China, already known to have the largest Internet population in the world, can now also claim the distinction of having the second-largest population of online shoppers—145 million people (versus 170 million in the United States). This is more than double the number in Japan and five times that of the United Kingdom. Moreover, online shopping will see exponential growth through 2015, with spending that could make China’s e-commerce market worth more than RMB 2 trillion and possibly surpass the size of the U.S. market.
Research conducted by The Boston Consulting Group offers an in-depth look at the underlying dynamics behind this exciting time of growth. Drawing from surveys of more than 4,000 online shoppers across tier 1 through tier 5 cities, this report illuminates the conditions that make China’s e-commerce environment unique compared with other markets and points out the crucial trends companies must be aware of to achieve success.
It is clear that Chinese consumers, especially the coveted urban dwellers and those in the middle and affluent classes (MACs), are quickly adopting “multichannel” shopping behaviors, creating both opportunities and challenges for brand companies, retailers, and e-commerce companies alike. Organizations that have been quick to capture the attention of these consumers are already reaping significant benefits. Vancl.com, for example, has become one of China’s top-ten casual apparel brands (excluding sportswear) while selling exclusively online, with expected 2011 sales of RMB 8 billion (four times 2010 sales).
Many companies, however, have been slow to respond, leaving significant growth opportunities on the table and allowing other merchants—such as those that sell on Taobao.com, a Chinese shopping portal in the vein of Amazon.com—to shape consumer perceptions of brands. Companies that do not have an active e-commerce strategy are allowing a fast-growing channel to develop without exerting any control or influence over the process.
Companies wishing to benefit from the rise of online shopping in China need to understand the circumstances that make the e-commerce environment there unique, as well as the trends and consumer behaviors that will direct future progress. At the moment, a very small proportion of overall category shoppers do their shopping online, leaving much room for growth. Usage and spending levels will increase in every e-commerce category, but certain categories are poised for more dramatic change. Consumers will become increasingly demanding as their needs alter, especially the heavy spenders, who will represent an outsize share of growth. Websites able to meet the need for better quality and service will win in an increasingly competitive online environment. And those that focus on the high profit potential of multichannel shoppers will also be at an advantage. Companies wishing to capture opportunities online must customize their strategies to account for the unique behaviors, demands, and challenges of the online ecosystem in China.