours, which both slid from 2015 by about 1.3%.

Within the online tourism market, there were three major players and a host of minor ones. The major players, Ctrip, Qunar, and Fliggy, collectively dominated the market in 2016, with 68.7% of market share. Ctrip maintained a commanding lead, holding 35.7% of the market (263.6 billion yuan or US$39.5 billion), a slight decline over the year prior in terms of market share.

Qunar, however, slid dramatically after being bought out by Ctrip; in 2015 it accounted for 27.8% of the online tourism market, but dropped to only 18.2% in 2016. Minor players stepped into the gap in a big way, moving on the backs of a market shift in favor of O2O and featuring several new players which combine tourism sales with Tripadvisor-like crowd-sourced advice and reviews.

Online tourism investment overview

When it comes to investors, holiday and accommodation booking are still the two sectors which attract the most attention and capital. With Chinese tourism spending continuing to rise and holiday booking markets still in their infancy, there is significant room for online providers to make an impact and earn a return on investment in this sector.

Within the holiday booking industry, international travel continues to be a growth market and a driving force. While overall investment share declined significantly from 2015, holiday booking is still an under-served market and will continue to attract attention and financing going forward.

In addition, investment into travel finance is noteworthy; a new and much-watched market, with investment only appearing in 2016, it is driven by Chinese consumers’ increasing willingness to amortize major expenses beyond a home.

Online tourism markets: Sector breakdowns and analysis

Online transportation market

Of all sectors, transportation booking has the highest online market penetration rate, with online booking accounting for 54.6% of sector revenue. As consumers in China come to prefer independent travel over group tours, online booking has become the preferred way of buying train or plane tickets because of its convenience and economy. In 2016, the online transportation market grew by 62.0% to reach 538.5 billion yuan (US$80.7 billion).

The market share breakdown within the online transportation market mirrors the breakdown within the online tourism market as a whole, with the same three major players accounting for 69.4% of the market in 2016.

As with the overall market, Qunar has seen a dramatic fall in market share from 2015 to 2016, dropping by a whopping 12.5% to 20.5% following its purchase by Ctrip. Ctrip has maintained a commanding lead as the largest player in the market, especially with the addition of Qunar.

Minor players have stepped into the market in a big way, with sites such as Tuniu (which formerly focused on group tours and holiday packages) introducing transportation booking platforms.

The most important component of online transportation booking, China’s online plane ticket booking market has grown in lock-step with (indeed, been the primary driving factor behind) growth in the online transportation booking market.

In total, plane tickets account for 88.5% of online transportation booking revenue, and 68.1% of all plane ticket revenue comes from online bookings. From 2015 to 2016, this market has grown by 60.9% to 476.7 billion yuan ($US 71.5 billion). By comparison, train and bus tickets are a small portion of the online transportation booking market, and online booking’s penetration into these areas is quite low.

Online accommodation market

The market for online accommodation booking in China is the second largest component of the online tourism industry, with a value in 2016 of 125.1 billion yuan (US$18.75 billion), and accounting for 32.6% of the accommodation booking sector within China. This market is also growing far more quickly than the tourism market in China, but u

This market is also growing far more quickly than the tourism market in China, but unlike the online transportation booking sector, its year-on-year growth fell markedly from 2015 to 2016, from 57.6% in 2015 to 45.1% in 2016.

The four major players within the online accommodation booking market in China are Ctrip, Qunar, Fliggy, and eLong, which collectively account for 74.4% of the market. Qunar, as mentioned above, was acquired by Ctrip in 2016, as was eLong, meaning that that one holding company collectively controls 67.3% of the market for online accommodation booking.

Market share for both Qunar and eLong has fallen significantly from 2015 following their acquisition by Ctrip. Their market share has been eroded in part by the entry of Meituan (A Groupon analog) into the hotel booking market in a big way in recent months.

Online holiday and tour markets

The online holiday and tour booking market is simultaneously the smallest sector of the online tourism industry and the one in which online platforms have the least penetration, accounting for only 10.3% of the online tourism industry and 17.5% of holiday and tour booking.

Its comparatively small market penetration is one of the reasons that it has attracted significant attention and capital from investors in recent years, but in 2016 the sector saw markedly smaller growth (37.7%) compared to 2015 (58.2%), reaching a total revenue of 75.7 billion yuan (US$11.3 billion).

Analysis sees long-term, slow growth in the online side of the industry as it slowly increases market penetration relative to offline providers, but the industry as a whole may be falling out of favor with consumers who are increasingly interested in independent travel.

Analysts concluded that the industry may be entering a period of “deep plowing and careful cultivation” (a Chinese idiom roughly meaning “retrenchment”) in which more strategically-minded participants restructure their operations to suit changing consumer preferences and many participants are weeded out entirely.

As with the other sectors, the online holiday booking market is dominated by several major players (with a total market share of 76.5%), but excepting Ctrip none of the players are the same as in the other sectors, due to the wildly different conditions and requirements faced by the industry. Compared to 2015, market consolidation has increased; market share for the largest four players in 2015 was 68.4%.

Given the conditions faced by the market, market entrants increasingly focus on upscale tours rather than the economy group tours which were the mainstay of the industry, and the major participants are restructuring their operations accordingly.

One bright spot within the online pre-packaged tour/holiday booking industry remains international tourism, which accounts for 56.0% of the market. Outbound tourism has been immune to many of the headwinds faced by the market for domestic group tours, buoyed by issues related to language, safety, and tourist visa access for Chinese traveling abroad.

However, the growth rate has slowed even for the international group travel market; Analsys analysts suggest that, as Chinese consumers become wealthier and more experienced internationally, and as foreign countries become more adapted to and comfortable with Chinese tourists, the same preference for independent travel which has already manifested itself for travel within China will come to do so for international travel as well.