The China e-commerce market is the largest in the world with a volume of 1.94 trillion USD in 2019. That is plus 27% year over year and a quarter of China’s total retail sales volume. As such, China’s e-commerce sector is more than three times the size of the US market, which ranks second.
Despite the Coronavirus outbreak, these numbers are expected to grow in 2021. In 2020, the global e-commerce growth rate is predicted to be 16% with the total volume surpassing 4.2 trillion USD.
Of course, China is no exception with an e-commerce market share of 35% of the country’s total retail sales. The gigantic investments in China’s Belt and Road Initiative (BRI) project fuel this trend – by linking Central Asia, the Middle East, and Europe offline, more online businesses will follow.
Online networks and social commerce on buzzing apps like WeChat, TikTok, and Sina Weibo have long become an integral part of China’s everyday life. In fact, Chinese consumers spend nearly five hours per day on their mobile devices (smartphones, tablets).
They stay in touch, pay, shop, book trips, and more with these popular apps. By the way, the global average is three hours per day on handheld devices.
This is why we are looking at the current trends in this week’s Tenba Group article. We present the main highlights of the Chinese e-commerce landscape as the events in 2020 shape the trends for 2021.
The E Commerce Players in China
With three times the size of the US market, the Chinese e-commerce market size is the largest of commerce markets in the world. The Middle Kingdom’s near 1.4 billion population, its traditional and innovative products together with the government’s censorship have created a prospering economy – online and offline. Even the West is beginning to implement Chinese sale festivals.
In order to get an idea about China’s e-commerce market and online landscape, let’s start with the largest online retailers:
This third most visited website in the world is a brand-driven B2C marketplace. Click here to read more about Tmall Global, the top CBEC marketplace in China.
Jingdong (JD) is a B2C marketplace with in-house delivery and logistics. Tmall relies on its sellers to fulfill the supply chain. And JD.com formed a strategic partnership with Tencent (WeChat) to take on Alibaba
This cross-border e-commerce player offers a large variety of goods, focusing on selling high-quality “Western” products to middle-class Chinese customers.
However, the exact market share among these online commerce platforms varies according to the source. Tmall is leading the e-commerce landscape with a market share of 50%-60%, JD.com follows with 15%-20%, Kaola and RED and others like WeChat (with their own WeChat store) divide the rest between them.
China’s E-Commerce Environment
Now, these are the e-commerce segments where China is a pioneer:
1. China Mobile Commerce
We all know that internet users in China mostly browse on their phones or tablet. But did you know that mobile devices generate 80% of the retail e-commerce sales?
This compares to the global average of 64%. Websites are still important in general for branding and ranking well for branded keywords as more buyers are checking to see the legitimacy of companies and products on sites such as Baidu. There is also a high demand for foreign products on website platforms.
2. Mobile Payment Platforms
Chinese consumers rely on apps like Alipay, WeChat Pay, and UnionPay for online China shopping platforms and payments at physical stores alike.
These are the best e-commerce sites in China. In fact, more than 80% of smartphone users in China use mobile payments compared to 27% in the US.
3. Cross-Border E Commerce in China
We have already presented Chinese cross-border e-commerce in great detail in this article. It refers to international sales at an online market platform to Chinese consumers (B2C, B2B, C2C). High-quality luxury goods from abroad are very popular. In particular, cosmetics, baby products, food, and beverages (organic), high-fashion, and jewelry.
Global infrastructure improves and small businesses gain better access to global markets. Therefore, the demand of Chinese consumers for household products and luxury goods will only increase.
Now that we have covered the basics, let’s look at the Chinese e-commerce trends!
A Look Back at the 12 Trends in the China E Commerce Market in 2020
In the past, China was known as the “world factory”, exporting high-quality fashion, sneakers, electronics, and more. Over the last years, this trend has seen a reverse – imports are becoming more and more relevant.
Now, let’s get to it and look at this year’s biggest trends in the Chinese e-commerce environment:
1. China Cross-Border E Commerce
This booming sector will supposedly reach a volume of 164 billion USD in 2020, almost double compared to the previous year.
Moreover, Alibaba’s acquisition of Kaola in September 2019 will lead to a consolidation in this segment. Kaola will become a part of Tmall, stealing market share from competitor JD.com.
