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ECOMMERCE RISES RAPIDLY IN CHINA

ECOMMERCE RISES RAPIDLY IN CHINA

In a world first, the majority of retail sales for an entire country will happen online with fifty-two percent of China’s entire retail sales coming from ecommerce in 2021.  This represents an increase from 44.8% last year in research done by eMarketer. No other country in the world comes close to this.

Following China, the country with the next highest rate of e-commerce as a percentage of total retail sales is South Korea, with 28.9% of retail sales taking place online this year. The UK follows in third place with 28.3%. Interestingly, the USA drags behind with only 15% of retail sales taking place online, rising to a projected 16.2% in 2022.

Despite the the US remaining just ahead of China in overall retail sales ($5.506 trillion against China’s $5.13 trillion in 2020), China will outpace the U.S. by nearly $2 trillion in e-commerce during 2021.

According to eMarketer, there are several factors that can be credited for the recent increased that pushed e-commerce over the 50%  threshold in China. These include social commerce, which grew by an astonishing 44.1% in China last year and will grow by another 35.5% this year, reaching $363.26 billion. In comparison, social commerce in the USA will total around $36.09 billion this year.

For next year, eMarketer projects that e-commerce will expand to reach 55.6% of total retail sales in China. Only two things will prevent this juggernaut growth. Firstly, China’s overall retail sales growth is expected to be far more constrained in the coming years than it has been over the past decade, as China’s economic engine is not what it once was. Secondly, several hundred million people in China are not yet online at all, and thus growth from these consumers will have to wait until a little later.

So what has propelled this extraordinary growth pattern. In reality there are several factors.

Firstly, social commerce:  This is estimated to have grown by 44.1% in China last year and will grow by another 35.5% this year, reaching $363.26 billion.

In addition, WeChat’s Mini Programs are also responsible. As ubiquitous as Tencent’s super app has been in China for nearly a decade, it was only recently that its interface began to skillfully facilitate third-party ecommerce. Mini Programs allow businesses to better leverage WeChat’s user base and have proven to be extremely popular among both merchants and consumers.

A further reason is Pinduoduo (PDD). This group-buying-meets-social-networking phenomenon has shot up from a 0.5% market share in 2016 to a projected 13.2% of China’s ecommerce market this year (Alibaba will claim 50.8% and JD.com will have 15.9%). PDD has unlocked China’s rural ecommerce participation more effectively than any other platform.  

Another reason is Livestreaming “Live Commerce”: Live Commerce is almost by definition a social media activity, but in the first instance the traditionally non-social Alibaba properties led the way on livestreaming commerce. Eventually, however, everyone else jumped on the bandwagon, and the organically video-centric platforms like Douyin have an edge going forward.

Finally, of course, COVID-19 helped the growth of ecommerce. Although China appeared to have suppressed the coronavirus threat far more quickly than any other country – and has been operating with a generally ‘normal’ economy for the last nine months – it is still true that consumer behavior was altered last year. Online grocery shopping surged thanks to the virus lockdowns, and this preference may prove to continue to be popular in the longer term.

Going forward, more of the same is anticipated from China. In 2022, an ecommerce sales growth of 11% is predicted which will push the sector’s share to 55.6% of total retail. The $3 trillion threshold for e-commerce sales should be breached as well (with a forecast $3.085 trillion for next year).

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