China will become the world s most valuable market for e-commerce
WHEN it comes to e-commerce, America is still top dog, with some 170m punters
scouring for bargains on the internet. However, China is not far behind, with
145m online shoppers, and it could become the world s most valuable e-commerce
market within four years.
In a new report, the Boston Consulting Group (BCG) calculates that every year
for the foreseeable future another 30m Chinese will go online to shop for the
first time. By 2015 they will each be spending $1,000 a year about what
Americans spend online now. BCG calculates that e-commerce could rise from 3.3%
of China s retail sales today to 7.4% by 2015 a jump that took a decade in
America.
The Chinese government has heavily subsidised the rollout of high-speed access,
so internet penetration now approaches rich-country levels. That boosts
e-commerce, of course. But so, too, do the shortcomings of China s costly,
inefficient bricks-and-mortar retailers.
For example, a quarter of Chinese shoppers seek products online because they
are not available at physical stores. Also, until recently, China lacked a
reliable and cheap method of shipping packages, so the e-commerce industry has
invested in developing one. Purchases on Taobao, an online Goliath that is a
division of China s Alibaba, are thought to account for a staggering 50% of all
packages shipped in China. The cost of shipping parcels is now a mere one-sixth
of what firms in America have to pay.
The biggest snag holding back e-commerce for years was a lack of trust.
Consumers worried (quite rationally) that online firms were fraudsters, or that
their credit cards would be abused, or that purchases would get swapped for
counterfeits during shipment. Alibaba overcame this by creating Alipay, a
clever online arrangement that unlike eBay s system releases payments to
vendors only after clients confirm that they are satisfied.
Chinese e-shoppers are also big users of social media. Precisely because they
do not trust sellers or advertising much, they devour online customer reviews
of the sort made popular by eBay and Amazon. According to BCG, over 40% of
Chinese online shoppers read and post product reviews online, making them twice
as likely as American online shoppers to do so and four times as likely as
Indians. The future of e-commerce is Chinese.
from the print edition | Business