Why the Future of Ecommerce is in China

A picture of the Shanghai China skyline

The future of ecommerce can be found in the East. Chinese ecommerce is inventive, social, gamified, and digital-first. According to a recent forecast, ecommerce will account for 52.1% of all retail in China in 2021. This is an increase of 44.8% over the previous year. This marks the first time ever that a majority of a country’s retail will occur online.

The acceleration towards digital isn’t letting up either. According to eMarketer, brick-and-mortar sales in China decreased in 2020 by 18.6% and are projected to decline by another 9.8% in 2021. The state of the COVID-19 pandemic in early 2020 forced a significant change in the way that consumers shopped for products, moving them away from traditional brick-and-mortar businesses and onto their computers. Due in large part to this dramatic shift in consumer behaviour, exponential growth in ecommerce seemed not only logical but inevitable.

And yet no other country comes close to China’s exponential ecommerce growth. South Korea is a far second, with 28.9% of sales taking place online. The United States sits well behind both countries at 15.0%, while Western Europe’s average online sales are 12.9%. While the U.S. remains the leader in the global retail market, reaching $5.506 trillion in 2020 as opposed to China’s $5.130 trillion, China’s ecommerce sales are forecast to outpace the U.S. by nearly $2 trillion in 2021.

eMarketer forecasting writer Ethan Cramer-Flood writes of China’s astonishing ecommerce growth, “China seemingly reached behavioural a tipping point over the past few years, wherein ecommerce enthusiasm accelerated rather than levelled off. While the pandemic did not create this trend, it certainly buttressed it. China’s most recent ecommerce boom did not decelerate even after the country got a handle on the virus and the economy fully reopened.”

Chinese Ecommerce: Driven by Innovation and Imagination

Several factors that don’t include the coronavirus can be credited for China’s recent ecommerce boom. For starters, China’s consumer culture has long cultivated a more forward-thinking and innovative online market environment than the West. Theirs is a market that takes full advantage of digital payments, group deals, social media, instant messaging, short-form videos, and live-streaming.

“In China these days, you buy anything and everything online,” says Michel Phan of the Emlyon Business School. “But in Europe, ecommerce is only for people who don’t have access to a store,” he says. “The experience and service of a store are still all-important.”

Phan also notes that U.S. and European markets lack China’s strong ecommerce ecosystems. China’s efficient mobile payment and high-speed delivery systems developed by companies like Alibaba, JD.com, and Tencent fuel China’s ecommerce growth.

Competition amongst Chinese ecommerce retailers has grown fierce. Chinese ecommerce pioneers Alibaba and JD.com no longer enjoy the exclusive market grip they once had, as competitors like Meituan, Tencent and Pinduoduo have staked their own claims in the Chinese e-marketspace. This gives consumers more choice and more reasons to shop.

According to recent reporting by the Economist, “[Chinese] Competition has led ecommerce and other tech firms to demolish the boundaries between different types of services that are still common in the West.”

While economic, societal, and demographic trends account for China’s recent ecommerce surge, their widespread adoption of four major digital trends has helped them to quickly become a world leader in ecommerce. From mobile commerce and livestreaming to social commerce and digital wallets, here’s what retailers stateside can learn from China’s digital innovation.

Chinese Ecommerce Trend 1: Mobile Commerce

Mobile devices play a crucial role in China’s DTC ecommerce economy. According to early 2021 statistics, nearly 851 million people in China own a smartphone, making them the country’s tops internet access device. According to government figures, China currently has 989 million internet users. To put that into perspective, that’s more than the entire population of the United States. (Around 330 million.) Due to those figures, it is no surprise that 80% of all ecommerce sales in China are made through mobile devices.

Because of this, Chinese companies have put great emphasis on mobile optimisation as part of their ecommerce strategies. All apps and ecommerce websites are optimised with the customer experience in mind.

“Online is where young Chinese people experience life these days,” digital commerce strategist Michael Zakkour states in a recent report in the South China Morning Post. “It’s where they research, write about, and exchange ideas on products. And ultimately, it’s where they buy them.”

Chinese Ecommerce Trend 2: Social Commerce

Social commerce is where ecommerce and social media intersect, creating a shopping experience that takes place on a single social site. No market on earth does this better than the Chinese, which is home to some of the world’s most connected consumers. Of the 1.4 billion people in China, 79% are active on social media, spending 5 to 6 hours a day online every day.

According to a report by eMarketer, social commerce grew by 44.1% in China last year and will grow by another 35.5% this year, reaching $363.26 billion. By comparison, social commerce in the U.S. will be just $36.09 billion this year. Not surprisingly, massive mobile usage in China is fuelling a social commerce boom that U.S. markets have yet to experience.

“A majority of social buyers in China are shopping via their mobile devices,” writes Rimma Kats for Insider Intelligence. “And many digital storefronts start off on mobile layouts. In the US, the inverse is true. Online retailers often focus on developing a site first and then transition to mobile.”

Chinese Ecommerce Trend 3: Livestreaming

While virtually unheard of in the West as a selling commodity, livestreaming is huge in China and a major contributor to the Country’s ecommerce surge. With livestreaming, ecommerce merchants host live video events that promote products on their own site or work with social influencers to market brand products. Platforms like Alibaba’s Taoboa Live, AliExpress, and AliExpress Connect are leading platforms in this trend.

Chinese Ecommerce Trend 4: Digital Wallets

For a country so firmly invested in mobile-first culture, it makes sense that digital wallets are now used for the majority of China’s ecommerce payments. While Western markets rely on credit cards for payment, digital wallets have become the primary payment method in China. In fact, digital wallets make up $620.5 billion in Chinese online sales.

In 2020, 77.6 million people were using mobile wallets as payment in China. The trend is powered by popular home-grown digital wallets from WeChat Pay, Tencent’s WeChat Pay, Alibaba’s Alipay, and more. Th popularity of digital wallet payments can be linked to their built-in suitability for mobile commerce, the rise of 5G, and ease of use.

China’s Role in Shaping the Future of Ecommerce

Photo of a tablet on Ali Express, a Chinese ecommerce site

New studies forecast that Chinese ecommerce sales will grow 11.0% in 2022. This will result in a total online retail share of 55.6%, with sales surpassing the $3 trillion mark. While growth is projected to continue, there is evidence that a slowdown may be on the horizon.

“Only two things will prevent nearly endless standout ecommerce expansion,” writes Cramer-Flood of Insider Intelligence. “Firstly, China’s overall retail sales growth is projected to be far more constrained in the coming years than it has been over the past decade, as China’s economic engine is not what it once was.”

What Western Markets Can Learn about Ecommerce from China

Western brands may not be able to fully emulate the success of China’s ecommerce industry. But there are many innovative digital-first tactics they can begin to employ to catch up.

Retailers should optimise their mobile ecommerce experience and invest in social commerce opportunities. Additionally, investments in ecommerce infrastructure and new online payment methods are key. Finally, spearheading new initiatives like livestreaming or the gamification of shopping platforms can help brands compete in a crowded marketplace.

Want to learn more about ecommerce in Southeast Asia? Read our Guide to Cross-Border Ecommerce in Southeast Asia. Then, schedule a call with an ESW cross-border ecommerce expert to discuss your brand’s goals.