China’s eCommerce industry has grown remarkably. Total online retail sales in the country (including B2C and C2C transactions) hit $307 billion in 2013, making China the world’s largest eCommerce market. Forrester estimates that it grew to $440 billion in 2014. Last year, the Chinese eCommerce giants Alibaba and JD.com both went public with IPOs on the US stock market, and Alibaba saw Singles’ Day transaction value of $9.3 billion on November 11. What’s driving this strong eCommerce momentum? My new China online retail forecast addresses the drivers and key trends shaping Chinese eCommerce:
§ Major web players are aggressively pushing online retail sales. China’s B2C eCommerce market is dominated by two large web players: Alibaba’s Tmall and JD.com, with market share of 57% and 21%, respectively. They also dominate the mobile commerce market; Taobao and Tmall have a combined market share of 85%, with JD.com a distant second at 7%. China’s web players have profoundly changed Chinese consumers’ shopping behaviors, and they will continue to drive this strong momentum by expanding into new product categories, reaching untapped audiences in smaller cities and rural areas, and enabling mobile shopping.
§ Underdeveloped retail infrastructure is fueling eCommerce growth. China’s retail industry was originally state-owned and regionally based, and the traditional retail market remains highly fragmented; no big-name retailer covers all of the country’s geographic regions. Even today, systematic problems raise barriers to local market access, making it difficult for traditional retailers to have a presence in multiple provinces. The underdeveloped retail infrastructure presents opportunities for online retail, especially in previously underserved regions.
§ . . . supported by improved logistics infrastructure. In the past few years, large eCommerce players Alibaba and JD.com have put great effort into developing their logistics networks to meet the rapidly growing demand for online shopping. In May 2013, Alibaba partnered with Yintai Group and major logistics companies to establish a smart logistics network called Cainiao. JD.com established an in-house logistics network in 2007, and by June 2014 it had achieved same-day delivery in 111 counties and districts across China. Finally, the Chinese government has also introduced policies to propel eCommerce and logistics development.
§ mCommerce is starting to contribute significantly to online retailing. Forrester’s Consumer Technographics® data shows that more Chinese people are using smartphone as their primary phone and that mobile shopping has become more frequent in metro China in recent years. mCommerce is growing much faster than eCommerce, and Forrester’s online retail forecast indicates that this trend will continue over the next five years. At the same time, the broad adoption of mobile payments by Chinese people is also a significant driver of mCommerce.
The thriving Chinese eCommerce market creates huge opportunities for retail business, but it’s also an intensively competitive space. To take the advantage of eCommerce’s rapid growth, eBusiness pros must drive innovation wherever they can, enable seamless cross-touchpoint shopping experiences, and leverage mobile to serve their overall online business strategy.