With the largest Internet population in the world, China also has the second-largest population of online shoppers – 145 million people, compared with 170 million in the US. This is more than double the number in Japan and five times that of the UK. Also, online shopping is set to grow, with spending that could make China’s e-commerce market worth more than £200 billion and possibly surpass the size of the US market.
Research from the Boston Consulting Group (BCG) has taken an in-depth look at the underlying dynamics of this growth, casting light on the conditions that make China’s e-commerce environment unique and pointing out crucial trends that companies should be aware of in order to achieve success in this burgeoning market.
Chinese consumers, particularly those in the middle and affluent classes, are quickly adopting ‘multichannel’ shopping behaviours, creating both opportunities and challenges for brand companies, retailers and e-commerce companies alike. At the moment, however, a very small proportion of shoppers do their shopping online, leaving much room for growth. Usage and spending levels will increase across every e-commerce category, but certain categories are poised for more dramatic change. Websites which meet the need for high levels of quality and service will win in an increasingly competitive online environment, with those focusing on the high profit potential of multichannel shoppers also at an advantage.
The BCG report outlines a number of factors particular to China’s consumer market that are important to understand before building an online presence there:
- The dominance of Taobao: Taobao.com accounted for 79% of transaction value in 2010. Like Amazon and Ebay combined into one giant online retail presence, the company has virtually defined the e-commerce landscape in China. It is crucial for companies to understand the degree to which the Taobao platform will shape an online presence, carefully assessing how to manage product flow across channels, regions or countries.
- Delivery and logistics challenges: Until now, e-commerce has benefitted from low shipping costs but has been impeded by an inadequate delivery infrastructure. Online vendors are forced to rely heavily on small, independent courier companies. Consumers tend to opt for vendors with distribution centres in their city.
- Distinctive online behaviour: The types of websites people choose for online shopping are very different to those in other countries. Only 19% of Chinese consumers go to official brand or manufacturer websites. They are also the most social in the world during the shopping process, most likely to write and read reviews.
- Unique online shopping ecosystem: In most markets across the world, searches begin with Google. In China, the top search engine is Baidu.com, but top e-tailer Taobao blocks the Baidu spider – meaning that consumers cannot find Taobao product listings with a Baidu search. This means that Chinese shoppers do not rely on search engines to find products online.
- Shopping by mobile phone: Roughly half of urban Chinese consumers have access to a mobile phone and, of those, about half use their phones to gain access to the internet. It is thought that this will continue to grow as e-commerce companies begin to introduce more mobile offerings, and when China begins to roll out 4G networks with higher data speeds.
The full BCG report, ‘The World’s Next E-commerce Superpower’, is available at: www.bcgperspectives.com
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