Source: iResearch, MRG as of 2012

In China, more shoppers are buying from established retailers instead of individual consumers selling goods.

(Updates comment from Alibaba in the 5th paragraph.)

Right now, China’s e-commerce industry looks like a bazaar where shoppers roam around for independent sellers who have the items they’re looking for. However, trends in the nation’s online buying habits show that the Chinese are moving away from small merchants and gravitating toward their own sorts of superstores such as 360buy Jingdong Mall.

The shift signals that the market is maturing, and it threatens to shake up the industry led by Alibaba Group Holding, China’s biggest e-commerce company. According to a report by Multimedia Research Group that was commissioned by Bloomberg, Chinese consumers made an estimated 35 percent of their online purchases at retailers last year. That’s up from 24 percent in 2011 and 14 percent in 2010, the report said.

As the chart shows, businesses are expected to continue to capture more market share this year and account for the majority of e-commerce transactions by the end of 2014. This type of e-commerce, dominant in mature Internet markets, “is the future of China’s online shopping,” Julia Zhu, an analyst at MRG, wrote in her report. “Chinese consumers shop online for a better price and accessibility to more products,” both of which are better served by big retailers than individuals.

Seemingly, that would be bad news for Alibaba, which owns the dominant consumer-to-consumer retail site Taobao Marketplace. 360buy, which describes itself as an “online shopping mall,” had been attracting millions of shoppers with perks such as free shipping and quality assurance.

John Spelich, a spokesman for Alibaba, said the company had foreseen this shift and has taken steps to address it, including spinning out its own superstore called Taobao Mall in 2011. Alibaba’s two largest e-commerce sites have collectively accumulated more than 1 trillion yuan ($161 billion) in sales, and Tmall continues to experience triple-digit growth, Spelich said.

Since launching Tmall in 2008, Alibaba has capitalized on the growing preference for an all-in-one shopping experience. Tmall is now the leader in that market, according to research firm Analysys International. Within the next decade, Alibaba plans to set up a logistics network that can support 10 trillion yuan ($1.6 trillion) in transactions, the China Daily newspaper reported last week.

In preparation for a brave new world of e-commerce in China, Alibaba has been arranging for several drastic changes to its business just in the past few weeks. The company said on Jan. 10 that it will divide itself into 25 units from seven in an effort to become more flexible. Then Jack Ma said he will step down as chief executive officer in May. Ma said last June the company could sell shares in an IPO within five years.

As the massive Chinese Internet market continues to evolve rapidly, all eyes are on Alibaba to see whether it can stay ahead of the trends without Ma, its billionaire founder, at the helm.

Original post is What the Big Shift in China’s Online Buying Habits Means for Alibaba by Tech Blog.

The closely-held company, founded in 1999, has been fairly quiet about its expansion to date compared with the buzz many technology and e-commerce sites generate. With the company growing, it’s starting to open up and gave Bloomberg.com’s Tech Blog an exclusive look at its 150,000-square-foot facility in San Jose on the busiest online shopping day of the year.

First, here’s how Zazzle works: When a customer views an item online, it exists as an image only. The site provides a wide array of designs or lets users create their own from templates. After a design is selected and the product is ordered, Zazzle’s machinery gets going, printing the image on-demand. That design is then sewn, pressed or otherwise attached to the product and then shipped to the customer. Blank items are the only inventory held in house, and Zazzle offers more than 95 million unique product designs.

“We’re working around the clock, processing thousands of one-of-a-kind orders,” said Charles Ohiaeri, vice president of operations technology. Business is 12 to 16 times greater than during the rest of the year, he said. It’s so busy, in fact, that the Redwood City, California-based company is in the midst of hiring more than 600 workers for the holidays.

In the customized goods market, Zazzle competes with CafePress, which went public earlier this year, as well as smaller startups like Cap That. They’re all vying for business amid what ComScore predicts will be a record holiday season with online retailers bringing in $43.4 billion. On Cyber Monday, spending jumped 17 percent compared with last year to $1.46 billion, making it the heaviest day in history, according to the research firm.

Our tour started virtually the day before Thanksgiving, when I ordered a mini messenger bag from Zazzle’s mobile Website on my Android phone (the company has an app for the iPhone, but not yet for Android devices).

On Monday, we visited the facility to observe the creation of my bag.

Amid the hustle, we were directed to a station operated by Daniel Olais, the production lead for light apparel. Olais rendered the design from the ordering system to the in-house computer. The full-size design was printed using Zazzle’s customized machine. It was then pressed onto fabric, cut and packaged, a process that took about an hour. But the bag wasn’t finished by Zazzle.

The company has teamed up with about a dozen smaller retailers that can take advantage of Zazzle’s design technology. This allows Zazzle to expand its product offerings while providing its partners a bigger pool of customers. Rickshaw Bagworks, a San Francisco-based boutique that sells its own messenger bags, iPad sleeves and tote bags, was the maker of my item.

So we drove the fabric 45 miles to watch the bag’s construction at Rickshaw’s facility, which doubles as a retail outlet. Rickshaw founder Mark Dwight said up to 20 percent of their daily orders now come through Zazzle. About 150 bags are constructed daily at the facility.

“This to me represents the new micro manufacturing,” Dwight said. “Our Zazzle business is definitely accelerating as it becomes more widely known.”

Zazzle’s material was combined with Rickshaw’s own fabric and sewn together on an assembly line, a process that took about 20 minutes. And at day’s end, I walked out with a bag, made to order.

Original post is Behind the Scenes: What Happens After You Place an Order at Zazzle by Tech Blog.