Online shopping has become more common over the past years with the latest developments in technology, the Internet becoming a more important place, and more people having access to online platforms. Online platforms allow the average consumer to compare prices and most of the time find a better deal than stores on the street offer. Most of the online operating suppliers are able to cut down on rent by not having brick-and-mortar shops and that reflects on prices. Not to mention that the consumer gets to access a wider range of suppliers than they would be having a shopping spree at their local venue since the majority of the suppliers ship anywhere in a competitive period of time. On the verge of becoming a cashless society, China is on top of the eCommerce game and is highly sought after by foreign investors.
How has the online shopping industry in China changed over the past five years (2015-2020)?
China’s eCommerce market size is estimated to be growing at an annual rate of 22.5% over the past few years which makes a total market size of $1.8 trillion. The reports show that the expected China eCommerce market growth for 2020 is at 20.1%. In addition to the increase of mobile Internet users and the continuous improvement of online business services, the COVID-19 pandemic seems to be playing a role in the solid rise of the China eCommerce market as well. With the latest COVID-19 outbreak, more and more people have become comfortable with making their purchases online. China eCommerce data shows that there has been a boost in the number of companies that switched to an online business model to survive the hard times.
What are the online shopping industry statistics for China ecommerce market? (market size, number of online shoppers, etc.)
The number of people who shop online has shown a tremendous growth recently. It jumped from 34 million users in 2006 to a whopping 610 million users in 2018 which made a breakthrough in the eCommerce sector of China. In 2017, the buyer penetration rate has reached almost 45%. This number hit 749 million users at the end of the first half of 2020. With a market size of almost $2 trillion US Dollars, 190 thousand businesses, and 1.5 million people employed in the industry; China’s online shopping adventure is sure to grow.
What are the biggest companies in the online shopping industry?
There are some big names everyone around the world is familiar with when it comes to the top eCommerce websites in China. Of course, everyone has their personal opinions on which one is the best eCommerce company in China, and it is a matter of preference. However, market research shows that top China eCommerce sites are as follows:
1. Tmall by Alibaba Group Of course, the first platform on the list is owned by Alibaba. Tmall.com, formerly Taobao Mall, is an online B2C marketplace that operates via registered sellers on the platform. International as well as local Chinese businesses are able to deliver brand name goods to consumers within China. Tmall is the third most visited website in the world and it is the top cross-border eCommerce marketplace in China. Tmall has a market share of 50%-60% which puts Alibaba’s market value at $480.8 billion.
2. JD.com JD, also known as Jingdong (formerly 360buy) is the biggest competitor of Tmall by Alibaba. JD.com is a B2C online retail and marketplace platform at the same time. While there are third-party vendors who deliver their products to consumers, JD.com also sells items directly to consumers. In 2014, JD formed a strategic partnership with Tencent, the leading technology company in China. Right now JD.com follows Alibaba with a market share of 15%-20% in the China eCommerce scene.
The list of the biggest eCommerce companies in China continues with Suning.com for electronics, Kaola for high-quality “Western” products, and Xiao Hong Shu (Little Red Book) for young people’s lifestyle shopping.
Trends in the China eCommerce market
China is the most prominent leader in eCommerce with a market size three times bigger than its closest counterpart, the US. So it is only fair to expect expansion and innovation in the market as technology shapes Chinese consumers’ new shopping habits. More and more companies are targeting lower-tier cities as a part of their expansion strategy and adopting new initiatives to keep up with the current eCommerce trends in China. Let’s take a look at the most important China eCommerce market trends for this year.
- Livestreaming is already huge in China and it’s not uncommon for Chinese influencers to endorse a product during their livestream. Together with the short video apps, it will become even more important as a sales medium and we will see the new ways it can be used in.
- Yes, we have just said that live-streaming will be even more important for sales, but there is a shift from KOL (Key Opinion Leader) marketing to KOC (Key Opinion Consumer) marketing. This means that consumers relate more to regular consumers like them that create authentic and trustable content. They always check online reviews before buying a product so why not have them on your side?
- There is an increasing demand for cross-border eCommerce. Alibaba’s acquisition of Kaola cannot be a coincidence, right? Consumers are interested in foreign brands more than ever before.
- Recommerce or reverse commerce will come to the fore. It’s not only cheaper but also environment-friendly! Right after mentioning sustainability, it’s time to talk about cruelty-free products. Animal testing has been mandatory in China but the policy-makers are moving away from these regulations as the number of animal right activists increase. Nǐ hǎo vegan brands!
- The importance of big data seems to be on the rise. Chinese consumers love using their smartphones so it’s the ideal place to put data-oriented C2M (Customer to Manufacturer) marketing into use. Group buying will gain more traction, especially in lower-tier areas. Alibaba and JD.com have already launched their own group-buying functions!
- On 29th August 2020, China Construction Bank introduced its Digital Currency/Electronic Payments(DCEP). This government-sanctioned cryptocurrency is planned as the digital version of RMB. China is on the verge of becoming a cashless society and this is the time for eCommerce to shine.
- Faster, faster, and faster delivery. It is no surprise at this point that it’s the reason market leaders are investing in warehouses all over the country.
- Vertical eCommerce websites will be more popular among consumers as they create a community for like-minded consumers to interact.
- Fintech companies in competition with institutions delivering traditional financial services are having a good run. With Artificial Intelligence and Machine Learning powered technologies, the loan terms are customized to the needs of the applicants which allows small businesses to be included in China’s eCommerce scene.
- Mini programs will gain more importance as it’s easier to shop within the same app without having to download another one.
- Chinese consumers show a strong preference for omnichannel retail services where they can find the benefits of physical stores combined with the advantages of online shopping platforms, and it seems to be getting more popular with the increasing trust in eCommerce platforms and online transactions.
Which devices do online shoppers prefer?
It is no surprise that China is the land of smartphones. But it could sound quite surprising that 80% of the retail eCommerce sales are made via mobile devices. This is quite ahead of the global average, which is currently at 64%. Mobile devices play a crucial role in connecting B2C. Thus, all eCommerce sites are optimized for mobile without exception. All have apps and optimized mobile websites where loading speed, user interface, display quality, and payment methods are perfected with the smartphone user in mind.
Popular online payment methods in China
The advancement in online payment methods has paved the way for eCommerce, and vice versa. After the COVID-19 outbreak, it has become even more common with the action launched by the Payment & Clearing Association of China (PCAC) advising people to use online payment. The most popular online payment methods in China are Alipay, WeChat Pay, and UnionPay. In fact, these are very common payment methods in China that they’re not only used for online shopping but also at the checkout of many physical stores. The idea of scanning a QR code sounds more quick and sanitary than dealing with worn-out cash, looking for coins, or paying the fees that banks charge in the case of a merchant.
Alipay payment method revolutionized the way payment is executed in China. It is the oldest among all its competitors having launched 10 years earlier than its closest rival, WeChat Pay. Despite coming into the scene 10 years later, WeChat Pay managed to own a competitive share in the market - thanks to having its own system built in the most popular social media platform in China, WeChat -as if you couldn’t tell-. WeChat Pay has more than 900 million monthly active users in the pool of 1.1 billion monthly active users of WeChat while Alipay boasts more than 1.2 billion active users every month. Alipay remains a leader with a 55.4% market share followed closely by WeChat Pay at 38.8%.
Challenges of eCommerce in China
There could be many challenges awaiting businesses aiming to enter the Chinese market. It might sound tempting to do business with the largest economy in the world but you should be prepared well in advance to avoid any issues in the China eCommerce market.
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