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E-commerce in China: A market overview

A powerhouse in convenience and personalisation, the People’s Republic of China is dominating the e-commerce market with big players such as JD.com and Alibaba. Retail Insight Network takes a look at the current and future state of e-commerce in China and what Western countries can do to mimic its success.
E-commerce in China: A market overview. Credit: China e-commerce

The current state of e-commerce in China

China has the most mobile users in the world and more e-commerce activity than any other country in the world. In 2017, Chinese consumers spent more than $750bn online – more than the UK and US combined.
And in June this year, retail e-commerce spend in China for 2019 was said to increase 27.3% to $1.935 trillion – making up 36.6% of total retail sales, according to digital data and research company eMarkter. The company also forecast Chinese retail e-commerce sales to maintain its strong growth through to the end of its forecast in 2023.

Alibaba and JD: the e-commerce giants dominating China

1) Alibaba Group

China’s most universally-known e-commerce giant, Alibaba Group recently hit its 20th anniversary this year. The Group was founded by Jack Ma, who stepped down from his position of chair during the recent milestone.
The company initially started by offering trading and lifestyle services; according to Alibaba Cloud EMEA business president Yeming Wang, and is responsible for 55.9% of China’s retail e-commerce sales in 2019.
In 2008, the Group launched its Singles’ Day marketing plan, in conjunction with the nation’s holiday of the same name, via its business-to-consumer online retailer Tmall. The Single’s Day shopping event included discounts from retailers and incentives such as red packer coupons.
The Singles’ Day was later rebranded as the ‘11.11 Global Shopping Festival,’ expanding into a large-scale retail event. In 2016, the festival hosted a ‘See Now Buy Now’ fashion show, which enabled consumers to shop runway looks in real-time with one click of their smartphone. Augmented reality shopping and 360-degree virtual reality panorama were introduced a year later to bring interaction to the consumers shopping at home.

The festival celebrated its 10th anniversary last year – bringing in more than $20bn in transactions in 24 hours.

As well as Tmall, Alibaba Group owns platforms such as business-to-business site Alibaba.com, retail site AliExpress and Taobao, and online payment system Alipay – which controls around half of China’s online payment market.
Fortune Global 500 company Jingdong (JD.com) has continued to grow within China’s e-commerce market with its multiple retail acquisitions, and retail tech and supply chain innovations. And for 2019, it is responsible for 16.7% of China’s retail e-commerce sales

This year alone, the company has partnered with Italian fashion house Prada Group to open an authorised flagship store on its platform, introduced a new supply chain innovation initiative as part of its Retail as a Service strategy and is using artificial intelligence (AI) driven retail solutions to enhance health technology company Philips’ flagship store performance.

JD.com vice president and JD Retail Solutions general manager Chenkai Ling revealed, at Retail Week’s Tech event last week, that traditional walls in retail were collapsing, with the future of retail being boundless.

This boundless retail concept would see the merging of content commerce, social commerce and AI, to produce shopping experiences that would seamlessly join the online and offline. JD.com also believes that the retail of the future is all about continuing the retailer-to-customer relationship after purchase and that the sector will see innovative collaborations between retailers and brands.

How has China become the ultimate e-commerce powerhouse?

Conversion rate specialists Smarter Click market development director Henry Boyson said: “Chinese e-commerce has seen a massive boom in recent years due, in no small part, to the massively successful and now globally recognised Singles’ Day.
“There is a much higher degree of personalisation in Chinese online retail when compared to the West, where customers are expected to search for and purchase individual products themselves. In China, however, brands tend to have stores on well-established online retailers – such as Alibaba – rather than have their own standalone sites. This means that the customer experiences a more personalised journey, where everything can be bought in one place, making the online experience ultimately more seamless.
“As a result of this, suggested products and adverts are easier to access with just one click, in China, when browsing the web because of the integrated online platforms, where the same activity would take much longer in the UK.
“The personalisation of the customer journey can also help to explain why Singles’ Day is so successful and how it eclipses Black Friday and Cyber Monday in the West. The latter retail events focus solely on prices and aggressive discounts. The former tends to focus more on experience, than price, celebrating the day through games and entertainment in a fun, social way. The other point to note is that Singles’ Day has remained – well – a single day, whereas Black Friday and Cyber Monday have merged into a somewhat chaotic month-long discounting splurge,” concluded Boyson.
UK delivery company Yodel director of international services Jayne James said: “One of the biggest reasons that Chinese e-commerce companies like Wish, Alibaba and JD.com are so successful is that they’ve been built in the internet age with tech at their core.
“Personalisation has become a popular buzzword when we talk about meeting the demands of consumers and Chinese companies have set the bar high in achieving this to enhance customer experiences. Chinese customers are spoilt for choice when it comes to delivery options and have a vast menu of preferences they’re able to define – from fast deliveries with tight, time-definable windows for the latest must-have tech products, through to slow but economical postal services for basic purchases. A lot of Chinese retailers build their own tech systems from scratch to improve their ability to personalise shopping experiences and then make the most of big data to study customers and make decisions at hyper-speed.
“The growth of China’s e-commerce has been spurred on by wider socio-economic factors. Early e-commerce in China tended to focus on low value, fast moving items but the growth in disposable income in the region has created a new type of shopper and higher-end retail has become a significant growth area. This has resulted in a major shift in product focus of the biggest retailers.”
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