Will China dominate the E-commerce market?

The Covid 19 pandemic has sped up the adoption of digital technologies by several years. Many businesses have been impacted so much by the pandemic that they have no choice but to move to online platforms in order to stay competitive. 

According to Activate Consulting in 2019, the global e-commerce market reached $3.4 trillion in gross merchandise volume and two thirds of the global eCommerce transaction volume are generated by the top 6 players. 

Here’re the top digital commerce companies: 

  1. Taobao.com: 15%
  2. TMall.com: 14%
  3. Amazon: 13%
  4. JD.com: 9%
  5. Pinduoduo: 4%
  6. Ebay: 3%
  7. Small companies like Rakuten, Walmart, VIP.com, Sunning.com, Apple and Shopee: 5%
  8. Rest of the Web: 37%
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Out of the top 6 companies, 4 are owned by Chinese companies and account for close to half of the total transaction volume. There is no doubt that China is catching up with the digital transformation. 

In the Dec 2020 report by eMarketer, China was ranked first in the retail e-commerce sales share, leading the rankings with a significant gap. The success didn’t happen overnight but the Covid 19 pandemic actually played an important role in accelerating the consumer purchasing pattern.

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How did China get to this point?

About a decade ago, the US and China were almost identical (4.9% and 5.0%) in terms of their retail e-commerce sales share. However, over the years China’s e-commerce retail space has grown tremendously.

Here are some key factors that help build the foundations of China’s e-commerce industry. 

1. The rise of Alibaba

The easy-to-use Chinese e-commerce platform allows consumers to deal directly with the seller. With the swift and reliable platform, online purchases became an easy and pleasant experience.

Today, Taobao takes over 15% of the global eCommerce transaction volume. They are known as China’s ebay and are the largest e-commerce platform in China that is operated by the Alibaba Group. It encourages consumer to consumer retail and mainly caters to buyers in mainland China, Hong Kong, Macau, and Taiwan. Not long after, companies like JD.com follow the successful formula of Alibaba and provided another platform for new shoppers to shop.

2. Innovative digital payments system 

In order for consumers to enjoy a cashless experience, innovative digital payment was created. Examples include Alibaba’s Alipay and Tencent’s Wechat Pay. 

3. Low delivery fees

Companies like Alibaba and JD.com have a lot of manpower that enable same-day delivery anywhere in the country for just pennies. This became a very attractive benefit for first time buyers who were uncertain about their purchase.

4. Mobile Apps

Over the years, the advancement of mobile apps allowed shoppers to order anything, anywhere at any time.

They are not restricted to getting items via the use of their computer. 

What is e-commerce like in China now?

Fast forward today, China has developed many innovative ways to get people to shop online.

For example, live streaming e-commerce whereby retailers, influencers, or anyone can sell products or services via online video streaming. It is the hottest trend and one that many companies like Douyin (the China version of Tiktok) or Kuaishou (which started out in the entertainment space) want to take part in. 

Will Douyin or Kuaishou be one of the companies that contribute to the e-commerce market in the future? We would not know yet but it is definitely something to look forward to.

Will the growth continue?

It is unlikely for consumers to stop buying from the online platforms and it is forecast that the growth in China e-commerce sales could be up by 52.1%, compared to the 44.8% growth from the previous year.

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Even if other countries do not support platforms like Taobao or JD.com, China itself has the capacity to continue growing, as it is believed that several hundred million people are not yet online. 

I believe that China e-commerce has much room to grow and dominating the market might be in a matter of time.

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