Online Shopping in China

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Online shopping in China is booming.

According to PricewaterhouseCoopers (PwC), since two years ago, China has replaced the US as the world’s largest e-commerce market, with a market value at $306 billion. Just the sales figure of Alibaba (taobao.com) alone is equal to the entire US online selling.

By the end of 2013, there are around 8 million stores on Taobao.com selling nearly 800 million different products, ranging from helicopters to cotton shoes handcrafted by village grannies.

Ele.me, an online food delivery service, is expanding rapidly across the country. About two weeks ago, the company raised $350 million from both Chinese and U.S. investors.

E-commerce in China and the US

E-commerce in China and the US

Chinese today are perhaps the world’s No.1 online shopaholics, willing to buy virtually anything online, from furniture to food, not just for cheaper prices but great convenience.

Factors that Contribute to China’s Fast Ecommerce Growth

There are many factors that drive China’s e-commerce development, and the followings are just some of them:

  • The first and the foremost factor is of course the growing use of smart phones across China that helps e-commerce to connect online and offline (O2O) services. By now China is making more online purchases and payments using mobile devices than the US;

Online shopping via mobile phone

  • The second is China’s tradition to work beyond a nine-to-five Mon-to-Fri routine. In China, most stores, including post office and banks, open 7 days a week. In fact, the commercial activities are much more thriving at night and over the weekends than the normal office hours;
  • Thanks, at least partly, to such working tradition, China’s online shopping delivery service is the best to none in the world. Many goods are delivered within 24 hours of online purchasing (including weekends), and often free of charge, and always to buyers door steps;
  • China’s huge labour force, in particular the so-called “peasant workers”, also helps. In the past, most of “peasant workers” would primarily seek a job in a construction site. Now as property development slows down, there is a vast human resource pool for online delivery industry to draw upon;
  • The final but not the least contributing factor is the growing ownership of motor vehicle in China, that have equipped many job seekers to take up delivery work.

Problems with Online Shopping in China

China’s speedy growth of e-commerce does not come without a catch. According to the data released by China Consumer Association, of 20,135 complaints that the organisation received, 92.28% are related to ecommerce, with telecommunications products, clothing and motor vehicle parts top the list.

A recent survey conducted by a Chinese media asked the following question to the online shoppers: how often were you unhappy with the products purchased online?

Nearly half of the respondents admitted that they found the quality of products were not to their satisfaction 1 in every 5 purchases, with further a quarter cited they were unhappy at least 1 in every 20 items they bought online.

Chinese online shopping customer survey 1

Among all online complains, half are related to the copycat problems (blue column).

Chinese online shopping customer survey 1

On the other hand, Chinese online shoppers’ attitudes towards poor products are not helping the resolve of the problems. The survey found, when they purchased a fake or poor quality product, instead of seeking for refund or repair, 40 percent of the respondents would just leave the issue behind and try another online store next time.

The new Chinese consumer regulation now allows unconditional money back within 7 days if purchased online. However, with hassles to go to a post office or find a courier to send the item back at their own cost, how many online shoppers will bother to take the advantage is still uncertain.

Outlook for China’s E-commerce Development

Despite being the world’s largest online shopping market, the potential of China’s ecommerce may still yet to be fully leashed for the following reasons:

  • With a less developed retail network in China’s numerous small cities and county towns, the need for ecommerce from these backward regions is huge. A Taobao report reveals that in 2012, online purchase from small cities and towns were 3.6 times more that from large cities.
  • A study by Dutch ACNielsen has discovered well-educated Chinese young males are online stores’ most faithful patrons. As the younger generation born in 90s and even 00s starts to grow more purchasing power, the demand for ecommerce in three to five years could be doubled even tripled.

PWC predicts China will overtake the US to become the world’s largest retail market by 2018, with an expected market value at about $10.3 trillion, that is twice as what is projected for North America.

References: 
· finance.people.com.cn
· reuters.com
· v5.ele.me
· rt.com
· ce.cn

17 comments

  • Xie Tiantian

    在很多中国高校校内,事实上已经不需要纸币了,这是阿里巴巴积极向普通民众的生活渗透的结果,政府也很赞同这种做法。

    • Awen

      Actually since a year ago, China has virtually become a cash-free society outside the university campuses as well. You can use online transaction to pay for practically everything through weichat or other applications on your mobile phone.

  • download pdf books

    Great post. I will be dealing with many of these issues as
    well..

  • Tar

    That’s an amazing, ludicrous figures. I mean the market value. Surely, this has affected the retail stores in China someway as e-commerce growth is increasing.

    I also would like to think that when you put different elements from different industries, like peasant workers from construction and the ideology of motor vehicles.

    What I’m saying is it’s like taking the production method of say, a phone industry, the machinery and apply in housing estate.

    Mixing two different concepts in one supplements well usually. I hope you get what I mean.

  • Seth

    Wow this has a lot of great information about the Ecommerce scene in China. It seems like someone that could manage to stand out from the crowd and provide quality products could capture a lot of repeat business. This article also makes me want to reconsider investing in Alibaba again, although the market is a little rough right now, long term I’m sure that would pay off! Great in-depth article!

    • Awen

      Hi Seth, I think it shall be a good idea to invest in China’s e-commerce. Online shopping in China is not merely an alternative lifestyle but the way of living – people buy everything online from food to helicopter, and shooping online on the daily basis.

      I believe e-commerce could be the savior of Chinese economy.

  • NemiraB

    It is a great analysis of China market. This country is so far away from America, but steadily goes forward with forming shopping habits as here, in USA. As I know, a lot people buy goods, which are for prestige, just show status in eyes of other people. I wonder, how it will be now, when economy in China slows down and monetary value of yuan changes dramatically. We will see. China had a lot ups and downs through history, but always recovers.

    Happy writing, all the best, Nemira

    • Awen

      Your observation is quite accurate, Nemira. Indeed, as most rich guys in China today are “get-rich-sudden” folks, the taste of many of them remains poor.

      China’s scale of e-commerce is the biggest in the world. It both breaks and makes Chinese economy. The negative part: so many brick and mortar stores are forced to shut; the positive part: so many new business and job opportunities have been created; and since the prices are more competitive and the way of the shopping is more convenient, on the whole, online shopping becomes a great driving force for China’s economy and will be more so in the future. 🙂

  • george

    It seems you are quite an expert in Chinese ecommerce. I’m considering to expand my online business to Chinese market, wish you can provide some information about the pros and the cons of running ecommerce in China. Thank you!

  • quadri

    Terrific post however, I was wondering if you could write a litte
    more on this topic? I’d be very thankful if you could elaborate a
    little bit more about online shopping. Kudos!

  • Byron

    Beneficial information about China’s online shopping. I didn’t know ecommerce would be so hot in China.

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  • dgq

    Thanks for sharing this info. I’m doing business with some Chinese companies and searching for this kind of information.

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