Chinese consumers’ growing taste for online retail is radically shaping both the country’s economy and its status as a player in the global market.
E-commerce has increased considerably in China over the past few years, with the market growing by over 70 percent in the country since 2006. Between 2006 and 2010, growth rates reached over 100 percent. In 2013, consumers purchased 1.8 trillion yuan worth of products from online retailers, accounting for 7.9 percent of China’s entire retail trade.
According to Carrie Yu, a partner with Hong Kong’s global consultancy firm PriceWaterhouseCoopers, the market is ripe for entry from international luxury brands. Yu, who specializes in retail and consumer practice, says that China’s increasingly affluent middle class is behind the country’s e-commerce boom.
“China is moving toward a consumption economy, and more and more of its citizens are becoming affluent,” Yu said in an interview with China Daily. “They want to spend to indulge themselves….young Chinese love to spend, as they want to have a comfortable life rather than just saving money.”
British luxury retailer Burberry and others such as Marks & Spencer, ASOS, Nike, Levi’s, and Sony are increasingly finding that they need an online presence for continued success in China.
PwC recently conducted their Global Total Retail Survey, which found that Chinese consumers “were more active in online shopping compared to their global counterparts,” with about 62 percent of Chinese respondents saying that they purchase things online on a weekly basis.
Shopping online also allows consumers in smaller and lower-tier cities to purchase items that might be difficult to obtain otherwise. As a result, e-commerce is “narrowing the purchasing gap between urban and rural China.” Alipay, the e-payment arm of e-commerce giant Alibaba, found that residents of its 100 most profitable small cities shopped online an average of eight times in the past year.
Although China contains 618 million Internet users, only about half of them shop online. However, according to Egidio Zarrella, a partner for clients and innovation consulting services with consultancy firm KPMG China, that number of consumers who use e-commerce regularly will continue to rise.
“Even though China’s e-commerce market is big, it accounts for just 8 percent of the global retail market,” Zarrella explained. “In the next 10 years, it would account for over 50 percent of the retail market.”
E-commerce also has large-scale implications for China’s economy, and already has created over 10 million jobs. China Daily reports that the Chinese government views e-commerce as “the catalyst that will help it transition from an export-oriented society to one that is more driven by domestic purchases.” The Chinese Academy of Social Sciences also predicts that e-commerce will drive around 5.48 percent of the country’s economic growth by 2020.
image credit: zara, china daily