China’s e-commerce market is the largest in the world, driven by rapidly increasing incomes and internet access. There are over 632 million internet users in China, 47 percent of the online shoppers. According to Statista, there were US$376.18 Billion in e-commerce sales in 2016; this is projected to increase to US$ 470.06 Billion in 2017. Despite its size, many firms entering the market fail because they don’t adapt their offerings, marketing, and communication to the unique characteristics and demands of Chinese consumers.
What Makes China’s E-commerce Industry Different?
China’s e-commerce industry is much more integrated than America’s and most of the West. Instead of independent retailers operating their own online store, most operate on existing platforms like Tmall. Amazon currently has a 30% market share in the U.S, but China’s Alibaba captures 75% of their domestic e-commerce market. It is important to note that, Alibaba is not a Chinese equivalent of Amazon. It owns multiple platforms, providing business-to-business (Alibaba), business-to-consumer (Tmall), and consumer-to-consumer (Taobao) sites, comparing to Amazon’s single platform. The competitors to Alibaba include Amazon China and JD.com. However, between these big hitters, the majority of the market is locked in.
E-commerce is still playing catch-up in the mobile market in many countries. In China though, 50% of e-commerce sales are through mobile devices. This is advantageous because many shoppers are only a click away from purchasing goods wherever they may be. For companies wishing to sell in China’s digital market, adopting a mobile-first strategy is key.
China’s unique retail environment has enabled it to become the world’s biggest e-commerce market. Away from the major cities, shoppers can find it difficult to find the global brands they desire. Rising wages continue to increase disposable income. As a result, many citizens desire perceived luxury goods from abroad. In smaller towns and cities, those brands can be difficult to find, but the internet changes this. For example, Burberry has a flagship store on Tmall, Alibaba’s business-to-consumer platform, there doesn’t need to be a store nearby in order to purchase premium goods
Shipping is another factor that has helped China’s e-commerce industry thrive. Whereas consumers in other markets may wait days or weeks for products to arrive (or pay a premium for expedited shipping), one-day and same-day shipping are common in China. China’s low shipping costs make this possible.
Closing Thoughts on China’s E-Commerce Industry
In China’s large and fast-growing e-commerce market, there continues to be huge potential for sellers; e-commerce penetration amounts to only 62% in Tier 3 and 4 cities, where the online shopper base is 257 million. However, the challenges posed by such a rapidly changing and competitive market require firms to develop a coherent strategy for entry and growth in China.