Foreign brands can cooperate with these platforms depending on their business model to sell their services. More about the CBEC trade in China here.
2. Omnichannel Retail
This cross-channel content strategy aims at improving the user experience and creating better relationships with the target audience across all points of contact. Whether you are shopping online or in an actual store, the transition from one point to the other at any point in your consumer journey should be seamless and easy – online and offline are melting together (O2O).
In particular, China is leading omnichannel retailing in high customer expectations, smart sales assistants, mobile-first, self-service kiosks, and virtual reality / augmented reality. In addition, close integration of consumer payments is creating the best practice example for the whole world.
A real-life example is Alibaba’s grocery platform Freshippo where customers can shop in person (click-and-collect), dine-in, and have goods delivered via online ordering.
This trend of selling to lower Tier cities and areas in China we already observe in the Chinese social media landscape. Lower Tiers have more money available for shopping (due to lower living costs) and are happy to spend it on consumer goods.
Financial technology and innovation which aims to compete with traditional methods to deliver financial services are on the rise. In particular, Chinese online banks like WeCash (unrelated to WeChat or Tencent) emerge as startups to bring easy and uncomplicated financial services to individuals and institutions, often incorporating machine learning and AI technology.
For example, WeCash with 130 million users in 5 countries allows individuals to get their credit score straightforward and apply for loans. And institutions can build their income-yielding loan portfolio on this big-data powered platform.
Cryptocurrency miners and users are facing severe regulation in the Middle Kingdom. Same as with social network platforms, a designated Chinese search engine (Baidu), and other China-specific tools and regulations, China is seeking new solutions for their country and market in terms of cryptocurrency.
First introduced as a concept 5 years ago, China is now finalizing the preparation for the release of its DCEP (Digital Currency/Electronic Payments). However, unlike Bitcoin and related currencies, DCEP is government-sanctioned. The government will likely distribute the new currency through traditional banks, making it fully centralized and exactly like traditional paper money.
As China expands its worldwide trade through the belt and road initiative (BRI) and other development initiatives, DCEP has the potential to create significant financial autonomy and less exposure to the US.
6. From KOL to KOC marketing
Key opinion consumers (KOCs) are “normal” buyers who create videos and posts about their own product reviews and recommendations. End consumers are hungry for advice and recommendations from real consumers they trust. KOCs also act as influencers but are more authentic. Relationship-based marketing is on the rise!
Brands that incorporate KOCs into their marketing strategy can benefit from a boost in the brand image and increased sales. Make sure to identify suitable KOCs, as they usually do not have many followers, which makes them difficult to find. A Chinese marketing agency can take care of this for you.
If you incorporate these trends, your business has a solid basis in Chinese marketing. Do you want to hear more about the Chinese e-commerce environment? Continue reading!
7. Short Videos
Together with live-streaming, short videos and short video apps are conquering the Chinese market. Thus, the line between business and socializing continues to blur. It will not surprise you that more than 300 million Chinese are using short video apps.
Higher Tier areas with middle and higher-income households and individuals as well as a younger audience (under 35 years old) are more drawn to this medium.
8. Group Buying
This trend hasn’t really arrived outside of China yet. Western shoppers may think that the products could have poor quality. Or that those platforms are unreliable and impose hidden costs. Chinese consumers value the significantly reduced prices – particularly lower Tier residents take advantage of the group-buying model.
In the Middle Kingdom, however, group buying is expected to grow as Pinduoduo, JD.com, and Alibaba launch their own group-buying functions.
9. Social Commerce
This hot new trend reached a volume of more than 300 billion USD in 2019. The increased use of mobile devices and social media created social shopping also known as social e-commerce.
The “now” consumer follows trends and has unplanned interactions with brand and retail experiences. Shoppers can do so at home, at work, or on the go. This behavior drives the need for new approaches to create a personal and ready-to-buy social commerce experience.
10. Cruelty-Free Products
Until early 2021, animal testing was required by law for cosmetic products imported to and sold in the Middle Kingdom. Since 1 May 2021, this law is obsolete. Animal testing is no longer required for general cosmetics imported into China, as long as they meet certain other requirements like a safety and risk assessment.
