An insight into the Chinese ecommerce market for Singles Day

Market value and growth

China’s ecommerce industry is in a state of boom, fuelled by a myriad of factors, such as government policy, upsurge in mobile and social media usage, and an offline retail sector that continues to show signs of weakness.

Online retails sales in China now trump that of the US, according to the Chinese Ministry of Commerce, who say that $296bn was spent online in 2013 in China, a surge of 41% on the previous year.

A staggering one in seven Chinese consumers turns to the internet for a purchase every day and more than 60% shop weekly, a ratio that is almost three times higher than the global average, according to PricewaterhouseCoopers.

It would not be overstating it to suggest that China’s flourishing ecommerce industry is a poster boy for the whole Chinese economy. It is growing three times as fast as the rest of the Chinese retail market and now represents around 8% of China’s total retail sales. And what is more, it still offers growth opportunities both for domestic and international brands.

A snapshot of China’s retail market

Such has been the upsurge in online shopping by Chinese consumers that forecasts are being shattered. A national ecommerce study carried out in 2012 by the Tongji University predicted that online retail sales would account for 6.3% of total retail sales in 2015.

However, this forecast has now been trumped as it seems the market has already exceeded this level: according to iResearch, online retail transactions accounted for 7.9% of all retail sales in China in 2013.

• China’s total retail sales of consumer goods more than doubled in four years, from 10.8 trillion yuan ($1.7 trillion) in 2008 to 20.7 trillion yuan in 2012 ($3.3 trillion).
• On 11 November 2010 (Singles Day), online retail sales in China hit 3 billion yuan, while offline retail sales accounted for 44 billion yuan, a difference of nearly 15 times. In 2013, online
  sales on this particular day reached a record high of 45 billion yuan, an increase by nearly 80% compared with 2012. Also, it was the first time that online sales exceeded offline sales.
  
• In 2013, online shopping transactions in China reached 1.84 trillion yuan, an increase of 39% year-on-year, and accounting for 7.9% of the total consumer goods retail amount (up 1.6% over the previous year). Online shopping in China is expected to reach 4 trillion yuan during 2016-2017.

Key players

Understanding the market

Regional differences in online shopping behaviour also increase the complexity in addressing ecommerce challenges in China. As Ogilvy & Mather’s Barney Loehnis so aptly put it: “Brands must decide where to focus. Entering China is like entering 100 markets simultaneously.”

Let’s go into more detail to understand this complex state of affairs:

• Sustained growth of consumption and shopping frequency. In 2012, Chinese online shoppers’ consumption per capita was 5,203 yuan (about $835), an increase of 25% year-on-year. Over a third (37%) of these shoppers spent 1,001-5,000 yuan online and around 7% spent more than 10,000 yuan.cc
• According to research conducted by PwC, just under two-thirds (62%) of Chinese online consumers shop at least once a week, far beyond the US average – only 22% of US consumers shop at least once a week online.
• Top three categories purchased online are ‘clothing, footwear and accessories’ (82%), ‘daily necessities’ (32%) and ‘computers, digital communications products and accessories’ (30%).
• Online shoppers’ age is gradually tilted towards the middle-age group, with over a third (36%) of users aged 31 or above. The highest proportion of shoppers (33%) is 25-30 years old.
• More middle to high-income earners are entering the online shopping realm. Almost a third (30%) of online shoppers enjoy a monthly income of 3,001-5,000 yuan, forming the largest segment online, and 13% of online shoppers earn more than 8,000 yuan per month.
• Women are active online shoppers, outnumbering men. Women account for over half of the online shopping population and the proportion is gradually increasing. Their purchase preferences mainly focus on clothing, cosmetics, home decor, maternal and baby products.

Econsultancy’s State of Ecommerce in China report is aimed at organisations who want to understand how the world’s largest ecommerce market is evolving, the players that are dominating the sector and how consumer behaviour and emerging technologies are impacting their strategies.