Picture yourself in a bustling souq or wandering through a busy shopping district anywhere in the world. A sensory ambush awaits you – colour, lights, vociferous vendors, bargaining customers, street performers, music, traffic, and a shopping experience that overwhelms. Now transport yourself from that high-energy chaos into an online experience that is pretty much a virtual reflection of the same, and there, in a nutshell, you have one of the most advanced digital marketplaces in the world. With its sophisticated shoppers, massive volume of transactions, rapid rate of innovation, and integration of social media, multimedia, and other channels, China’s online environment offers a jaw-dropping glimpse into the future.
For those of us accustomed to simple, transactional online buying, China’s digital revolution presents something of a culture shock in the sheer range and amazing diversity it presents. China’s big three digital titans—BAIDU, ALIBABA and TENCENT (BAT for short), have eroded into traditional retail market share — Alibaba and Tencent focus primarily on e-commerce, while Baidu dominates search—and have sky-rocketed to dominance over the last decade. They now rank among China’s top 5 most valuable brands, with a collective brand value approaching $200 billion.
There is no doubt China’s e-commerce is flourishing like no other. Take a look at the figures. Online retail sales in China reached 5.16 trillion yuan ($752 billion) in 2016, which is equivalent to the sum of consumption in the US and Europe, more than double the growth rate of overall retail sales, according to China’s National Bureau of Statistics. In comparison, U.S. e-retail sales totalled $341.7 billion in 2015, and expected to grow at around 15% in 2016 to around $393 billion. The figures are astonishingly only 50% of China’s in comparison. The report guarantees China will further extend its lead as the world’s largest online retail market in the next five years.
A pioneer also in mobile commerce, according to industry estimates, online purchases made with mobile phones will account for 74% of total e-commerce in China by 2020, compared with just 46% in the US. The industry is expected to grow by 20% annually in China over the next five years—twice as fast as any other market. This growth will be driven not only by increased individual spending but also by an expected influx of hundreds of millions of new consumers, many from smaller cities and rural areas, who have yet to go online.
Unlike other countries and markets, Chinese consumers buy everything online from organic foods to luxury cars to booking services, financial products, and even for ocean-going freighters. It is projected that online shopping will spread and deepen across a wide range of categories. According to some projections, just five categories in the US— such as books and clothing—will capture more than 40% of e-shoppers. In China, 15 categories, from snacks to financial services, reach this level of penetration.
News sites, games, videos, and e-commerce are all interconnected in the major online hubs, with click-to-buy product placements and quick links to payment options. Unlike online shoppers in other countries, Chinese consumers rarely visit company or brand websites. Instead, they discover what they want to buy through online marketplaces such as Taobao, entertainment apps like iQiyi, and WeChat.
Taobao, owned by Alibaba and the brainchild of founder Jack Ma, is a free-to-use online marketplace with some 800 million product lines – from food to clothes to technology. It boasts 50 million unique visitors a day and is the top destination for three-quarters of the country’s online shoppers. Faced with a rapidly changing marketplace and freshly financed challengers with more focused product lines, parent company Alibaba split Taobao into three separate companies:
eTao, a shopping search engine, to help drive customers; Taobao Mall, a fee-earning “online showroom” for some 70,000 companies, including many leading foreign brands; and, of course, the Taobao marketplace for small sellers – a platform that is free for users, although Taobao earns from adverts.
Helping fuel growth in online retail sales was the rapid integration of stores with online channels, New Retail, a new form of [online-to-offline sales] promoted by Alibaba and supported by Chinese authorities, is expected to shape the retail landscape for China going forward. New Retail is a term that roughly indicates a combination of the best in physical and online retail. In the words of Jack Ma, founder and chairman of Alibaba Group Holdings Ltd, New Retail is making the distinction between physical and virtual commerce obsolete.
China’s most popular social media platforms, Taobao and WeChat, two of the top five apps in China, have evolved into all-in-one super apps. Taobao, which began as solely an e-commerce site, now offers social and entertainment features. WeChat, which started as a social platform, now allows users to buy and sell products. These super apps also provide a wide variety of online and offline services. Users can send money to people, order food, call a taxi, set up a doctor’s appointment, pay bills, and get movie tickets. Anywhere else in the world consumers would need a different app for each of these activities.
Tmall: Owned by the ubiquitous Alibaba Group, Tmall is currently at the forefront of the e-commerce race in China, occupying over 50% of the market this year. In a time when many Business-to-Consumer (B2C) platforms struggled to maintain consumers’ trust in the quality of products, Tmall set itself apart by only signing on legitimate companies or their authorized distributors to ensure authenticity. How does the platform work? Brands operate their own online store through Tmall, from uploading their product selection all the way to delivery and customer service. International brands such as Adidas, Sony, and Levi’s are already signed on, which is of no surprise considering the over 100 million Tmall users. With its vast reach and strong branding, Tmall is the perfect stepping stone into the Chinese e-commerce market.
JD.com: The recently rebranded B2C shopping portal has positioned itself in direct competition with e-commerce giant Tmall. Boasting an extensive product catalogue, a vast distribution network, flexible payment options, and an international store, JD.com has received significant funding in early 2013 to expand its presence. With the recent launch of a dedicated Singapore online store, the company has made its intention for broader international expansion clear. In contrast to Tmall, JD.com runs its own fulfilment centres and holds stock in their own warehouses. To further cement its place to be neck-at-neck with Tmall, JD.com announced that it will be launching its own payment system that will be a direct competitor to Alibaba Group’s Alipay, an online payment platform similar to PayPal that is already used widely in China.
Tencent and WeChat: This internet behemoth rose to fame through its gaming platforms and its messenger and social media services, QQ and WeChat (known as Weixin in China). The colossal amount of advertising that flows through Tencent’s services, as well as its online payment platform Tenpay, makes Tencent an important e-commerce player. Creating an entirely new shopping experience, WeChat users can make payments directly through the social media service. Moreover, companies can target users directly by pushing messages for sales, as well as location based advertising.
Vancl: Although this company is the biggest fashion e-tailer in China, it is still relatively unknown outside of the country, a point it is trying to change by buying up a series of international and domestic brands to expand its product range. The company rose to prominence selling affordable yet fashionable items and has since carved out a market in the Chinese e-commerce playing field. With an aggressive marketing strategy including celebrity endorsements and a huge advertising budget, Vancl is miles ahead of foreign fashion e-tailers hoping to penetrate the Chinese market.
Yihaodian: B2C grocery store platform is particularly noteworthy because US retail giant Walmart bought a 51% stake in the company in February 2012. Launched in 2008, Yihaodian’s founders saw an opportunity in the market as China’s urbanites had less time in their busy schedules to do their grocery shopping. Since then, the website has built a name as the go-to destination for e-grocery commerce. Yihaodian developed a revolutionary virtual grocery store app last year. Yihaodian’s closest competitor is JD.com, which recently expanded its range of products to include groceries. In response, Yihaodian launched a fresh food delivery service in Shanghai and Beijing, with plans to roll out in more cities by the end of this year.
OSELL: A leading e-commerce platform and solution provider that has made Chinese sourcing easy even for individual entrepreneurs. The assortment includes virtually everything from clothing, to mobile phones and other consumer electronics, to home appliances, to jewellery, to security items. While most online services have developed over the past four years to help e-shoppers navigate through Chinese sites, Osell is the very first one to address the needs of e-merchants. Osell provides them with China’s largest international sourcing platform as well as with a complete set of solutions to start or develop their business with China.
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