This also opens up the market to vegan, cruelty-free and sustainable cosmetics and beauty brands. The UK-based skincare brand Bulldog was the first cruelty-free cosmetics brand to sell in mainland China, imported under the general trade (and not CBEC model).
11. Private Traffic
As a result of paid traffic getting more expensive, brands are seeking alternatives. By setting up exclusive clubs or groups like WeChat groups, brands can communicate a certain lifestyle and the corresponding products.
The advantage of a closed group is that they already consist of loyal customers and fans. And they respond more easily to CTAs.
12. Big Data
This last trend brings all the previous ones together, literally. Big data analyzes massive volumes of information to apply data-oriented marketing in China.
By combining information from online and offline consumer behavior, businesses overcome the limits of space and time. Businesses gain deep insights into the likes and dislikes of their (potential) customers, their movement, and behavior patterns.
For example, Tencent collects and classifies information into different dimensions, which consist of more than 3,000 tags, including basic attributes, social interests, entertainment interests, media preferences, etc.
Keep in mind that Chinese consumers love their mobile devices and use them for everything. Specifically, their super-app WeChat, which lets users pay, play, chat, shop, order everyday services and products, and more. Advertising in China has never been easier and more complex at the same time.
Coronavirus – Impact on China E Commerce Landscape in 2021
For years, China’s economy and the China e-commerce landscape have been booming. Seemingly without an end in sight. Last year alone, the Middle Kingdom’s retail e-commerce sales increased by a third to 1.9 trillion USD.
Now, is the recent outbreak of the Coronavirus in Wuhan (central China) in December 2019 a treat? Not only to the health and well-being of people in China and around the world but also China’s buzzing economy?
A New Era of Marketing
With the high usage rate we’ve learned above, social commerce on social media is flourishing. Besides, Chinese buyers trust their peers more than official brands or government messages. Influencer marketing with KOLs (Key Opinion Leaders), KOCs (Key Opinion Consumers), and Wanghong is the latest trend.
The growth seems endless. No one can imagine that consumers voluntarily renounce themselves from technology, innovation, and convenience. And despite the recent trade war with the US, China’s market economy is growing and the general economic environment is stable.
Now, can a virological outbreak like the Coronavirus threaten the China e-commerce landscape and beyond? Or does it even amplify the Chinese online marketplace, because people are homebound and distrust physical interaction?
The Coronavirus (Covid-19)
The outbreak of the Wuhan virus in December 2019 links to the Huanan Seafood Wholesale Market, where shoppers can purchase live wild animals. In January 2020, amidst the Chinese New Year, the virus spread to other Chinese provinces. By now, the virus has been carried to countries around the world by international travelers and as of mid-February 2020 has infected more than 17,000 people.
The symptoms are similar to pneumonia, and range between mild and severe. The disease is transmitted through respiratory droplets by sneezing and coughing. However, the estimated death rate is only 2% at the moment.
Impact of the Coronavirus on China E Commerce
In 2002, SARS (Severe Acute Respiratory Syndrome), a likewise pneumonia virus, broke out in China. Back then, the country was mostly supplying the world with low-cost goods like t-shirts and sneakers. However, today, China is one of the key commerce players in the global economy.
During SARS, China’s trade suffered significantly and stock markets fell up to 15%. Yet, the recovery was quick and markets became stronger than ever.
Today, fear of the virus also means people tend to avoid activities that expose them to the risk of infection. For example, going to restaurants, movies or shopping, using public transport and public services.
Although general anxiety comes with the pandemic, which negatively impacts sales, in today’s online world, certain sectors are actually benefiting. So, let’s take a closer look at the impact of the Coronavirus on the China e-commerce landscape and online shopping:
Public life, including public transport, flights and trains have come to a stop since 23 January 2020.
Wuhan’s 11 million residents order food and other items of daily life online. But even delivery comes with a certain risk. For example, food deliverer Meituan – which is owned by Tencent, the tech giant behind WeChat and Alibaba Group rival – has adapted its food delivery app with lightning speed.
Now, customers and delivery drivers don’t have to meet face-to-face. They drop off the food at the doorstep, reception, or nearby as per the buyers’ request. And with a mobile payment rate of 95% in China, there’s no cash involved.
Recently, instead of having food delivered, Wuhan residents are starting to order fresh foods, which they cook safely themselves.
