China is one of the most unique nations in the world when it comes to the online retail industry. With the largest population of any country in the world (approximately 1.4 billion people), China possesses vast cultural differences from a highly industrialized city life to a more simplistic countryside lifestyle. Few countries can even come close to rivaling the sheer population size and cultural differences of China – but how have these factors affected eCommerce in the country? Here are eight things to know about eCommerce in China…
1) China now leads the world in eCommerce sales by a single country – According to Forrester Research, online sales in China surpassed $290 billion in 2013 – roughly $30 billion more than the U.S, now the second largest country. This is the first time China has surpassed the U.S. in online sales and with strong growth projections for China’s online retail industry, it’s likely China won’t fall behind the U.S. anytime soon.
2) Although China leads the world in online sales, it’s not due to digital ads – The digital ad budget of the largest eCommerce nation in the world isn’t very big at all. China actually trails far behind the U.S. and other leading eCommerce nations with their digital ad spending. For paid search in particular, the U.S. ($19.9 billion spent in 2013) saw ad spend grow to more than double the total spend in the Chinese market last year ($7.9 billion).
3) eCommerce in China is also growing faster than any other country – According to iResearch, eCommerce sales in China doubled from last year (compared to only a 17% increase in U.S. sales) and now accounts for 7.8% for all retail sales in the country. Growth rates are projected to decline but still remain higher than most countries – China is still projected to see at least 30% year-over-year eCommerce growth each year through 2017.
4) Less than half of China’s internet users currently shop online – While some countries such as England have more than 80% of their internet users making online purchases, less than 50% of China’s internet users made an online purchase last year. However, this is expected to change in the coming years as eMarketer predicts 70% of Chinese internet users will be shopping online by 2017.
5) China’s virtual mall, Tmall, dominates eCommerce in the country – Alibaba’s Tmall, which acts like a digital mall for online retailers, dominated the eCommerce landscape in China last year and accounted for approximately 50% of all online retail sales in China in 2013. Jingdong (formerly called buy360) also continues to emerge and is currently the only major competitor of Tmall. Many smaller retailers and brands have had recent struggles due to the dominance of Tmall.
6) Chinese consumers shop online to avoid fake products, get regionally exclusive products – Although the Chinese consumer culture is very deal conscious, more Chinese consumers are turning to online shopping to find authentic products of North American and European origins. Sites such as Tmall and Jingdong have gained consumer trust and it shows through their increasing sales. The expanded range of product variety is also a selling point to Chinese consumers to get them to shop online.
7) Mobile commerce in China has emerged from essentially nowhere – One of the most startling revelations within the global online retail industry in 2013 was the surprising increase in mobile payments in China. In 2012, mobile payments made in China were just $24 million but increased to $197 million in 2013, a staggering 707% year-over-year increase. Mobile is expected to continue to grow at an alarming rate in the coming years as the number of consumers in China who own a smartphone increases.
In conclusion, the eCommerce landscape of China is quite different from other leading online retail markets such as the U.S. and Europe. Although China is now the largest online retail market in the world, a large percentage of its population still does not shop online and the full potential of digital advertising in the country has not been realized. As mobile continues to drive major growth in the Chinese online retail industry, it’s likely more Chinese consumers will turn to online retail once they are exposed to its potential for finding unique and authentic products through Chinese online retail sites.