E-commerce in China
Internet sales have increased by almost 50% last year! This is a sector that is developing rapidly and steadily rising. Big names in e-commerce help to develop this market, including the Alibaba leader. It offers shopping online at international consumers through payments platforms and retail sales. Since its stock market listing in 2014, its sales have increased significantly and could be a more important place on the international stage. This activity area is very well developed in China thanks to strong use of social networks and mobile applications by the Chinese people. This is a major factor to consider when you want to enter the Chinese market. It is more focused on digital tools market, more connected. This country represents a substantial market with about 780 million users. The founder of Alibaba, Jack Ma is working with the government to better integrate the digital revolution on the Chinese market and promote the development of the country.
A change in the job market
The arrival of this new concept of online sales has changed consumer habits, but also jobs. More than 46 million new jobs will be created to meet the demand of e-commerce. Thanks to this new market, consumers have more choice and they have access to new products and new concepts. However, this also has an impact on jobs in the stores. Companies should close stores, people are laid off. Li Ning Company, specializing in sportswear was due to close over 2,000 points of sale since 2012 and it shows a budget deficit of more and heavier each year. The e-commerce market competition and disrupts business.
Clashes between the old and new Chinese economic system
The new economic system with the e-commerce market has no solid foundation. It was set up to respond to the economic problems of the population, namely the high cost of taxes, labor and rent. Moreover, China lacks experience in the digital market. The country open up more and more to the outside world but it lags behind Western countries. In the US, only Amazon is based only on the Internet, without having a physical stores.
Contrary to China, traditional retailers are too slow in the digital market. Thus, they do not invent their own online networks but rather placed on existing platforms. This explains why the internet platforms in China represent 90% of the country’s economic market, while it is only 24% in the US. It’s still hard not to rely on advertising to be seen by consumers. Alibaba owns 80% of internet advertising in the distribution sector. Although eBay platform offers a commission fee, 57% of its revenue comes from advertising by Alibaba. Thus, only vendors that can taken advantage of economies of scale can afford to advertise while offering low prices to their customers. For other traditional retailers, it is too difficult to hold on to market online.
3 types of online consumers
First, there are mobile customers who have a fragmented purchasing behavior. They generally pay higher prices and buying in smaller quantities. They order in their trips or midnight. Consumers living in rural areas will pay more expensive for the most recognized products. Consumers who buy from their computers only buy in large quantities. And finally, there are consumers using different distribution channels, which represent 11% of sales online sales, which are about 5%. They are the most experienced and live mainly in large cities. Surprisingly, the products that are not very popular on computer platforms are easier to sell through mobile platforms. Thus, the question arises of whether to adopt a different strategy in connection with the mode of use of the platforms that consumers choose.
With a two-digits growth that has been going on for a few years, it shouldn’t come as a shock to learn that retail shops in China seem to be on the verge of closing. That is what you may think at first glance. BUT, New Digital media have arrived, they have been around for 2 – 3 years that may allow online retail store to provide unique services e-commerce shops can not. So, no no, the fight is far from over. One thing is sure though : Online retail shops will have to undergo a severe transformation to stay on course. O2O strategies should be the first tool coming to mind on that subject. Round 2, go!