E-commerce in China and New Trends in 2020

1. Brief Introduction of E-commerce in China

According to the E-Commerce in China 2019 report released recently by the Ministry of Commerce, the market size of Chinese e-commerce is the biggest in the world with more than 900 million online shoppers and ￥34.81 trillion yuan ($4.98 trillion) total transaction volume. There are three main reasons that lead to such success:

• The rapid economic growth in China helps transaction power keep upgrading constantly, which forms a huge market space.
• The insufficient consumption supply in Chinese rural areas can be fulfilled by e-commerce platforms.
• China is deepening the reform and this is beneficial for creating sound environment for both startups and large companies such as Alibaba, JD, Suning and Pinduoduo (Sun, 2020).

(Alibaba: https://www.alibabagroup.com/en/about/overview

JD: https://corporate.jd.com/home

Suning: http://www.suningholdings.com/cms/snCom/index.htm#:~:text=Suning.com%20is%20a%20leading%20online-to-offline,%28O2O%29%20smart%20retail%20company%20in%20China.

Pinduoduo: https://investor.pinduoduo.com/company–profile)

(Figure 1. Number of Listed Companies in E-commerce in China in 2018, by Category. Adapted from ‘E-COMMERCE IN CHINA’ by Italian Trade Agency,  https://www.ice.it/it/sites/default/files/inline-files/e-commerce%20in%20China.pdf)

2. Features of Chinese Online Consumers

Based on Nielsen research, female younger than 30 years old with an income of more than RMB 11,000 per month is the typical online buyer in China.

(Figure 2. Preferred E-commerce Types in China as of Q2 2017, By Gender. Adapted from ‘E-COMMERCE IN CHINA’ by Italian Trade Agency,  https://www.ice.it/it/sites/default/files/inline-files/e-commerce%20in%20China.pdf)

The following picture shows that why people like online shopping:

(Figure 3. Reasons Why People Like Online Shopping. Adapted from ‘E-Commerce in China, A Guide for Australian Business’ by Keith Jones, 2015 June, https://www.readkong.com/page/e-commerce-in-china-a-guide-for-australian–business–7604719) 

From my own experience, my trust towards online shopping is grown gradually, but once I have an unhappy experience of a specific store, I will no longer purchase there again and may change to another online store or just buy offline. What about your habits and why do you choose online shopping?

Moreover, in a survey, among the selected 25 products on Taobao, here is the frequency of keyword searches, which reflects customer preferences of packaged snacks and toys.

(Figure 4. Key Words of Customer Preferences. Adapted from ‘E-Commerce in China, A Guide for Australian Business’ by Keith Jones, 2015 June, https://www.readkong.com/page/e-commerce-in-china-a-guide-for-australian-business-7604719) 

3. Impacts of E-commerce in China

• Digital Inclusive Finance: Digital technology is advantageous to cost reduction, payment efficiency improvement (Figure 5), experience enhancement (Figure 6) and can provide equitable access to convenient, safe and creditable financial services to all users.

(Figure 5. People Use QR Code to Make Payment Through Mobile Phones. Adapted from ‘Inclusive Growth and E-commerce: China’s Experience’ by AliResearch, https://unctad.org/system/files/non-official-document/dtl_eWeek2017c11–aliresearch_en.pdf)

(Figure 6. Digital Technology Improves the Experience of Financial Services. Adapted from ‘Inclusive Growth and E-commerce: China’s Experience’ by AliResearch, https://unctad.org/system/files/non-official-document/dtl_eWeek2017c11-aliresearch_en.pdf)

• Express Delivery: E-commerce has door-to-door delivery service that is inexpensive and has become a common consumption practice for Chinese customers, which is changing the logistic service model in China (Figure 7) and enlarging the coverage into not only urban but also rural areas (Figure 8).

