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What is driving China’s e-commerce growth?


China’s retail e-commerce market has been the largest in the world since 2013. Its sales grew 34-fold in the decade to 2020 compared to the world’s ninefold growth. In 2020, its sales stood at US$2.3 trillion, representing just over half of the world’s e-commerce market total of US$4.3 trillion. What has contributed to this remarkable growth?


China has the most online buyers and sellers aided by being the world’s most populous nation. At the end of 2020, it had 782 million online consumers, more than twice the US population, the next largest market. Its largest e-commerce platform, Alibaba’s Taobao, has 4.5 million active sellers in the country. In contrast, US e-commerce giant Amazon has 1.5 million active sellers worldwide.


China’s e-commerce market is not only large but diverse — providing rich pickings from a variety of brands. Although richer cities like Beijing, Shanghai, Guangzhou and Shenzhen remain important, the main drivers of growth are smaller and less wealthy cities. These cities represent emerging middle-income buyers who have turned to online stores in droves due to limited access to physical retail stores in their cities. They mainly purchase value-for-money consumer and household necessities rather than high-end goods.


In China, over 90 per cent of e-commerce sales are done through mobile devices versus 43 per cent in the US. More broadly, China has 932 million mobile internet users representing 99.2 per cent mobile internet penetration.


Mobile payments took off after 2012 with the widespread adoption of smartphones and payment apps. The share of mobile payments to non-mobile payments rose from 4 per cent to 85 per cent in 2019. The absence of a credit card culture also boosted growth.


But the early days of online shopping were marred by a lack of transactional trust. Alipay, the pioneer, addressed this through an online escrow system. Alipay keeps the payment, for about 10 days after the receipt of goods by a buyer. This gives the seller the confidence they will receive the payment, and the buyer the confidence their payment will be refunded if needed.


Read More at https://www.eastasiaforum.org/2021/10/13/what-is-driving-chinas-e-commerce-growth/


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