Meanwhile, the lockdown was to other parts of Hubei province. There are severe restrictions around business-travel, the movement of goods and workers. Yet, the mass quarantine of Wuhan and Hubei didn’t stop the Coronavirus. But it became much slower. Fortunately, there was and is no shortage of food and supplies.
Since the beginning of February 2020, casinos in China’s top gambling destinations are closed. This essentially stopped life on the peninsula. More than 37 billion USD alone is generated every year in the casinos of Macau. The lockdown has been limited to two weeks for now.
Other Parts of China
Apple, Starbucks, and Ikea have closed their stores in China for the time being. Shopping malls, restaurants, and public places are basically empty. International airlines, including American, Delta, United, Lufthansa, and British Airways, have suspended flights to mainland China.
All of this severely impacts the offline economy, but actually favors online services for shopping, in particular items for daily use.
Besides, China is an important supplier for the global motor industry and the electronics sector. Some factories have stopped their production for the time being, which can lead to bottlenecks internationally in these sectors.
Around the World
These days, some buyers may be more reluctant to buy items from China. Generally speaking, the analysis firm Oxford Economics estimates that the global market is expected to grow slightly less – by 0.2% – than it would have done otherwise.
Demand for crude oil went down 16% in price since China identified the Coronavirus. China is not only the world’s biggest oil importer, but the locked-down city Wuhan is also one of the Middle Kingdom’s key oil and gas hubs. However, shortages are not expected as of now, because general production in China, as well as consumption outside of Chinese consumers, has decreased to halted.
As a result of being homebound, Chinese consumers spend more time than ever on their smartphones and online. People who had still been purchasing goods offline now prefer to buy from online shops, and not only for daily needs items. A more detailed impact of COVID-19 on Chinese consumer behavior can be found in this article.
Online retailers for fashion, accessories, and cosmetics didn’t even experience a decrease in sales. For example, the BESTSELLER Fashion Group (Only, Vero Moda, Jack & Jones, etc.) launched a WeChat Mini-program, which exceeded its offline sales in only two weeks.
Turning Around the Negative Impact of the Coronavirus
So, how can the China e-commerce market respond to some of the negative impacts of this ongoing pandemic? Search engines like China’s own Baidu are running hot these days with users searching for “face masks” and “hygiene masks”. In fact, masks are no longer available in parts of China.
The health sector and high-quality items for daily needs stand out when it comes to business opportunities, in particular for foreign companies.
You can export pharmaceutical/medical products like masks, (organic) food, or baby products via cross-border e-commerce to satisfy China’s need for healthy and high-quality household products and luxury goods.
These sectors generally contain products, which Chinese internet users love to buy from abroad, as they associate stricter quality controls, value, and an exotic flair with it. The most popular cross border commerce platforms are Tmall Global, JD Worldwide, Kaola, VipShop, RED, and Pinduoduo.
Whereas cross-border logistics remain difficult as a lot of checkpoints have been closed in Hong Kong, authorities are working on normalizing the process. At the same time, there are still warehouses and logistics providers still operating as usual.
In this regard, it is noteworthy that the Chinese Drug Administration Law became effective on 1 December 2019. With this so-called “New Law”, it is now easier to import medical and pharmaceutical items via cross-border commerce into China.
Several licenses, which were necessary in the past, are not anymore. And authorities tolerate importing only a small amount of drugs by entities or individuals without an importation certificate.
The Takeaway: China e-Commerce Trends
The China e-commerce market is growing steadily, leading the world in this online millennium. The Coronavirus impacts daily life factory production. Chinese consumers avoid physical shopping due to fear of infection and shift to buying household items like food and medicine online.
As they stay home for health reasons, Chinese consumers also shop online for their favorite foreign fashion, accessory, and beauty products. Paired with the popular cross-border e-commerce shopping and with fewer restrictions in the medical sector, this opens opportunities for your business to import goods to China and expand your market.
Are you thinking about entering the Chinese market despite or because of the recent Coronavirus outbreak? You can start by creating a website for your Chinese audience, online and social media marketing targeting Chinese around the world, or launching an app in China.
Do you want a helping hand? The experienced team of your favorite China marketing agency Tenba Group is at your service! Request a FREE Consultation to get to know us and our services.