A different target audience, an evolving market, and e-commerce platforms aimed at entertaining instead of selling: from the Western point of view, e-commerce in China represents a big challenge but also the greatest opportunity
Since 2015, China is the first country in the world for online sales. A leadership confirmed in 2017 when the big Asian country’s turnover accounted for one-third of the global online sales. But the Dragon’s e-commerce industry seems to be just at the beginning of its rising.
According to a report released at the China International Big Data Industry Expo 2019 in Guiyang last May, China’s e-commerce trade volume reached $4.58 trillion in 2018. With over 50 billion packages delivered last year, Chinese cross-border e-commerce is a booming phenomenon.
China’s $1.94 trillion e-commerce market is the largest in the world, and more than three times that of the number two US market, according to a recently released eMarketer report.
E-commerce in China, therefore, is a growing sensation and an increasing number of countries from all over the world are now striving to reach this successful market. The potential is enormous and it is constantly evolving.
But these figures are possible because the Middle Kingdom is nothing like the Western world has ever experienced. Within a population of 1.4 billion, the country’s netizens account for 900 million people and 98% of them is accessing the internet through their smartphones.
© Photohunter. Shaanxi, Xi’an. While consumption slows down in first-tier cities like Beijing, second tiers like Xi’an will drive China’s consumption in the future, both offline and online.
Contrary to the Western world, China’s mobile-driven society has totally leapfrogged the computer era. And millennials and Generation Z – those born between 1995 and 2002 – are leading online sales. But they are not alone. Although Gen Zers account for 15% of their household’s spending compared with 4% in the US, new customers are starting to enter the online shopping world in the PRC.
In recent years what was considered girls’ favorite hobby seems to have experienced a complete change towards new male consumers. Opposed to the traditionally predominant “she-conomy”, the emerging “he-conomy” – male consumer consumption – is recently rising opening new windows of opportunity for brands and the industry.
The expansion of the middle class and the development of online consumer finance are some of the important factors that led to the rise of the “he-conomy.” As a result, advertisement campaigns like that of the baby products marketplace Mia.comare showing the Chinese companies’ growing interest in breaking gender stereotypes as well as the need to address to new audiences like that of the elderly, which is about to exceed 255 million people by 2020.
“The future of the Chinese digital economy is not to give a Shanghai resident the life of a Parisian, ” said Pinduoduo’s founder. “The future is to provide handkerchiefs and fresh fruits to those living in the province”.
Nevertheless, the new trend in Chinese e-commerce is the focus in lower-tier cities. Being home to 73% of China’s population, these lower-tier cities, which include prefecture and county-level urban enclaves, already produce 59% of the country’s GDP. So that now even Chinese graduates prefer to look for opportunities in lower-tier cities instead of first-tier ones.
“While investors perceive larger cities as offering the most important consumer base, we believe that lower-tier cities will be bigger, wealthier and more eager to spend, and could contribute two-thirds of incremental growth in national private consumption toward 2030,” says Robin Xing, Morgan Stanley’s Chief China Economist.
Here, companies like Colin Huang’s Pinduoduo leverage the absence of direct competition with e-commerce giants but their success lies in the fact that the e-commerce industry in lower-tier areas has more room to grow compared to the saturated markets of Tier 1 and Tier 2 cities.
© 123rf. Although Taobao and JD.com are the e-commerce market leaders, social-commerce apps like Pinduoduo have a high imitation rate by foreign platforms.
The emergence of a brand-new middle class in China with a higher income together with the rising of unexpected audiences led to a whole new market for the luxury industry.
Beauty products are still the most favorite items bought online in the PRC, especially those from South Korea, and the last Single Day sales witnessed a renewed interest in food and drinks categories. But when it comes to luxury consumption, Chinese consumers have been ranking first for three years now, accounting for one-third of the global spending. Therefore, although luxury brands were used to rely on offline sales rather than online ones, the digital world has become the one and most effective channel to talk to Chinese Millennials and Generation Z.
As a result, the Chinese large luxury market is currently witnessing the migration of customers from offline to online, especially in smaller cities, where high-end stores are rare and unaffordable. Moreover, if in the past luxury buyers used to travel to buy high-end products, today, an increasing percentage of consumers is buying directly from mainland China through its multiple luxury e-commerce platforms such as Secoo and Tmall Luxury Pavilion.
But in addition to an evolving target, a new interest towards lower-tier cities, and a continuous seek for the best product online, even if it means spending much more money than in the past, what makes the Chinese e-commerce market truly different is the e-commerce itself.
“On the Chinese mainland, you have big players like Alibaba and Tencent whose services are so intertwined in your daily life, where you depend on their ecosystem for services like ordering food, making payments and for e-commerce and entertainment. So it seems almost natural to blend all of this together,” said Tiffany Wan, general manager of VS Media.
E-commerce here should not even be called digital commerce anymore. Through Alibaba, Jack Ma combined the online world with the offline experience in what is now called New Retail. People in China now can do their grocery shopping at the Hema supermarket and complete the transaction online. Pop-up stores in Beijing now open just to assist the online store and not the other way around.
Moreover, shopping online in the PRC has become an act of entertain. A brand-new social-commerce has risen in the Middle Kingdom where social networks host e-commerce features and vice versa. Through online shopping, Chinese netizens engage with other people with the same interests while the platforms provide all the entertainment is needed.
Live-streaming is the last popular trend in the Dragon’s e-commerce. According to statistics, today, more than 100 million viewers watch a live online video event every month while nearly 32% of users now buy products through live-streaming videos. Behavior that goes hand in hand with the growing demand for better quality and transparency.
Thanks to the social-commerce even recycle has become fun for China’s young generation. Second-hand shopping is quickly becoming a first-choice experience in China. And as the number of users on Chinese second-hand trading platforms is rising, even the Dragon’s tech giants now bet on recommerce.
© Unsplash. The trading online of second-hand goods has been booming in China recently, with companies as Dangdang specialized in second-hand books.
PRC leads the world in e-commerce. Today, more than 40% of whole online transactions take place in China. One decade ago, the Dragon’s e-commerce transactions only count for 1%. Chinese consumers are becoming more aware of international brands, which results in the increasing demand for overseas products on cross-border e-commerce platforms.
And while local Chinese tech giants such as Alibaba, Tencent, and JD.com dominate the rapidly growing e-commerce ecosystem, the number of e-commerce platforms that international brands can leverage in China is growing. But the Dragon is doing a lot abroad as well, it is exporting an e-commerce culture followed by its idea of “cashless society.”
E-commerce in China is, therefore, an evolving experience. It is vast and it is changing day after day, shifting from an act of purchase to an entertaining experience, from a firm decision to something as easy as watching a live-stream online. It is nothing like the Western market even though it is actually influencing the global approach to online shopping.
Chinese platforms are now getting popular beyond national borders and are increasingly popular among foreign brands, which might find in the Chinese market one of the biggest challenges but even the greatest opportunity.