E-commerce in China

Introduction

Electronic commerce (e-commerce) refers to the purchasing and retailing of goods and services over the internet. Business transactions in electronic commerce can either take place as consumer-to-business, consumer-to-consumer, business-to-consumer, or business-to-business. For an e-commerce to be successful, customers must have a pleasant shopping experience because more customers make purchases when the experience is excellent. This paper describes how China has managed to become a global giant in e-commerce.

Literature review

The growth of internet usage and penetration of online shopping have created a firm foundation for the booming of online retail industry in China. A survey conducted by E-commerce Research Centre of China indicated that e-commerce transactions of China rose by 47.3 percent to RMB 754 billion by mid-2013, accounting for 6.8 percent of the overall retail trades of consumer products (eMarketer Inc., 2016). According to a survey carried out by China-Britain Business Council, China beat the United States in 2008 to have the widest internet user base globally and has laid claim to the biggest population of online buyers (China-Britain Business Council, 2015). The overall value of e-commerce market in China rose by 27.9 percent to RMB 8.1 trillion in 2012. Currently, there are more than 240 million e-shoppers in China (eMarketer Inc., 2016).

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Chinese market’s diversity and sheer size make online channels hugely important means through which foreign enterprises can connect with shoppers nationwide. Its e-commerce landscape is unique since it is dominated by national platforms thus foreign companies have to fully take cognizance of the opportunities and barriers before making a commitment to the market. An efficient online strategy is imperative for companies that seek to access the business-to-business (B2B) and business-to-consumers markets of China. (China-Britain Business Council, 2015).

China’s business-to-business (B2B) e-commerce market pioneered the Chinese e-commerce’s development and is still very dominant. It accounted for 81.6 percent of the overall e-commerce market of China in 2012. Small and medium enterprises accounted for 53.3 percent of the overall e-commerce market, while larger B2B e-commerce’s market share was 28.3 percent. The B2B e-commerce market in China is fragmented and has more than ten thousand independent platforms. Its biggest single participant is Alibaba whose market share is about 42.9 percent. It was initially created to offer a trading network between shoppers in the United States and the European Union and Chinese suppliers; however, it currently serves millions of suppliers and purchasers from over 240 nations (China-Britain Business Council, 2015).

Alibaba’s domination in the e-commerce of China implies that making purchases from a new online vendor is as easy as buying products from the favorite retailer since purchasers increasingly use one Alibaba’s Tmall account irrespective of the marketplace from which they are shopping. Another prominent participant in the Chinese e-commerce market is JD.com. It runs on a model of direct sales and has a marketplace platform, which competes with Tmall (Ye, 2012). Another player (though tiny) in the Chinese e-commerce market is Amazon China.

According to China-Britain Business Council, the local B2B e-commerce market of China is still less developed than that of several North American and European markets. In spite of the proliferation of industry-specific and general B2B websites, they lack payment security thus hindering extensive shift to B2B procurement over the Internet. Purchase from appointed wholesalers or distributors and suppliers is still the leading sales channel in several sectors (China-Britain Business Council, 2015).

Customer-to-customer (C2C) e-commerce in China has dominated the online shopping market for a long time till recently. The primary C2C participant in this market has been Alibaba’s Taobao, accounting for nearly 95 percent of the overall market share. Consumers in China are slowly moving away from making purchases via non-professional suppliers towards buying products, whose registered stores sell on B2B websites like Tmall. Most Chinese shoppers focus more on service and have very high expectations of the experience of online shopping (Ye, 2012).

Without a doubt, the e-commerce market of China has a unique extent of centralization. Unlike American e-commerce markets, where major vendors and a bigger portion of the minor retailers manage their e-commerce websites individually, Chinese e-commerce vendors operate on Alibaba’s business-to-consumer (B2C) site, Tmall.com, as storefronts. Over 75 percent of e-commerce in China takes place via Alibaba’s Tmall and Taobao. This kind of centralization is a considerable difference from other major e-commerce markets in the world where making purchases at various e-commerce sites requires purchasers to have several accounts with multiple log-in credentials together with the completely different point of sale processes to comprehend. In Chinese e-commerce market, shoppers use the same account and one checkout UI to shop at various marketplaces. In essence, the fact that Chinese e-commerce vendors do not personalize the shopping experience ensures more e-commerce across the ecosystem (González, 2016).

The centralization of the e-commerce market in China has resulted in many sales-driving benefits, for example, the capacity to bake e-commerce into commercials, online TV, and even social media at a level beyond compare in other markets. Making purchases through a text, video, or image, or within an advertisement is very common in e-commerce in China. That means that vendors can sell their products without customers having to visit their e-commerce apps and sites. To be sure, more shopping takes place when the whole digital space is a store (Shier, 2014).

China’s gains in e-commerce will continue growing over the following years since it has one of the most advanced e-commerce markets globally (Shier, 2014). Experts expect online sales in China to rise to $2.416 trillion (68 percent of the overall retail sales nationally) by 2020 (eMarketer Inc., 2016). Many people attribute the booming e-commerce in China partly to the growth of the leading local marketplaces like JD.com, Alibaba, and Tmall, which exploited the undeveloped traditional trade infrastructure of China. They positioned themselves suitably to make the most of the increasing customer demand by developing their payment systems, for instance, Alibaba came up with Alipay. They also developed logistical services, for example, JD.com runs its logistics network (Shier, 2014).

Another shot in the arm for e-commerce in China is the fact that shoppers who are located outside the main cities can purchase non-Chinese products only through the internet. Customers across the globe can pick up a broad range of non-Chinese products irrespective of whether they live (González, 2016).

Conclusion

Without a doubt, the primary factor that has made China the largest and fastest growing e-commerce market in the world is a standardized as well as a single account process of transaction across nearly all vendors. This standardization has translated into many trickle down effects. As online shoppers can confirm, having a look at the e-commerce in China offers a viewpoint on how much better e-commerce can become. E-commerce in China has been very successful because customers have a pleasant shopping experience and can find and purchase items easily. Indeed, more customers make purchases when the experience is excellent.

 

References

China-Britain Business Council. (2015). E-commerce in China. Beijing: China-Britain Business Council.

eMarketer Inc. (2016, August 18). China Eclipses the US to Become the World’s Largest Retail Market. Retrieved from e-marketer: https://www.emarketer.com/Article/China-Eclipses-US-Become-Worlds-Largest-Retail-Market/1014364

González, A. (2016). E-Commerce in China: Opportunities for Asian Firms. Geneva, Switzerland: International Trade Centre.

Shier, E. (2014). Online Shopping Spree in China. Hong Kong: Alberta Hong Kong Office.

Ye, Q. (2012). Transfer Chinese E-Commerce Website into Global E-Marketplaces . International Business/International Trade, 8-58.