Forbes reported that “the e-retail market is estimated to grow to over $1 trillion by 2018”, therefore it could become larger than the e-commerce markets of the U.S, Britain, Japan, Germany, and France all combined. There were more than 360 million online shoppers in China in 2014, a greater number than the entire population of the U.S.
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Understanding the lucrative e-commerce market is vital, here are 7 reasons that account for its dramatic growth.
China’s ‘Internet Penetration Rate’
The internet revolution in China has been unprecedented. At the end of 2014 just under 50% of China’s population had access to the internet, a phenomenal 649 million people are now online in the middle kingdom. Such a high internet penetration rate encourages the rise of e-commercial activities, the number of potential consumers is vast. Increasing mobile engagement and better Wi-Fi networks are expected to further fuel internet usage.
The popularity of shopping online
As the internet penetration rate increases so do the percentage of users shopping online. The percentage of Internet users shopping online rose from 48.9% in 2013 to 55.7% in 2014. Increasingly crowded, congested and polluted urban areas are a key factor in encouraging consumers to go online, to shop from their own homes or ‘on the go’ from their mobiles. Avoiding the crowds and overstretched public infrastructure is an appeal of e-commerce.
The growth of the ‘Smartphone’ and ‘mobile commerce’
According to data by eMarketer the number of monthly active smartphone users in China was 519.7 million in 2014, this encourages users to go online and access mobile-friendly e-commerce platforms from their smartphone. Accessibility and ease of use are thus driving factors.
This form of technological consumption is a relatively new phenomenon in China, it is therefore seen as an exciting and dynamic way to shop.
In a sense, it is a more ‘individual’ shopping experience. Users are not limited by any fixed time or location, the shopping experience through a smartphone becomes an extension of one’s personal, daily life and routine.
The process of integration arguably encourages online e-commerce. Consumers lives are increasingly centered around their Smart Phone. It is a uniquely personalized digital space and incorporating shopping into this forum is no surprise.
Consumers are also not limited by the selection of high street stores, rather they have access to everything online.
Although the majority of e-commerce consumption is by those living in urban areas it is important not to neglect rural customers. Rural populations live away from shopping centers, there is a lack of physical retail services within a proximity to their homes. Many rural dwellers will access the internet and rely heavily upon it for the majority of their purchases.
The growth of a new Chinese ‘middle class’
Spending power is increasing with an increasingly affluent middle-class population. China’s growing economy has lead to increased incomes. GDP per capita in China rose from $4,433 in 2010 to $6,807 in 2014, according to the World Bank. This growing ‘middle class’ have not just a higher disposable income but more freedom than Chinese citizens have had in the past. Modern China is a very different proposition for western brands.
Increased speed of delivery
Investments into logistics, infrastructure and warehousing capabilities have resulted in improved delivery times for online orders. Alibaba is reportedly even testing drones to quickly deliver goods in Beijing, Shanghai and Guangzhou. All this is contributing to increased demand in the Chinese e-commerce market.
Ease of purchasing products from across the globe
‘Tmall Global’ is a key e-commerce platform (owned by Chinese internet giant Alibaba) which specializes in selling international products. It is easier for Chinese consumers to find products from all over the world online, they are not limited by space and time. International products are popular in China with a strong demand for western brands.
Bayern Munich has launched an account with ‘Tmall Global’ where they are selling official club merchandise. This allows them to sell directly to the Chinese online, it also ensures the products are official and not counterfeit which establishes trust in the brand.
The growth of E-commerce presents a huge opportunity for western brands, you will need a comprehensive digital strategy to attract consumers.
– You will need to establish partnerships and strong links with e-commerce platforms such as Alibaba.
– Increase your presence on Chinese search engines (such as Baidu) users will search using certain keywords here, ensure you are a top result.
– Manage your e-reputation in forums and on social networks.
– You need to understand the Chinese e-commerce market and what the Chinese consumer is looking for in terms of the product and how to market it.
We are a specialist marketing agency in China, if you have a project in mind and need advice on how to plan and implement a comprehensive digital strategy do not hesitate to get in touch.
Olivier VEROT, passionate about Marketing and China. Already spent 10+ years in china and now based in Shanghai. One could say I am an "old laowai". I am the founder of GMA, and learn every day new things about Marketing in China, that I share here...
PS: contact me on linkedin
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