In this article, Bain & Company addresses the budding role of the digital retail industry in China.
Bain & Company analysts predict online retail will grow three times faster than overall retail in China. Analysts attribute future e-commerce growth to Chinese consumers’ preference for mobile retail and “heavy investment from logistics players.” China’s distribution infrastructure allows retailers to ship products anywhere in the country in as little as four days. The convenience and efficiency of online shopping attracts Chinese consumers to “make the leap to mobile retail.”
The article delineates market trends within the e-commerce sector: price remains the primary motivator, 80% of online shoppers use smartphones, and social media grows as a “critical customer engagement channel.” Companies, such as CocaCola and Walmart, tailor marketing initiatives and mobile apps to capture the growing digital market.
The “e-commerce boom” indicates a secure and expanding middle class in China. As the landscape of China’s marketplaces changes, so does its consumers. Mobile retail demonstrates the growing complexity of Chinese consumers in an increasingly diverse market. Digital retail gives consumers freedom to choose. Consumer freedom creates a competitive environment, forcing companies to adapt to satisfy customers. Thus, e-commerce represents a healthy growth opportunity in the now ‘normalized’ Chinese economy.
Source: Forbes article
As noted on another post, Alibaba is already huge relative to Amazon, eBay and the like combined, and Alibaba’s sales alone generate more package deliveries than UPS and FedEx carried all year. In the background is widespread cell phone diffusion. To my knowledge, Americans do not use their smart phones for online shopping, they prefer a regular computer with the larger display. Europeans are similar. But in developing countries cell phones will be how people connect. So a big question is whether Chinese firms will totally dominate that footprint. To my knowledge, no European or American firm is particularly good at that. (In Japan cell phone shopping has long been common, and Rakuten and Amazon Japan each have businesses models unique to the market, but to my knowledge they’ve not yet done much international.)
As I’ve read in other articles (and mentioned in my first blog post), China seems to be fading away from the traditionally heavy export-based economy to one that encourages consumerism. The expansion of the middle-class combined with the growing use of smart phones is a perfect recipe to facilitate this transition of economy-type. As shown in the United States, online shopping is not only a convenient means of acquiring goods and services, but it is also an effective way to promote reinvestment into the economy. It will be interesting to see how China’s e-commerce market grows, and how the logistics of which will compare to the well-established retailers like Amazon in the US in the coming years.