(Figure 7. Volume and Price of China’s Express Delivery from 2005 to 2016. Adapted from ‘Inclusive Growth and E-commerce: China’s Experience’ by AliResearch, https://unctad.org/system/files/non-official-document/dtl_eWeek2017c11–aliresearch_en.pdf)

(Figure 8. cun.taobao.com Means Rural Areas. Adapted from ‘Inclusive Growth and E-commerce: China’s Experience’ by AliResearch, https://unctad.org/system/files/non-official-document/dtl_eWeek2017c11-aliresearch_en.pdf)

• SMEs Development: Small and medium-size enterprises (SMEs) gain lots of developing opportunities through direct access to customers, self-brand building and innovation. For example, young people dominate Taobao, i.e. 80% born after 1980 & 35% born after 1990. They no longer regard work as something have-to-do or related with satisfying basic living, instead, they are more enthusiastic to create and innovate something for self-fulfillment (AliResearch, 2017)
• For instance, one of my university friends opened her own Taobao and Pinduoduo store after graduation and is gradually growing sales especially special discount periods, she said she enjoyed it and planned to establish her own offline store and warehouse in the future.
• What do you think of university graduates open an online store after such a good educational background? Would you like to open one of your own on e-commerce platforms if possible and why? Share with us in comments!

• Social Value: This also helps create many job positions and promote rural development. “Every additional active online store in a Taobao Village on average creates approximately 2.8 direct job opportunities. It is estimated that active online stores of Taobao Villages created more than 840,000 direct job opportunities by the end of August”. Furthermore, e-commerce fights poverty by leveraging the joint efforts of market, government and society to better allocate resources, build infrastructure, provide talent training, and make sustainable poverty alleviation.   

(Figure 9. A Person Using a Small Unmanned Aerial Vehicle – UAV to Check the Situation of Tea Garden, which saves time, increases precision and can let buyers know exactly. Adapted from ‘Inclusive Growth and E-commerce: China’s Experience’ by AliResearch, https://unctad.org/system/files/non–official-document/dtl_eWeek2017c11-aliresearch_en.pdf)

4. New Trends of Chinese E-commerce

• COVID-19 drives e-commerce in China, since customers were not allowed to eat outside at restaurants (therefore food non-contact delivery) and perceive shopping at traditional supermarkets as unsafe due to the amount of buyers near each other at such a closed occasion (therefore some traditional supermarkets begin online products buying and then deliver to home) (Attache Reports, 2020).

• E-commerce platforms, for instance, Alibaba, team up with a Chinese animal welfare group to initiate a plan of alleviating the suffering of stray animals. This charity plan will try to draw more public attention by online pet retail platforms where the target customers love animals and have sympathy towards animals (Xinhua, 2020).

In a word, e-commerce in China is developing quickly and variously. 

References

AliResearch (2017, April). Inclusive Growth and E-commerce: China’s Experience. Retrieved from https://unctad.org/system/files/non-official-document/dtl_eWeek2017c11–aliresearch_en.pdf.

Attache Reports (2020, June 22). China: COVID-19 Drives E-commerce in China. Retrieved from https://www.fas.usda.gov/data/china–covid-19–drives-e-commerce-china.

Italian Trade Agency. E-COMMERCE IN CHINA. Retrieved from  https://www.ice.it/it/sites/default/files/inline-files/e-commerce%20in%20China.pdf.

Jones, K. (2015, June). E-commerce in China: A Guide for Australian Business. Retrieved from  https://www.readkong.com/page/e-commerce-in-china-a-guide-for-australian-business-7604719.

Sun, C. (2020, July 16). China’s e-commerce market size tops the world. Retrieved from http://www.chinadaily.com.cn/a/202007/16/WS5f0fca86a310834817259e76.html.

Xinhua (2020, November 12). China’s welfare animal group, e-commerce platforms team up to rescue stray animals. Retrieved from  https://www.chinadaily.com.cn/a/202011/12/WS5face7daa31024ad0ba93b62.html.

Recommended Relevant Videos:

E-commerce and The China Opportunity – Jack Ma. (35:09)

https://v.youku.com/v_show/id_XNjU5NjU3Njgw.html

Taobao Villages in China Show E-commerce’s Transformational Power. (03:42)

https://www.bilibili.com/video/av63597693

China’s cross-border e-commerce pilot zones. (02:23)

http://govt.chinadaily.com.cn/s/202009/29/WS5f72925c498eaba5051bb8c6/chinas-cross-border-e-commerce-pilot-zones.html