 6 min. læsning |
 Reagan Evans |
 Februar 16, 2017 |
Editor’s Note: This is Part 1 in a 2-part series. Read Part 2 here.
China’s yearly economic growth may not be as supercharged as it used to be, since it began its pivot from a manufacturing-based economy to a consumption-based one, like the United States’.
But amazingly, that hasn't impaired the buying power of its middle class, or their consumer spending, or e-commerce growth. The market burns bright with promise for both domestic and foreign businesses-especially online.
Indeed, China’s retail sales grew more than expected last November, as did GDP in Q4. The country remains on track to hit its goal of doubling GDP and per capita income from 2010 levels by 2020, analysts say. That’s good news for China, and for Western businesses hungry to serve its residents.
The time is ripe for businesses to enter the Chinese online market.
We’ve been saying this more and more in recent years, but the time is ripe for businesses to enter the Chinese online market. We are now witnessing a “perfect storm” convergence of technological, social and economic trends that are priming Chinese consumers to research and buy online more than ever before … and to buy from cross-border websites in particular.
There are challenges to entering and serving this market (which we'll discuss in Part 2 of this blog series), but the opportunities have simply become too compelling to ignore. Let's take a closer look at this perfect storm.
Western companies are fast learning that they need not have brick-and-mortar presences in China to serve Chinese customers. Websites and virtual marketplaces such as Tmall are very powerful channels to market to, and sell to, these increasingly affluent consumers. In China-as with the rest of the world-online is fast becoming where the action is.
Internet penetration here continues to grow. It’s presently up to around 53%, representing over 730 million people. This rising Internet use—alongside rapid growth among the country’s middle class—is translating into supercharged online spending. E-commerce spending grew by over 70% in 2015 alone.
This growth is especially apparent on cross-border e-commerce sites, which bodes well for Western brands and retailers. Last year, more than 15% of the country’s population made cross-border purchases (worth more than $85 billion). eMarketer estimates that in four years, 25% of China’s population will be shopping on cross-border sites. This will represent over half of the country’s online shoppers.
Western companies need not have brick-and-mortar presences in China to serve Chinese customers.
Many of these cross-border shoppers are young, and highly educated, an Amazon study recently found. About 80% of consumers surveyed were younger than 35. Ninety percent had bachelor’s degrees.
Historically, Internet adoption has grown most quickly in China’s urban regions. However, expect future growth to hail from rural areas. Government agencies are currently doubling down on rural infrastructure improvements to help generate consumption in these areas. And it’s working: rural e-commerce almost doubled to $51 billion in 2015, according to the country’s Ministry of Commerce. Here’s another way to illustrate the astonishing rural growth. Between 2015 and 2018, China’s “tier 1 cities” (such as Beijing) will see a total increase of 10.6 million new Internet users. The rest of the country will bring nearly 150 million new Internet users during that same time, JP Morgan data suggests.
Beyond the emerging rural opportunity lies the astonishing power of Chinese millennials. Perhaps unsurprisingly, these young, tech-savvy consumers are a driving force in China’s e-commerce space. There are over 415 million of them, accounting for nearly one-third of the Chinese population. (Amazingly, they represent more people than the working populations of the U.S. and Western Europe combined, says Goldman Sachs.)
They’re already active shoppers online. Of all Chinese retail e-commerce shoppers, 39% are between the ages of 18 and 25, who largely fall into the post-1980s jiulinghou generation. Another 32% are from the between the ages of 26 and 35, members of the post-1990s balinghou generation. All told, millennials represent over 70% of the country’s online shoppers.
Thanks to high-speed Internet and mobile access, these consumers embrace zhai, or “homebody” culture. This means millennials spend most of their leisure time at home, and often prefer products delivered to them, ordered via digital channels.
According to a Forbes contributor, Chinese millennials aren’t burdened by student loans or housing expenses. (About 90% of Chinese households own their homes, purchased with cash. Mortgage payments are uncommon.) The end result? Chinese millennials are big spenders. That’s good news for e-retailers. According to that Goldman Sachs report, Chinese millennials will see their income grow by $3 trillion in the next decade.
Chinese millennials are big spenders and they represent over 70% of the country’s online shoppers.
Another interesting emerging e-commerce demographic within China are elderly consumers. According to a 2016 survey of 1,500 consumers, about 80% over the age of 55 said they like to shop online. Nearly all of those consumers had shopped online in the past year; over 60% said they’d made online purchases more than 10 times that year.
Serving Chinese consumers with an in-market—or cross-border—e-commerce experience can be a smart play for your business. But don’t ignore mobile’s powerful role in how the Chinese consume content and shop. According to the China Internet Network Information Center, over 95% of the country’s Internet users accessed the web last year via mobile devices.
Last year, mobile e-commerce (m-commerce) represented over 55% of all retail e-commerce sales in the market, totaling more than $505 billion. This spending will hit $737 billion by year’s end. By 2019, it will be a $1.4 trillion market, representing nearly one-fourth of all Chinese retail spending—both online and off.
The m-commerce space is “miles ahead” of the U.S. say some pundits, thanks mostly to the mobile-first nature of the market. China is the world’s No. 1 smartphone market. Nearly 100% of Chinese residents between 14 and 47 now own a smartphone Deloitte data suggests. Half of these consumers access the Internet about 25 times a day via their phones. Ten percent access the mobile web more than 100 times a day.
Over 95% of the country’s Internet users accessed the web last year via mobile devices.
Why is m-commerce so stratospherically popular here? Most Chinese residents never formed a habit of shopping online via PCs, and have effectively leap-frogged the traditional e-commerce experience. Apps and the mobile web are how these consumers experience online content and shopping.
Mobile payment platforms also make the buying process frictionless for consumers. Take Chinese social network WeChat, which has nearly 820 million active monthly users—640 million of whom access the service through their smartphones. This service facilitates tons of transactions (thanks to the ability for retailers to offer transactional experiences within WeChat), processed through its WeChat Pay platform.
“WeChat is the most influential app in the world,” an analyst told CNBC last year. “It has the functionality of an iTunes store. So you can do anything you want.”
It should be clear that the opportunities for e-commerce and online engagement are thriving in China. These consumers are crazy for the Internet, and are already spending plenty of time and money there.
In Part 2 of this blog series, which will debut next week, we'll explore how to best serve these customers. You'll discover e-commerce best practices, read about peculiar bureaucratic pitfalls (and how to sidestep them), and gain a better understanding of local marketing tactics including in-language social media marketing and customer loyalty programs. And you'll learn how serving these consumers in their language of choice can be the smartest move of all.
Stay tuned! Part 2 drops next week!
Photo credit: Songquan Deng / Shutterstock.com
