E-commerce in China is booming more than you think
In our cold little country, we often think that the Western world is a leader in the field of e-commerce. With this we usually forget our distant eastern neighbors. But what does it turn out to be? First of all, the e-commerce market in China is many times larger and more creative. In terms of size, the market surpassed that of America in 2013. In addition, a so-called “Chinese e-commerce model” is rapidly conquering the hearts of approximately 850 million Eastern consumers. Hence a look at the land of the rising sun.
“Made in China 2025”
When the global recession hit in 2008, China took the bold step of investing massively in its own technological advances. China wanted to radically change its reputation as a “factory of the world”. The “Made in China 2025” strategy was intended to turn its “cheap products” image on its head. This was done by encouraging the country to produce products and services with a higher value.
Huge investments in digital infrastructure gave major cities access to 100 Mbps internet connections. This led to coverage of 98 percent of its population. Huge funds were provided to promote business development and innovation. In addition, China’s dependence on non-domestic technological innovation was significantly reduced. As a result, China now has the highest number of internet users in the world (more than India and America combined).
Innovative e-commerce model in China
When Alibaba went public in 2014, it was the world’s largest IPO ever. Today, the e-commerce market in China is worth €2 trillion, more than that of America and Europe combined. But apart from its enormous size, China stands out in many areas.
In recent years, new challenging competitors, including Meituan and Pinduoduo,have come of age. A sign of fierce competition is that Alibaba’s share of the Chinese e-commerce industry has fallen from 81% (at the time of listing) to 55%. Competition has also led e-commerce (and other technology) companies in China to expand their services. They no longer focus on mere sales; The online shopping platforms in China now combine digital payments, group deals, social media, gaming, instant messaging and live streams.
Biggest e-commerce players in China
At three times the size of the U.S. market, the Chinese e-commerce market is the largest trading market in the world. To get an idea of the e-commerce market in China, here are the biggest online retailers:
- Tmall China by Alibaba Group; this third most visited website in the world is a B2C marketplace with only dropship sellers.
- JD.com; Jingdong (JD) is a B2C marketplace with internal delivery and logistics. JD.com has a strategic partnership with Tencent (WeChat).
- Kaola by NetEase; this cross-border player in the field of e-commerce offers a wide variety of goods. They are refocusing on selling high-quality “Western” products to Chinese customers.
- Xiaohongshu (RED); a platform for lifestyle shopping for young people. User-generated content (UGC) inspires this sub-community.
The exact market share of these online trading platforms varies by source. Tmall leads the e-commerce landscape with a market share of 50% to 60%. JD.com follows with 15% to 20%, Kaola and RED and others such as WeChat (with their own WeChat store) take care of the rest.
China as a trendsetter
Today, China is a hotbed of digital innovation, which threatens to dethrone Silicon Valley. This is not only caused by the aforementioned all-encompassing online shopping platforms. We’re also seeing wonderful innovations in social media (such as Tencent’s Wechat), seamless omnichannel shopping, and groundbreaking approach to live streaming.
Tencent and Alibaba are now in the list of the 10 most valuable brands in the world that has historically been so dominated by Western counterparts. With its digital landscape and culture, China has formed a consumer who is at the forefront. Both in terms of digital acceptance and the demand for the integration of platforms.
Expansion to the rest of the world
The obvious question is whether the Chinese e-commerce model will conquer the world. As has been the case for decades, the Western giants (I’ll mention Silicon Valley again) still tend to underestimate China. Where we still see many dominating silos in the West (e-commerce, gaming, payment, social media, messaging, etc.), in the East these are often intertwined. Partly as a result of the pandemic, Chinese characteristics are already emerging in the West. The silos are being broken down as companies diversify.
Facebook now promotes shopping services on its social networks and engages in “social commerce”. Live streaming and the use of WhatsApp promote the exchange of messages between merchants and buyers. In December, Walmart hosted its first live shopping event within TikTok,a Chinese video app. In France, Vova (affiliated with the founder of Pinduoduo) was the sixth most downloaded e-commerce app in the past quarter. And in America, the share price of ecommerce platform Shopify is rising like a rocket. Its current value is more than €110 billion.
Still, Chinese e-commerce has flaws. After all, fraud is more common in the West. There are antitrust issues where China is ahead of U.S. and European regulators. So far, the latter have not been effective in controlling large technology companies and markets. They too should study China to get an idea of where the industry is going.
Continue to ignore or start learning?
There is a pattern in how the West thinks about Chinese innovation. From electronics to solar panels, Chinese manufacturing innovation has previously always been ignored or dismissed as copying. I think it’s only a matter of time before we start embracing Chinese innovation. What do you think?
