Thesis on The E-Commerce Explosion in China

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Thesis on The E-Commerce Explosion in China

E-Commerce Explosion in China

E-Commerce Explosion in China – No one would have imagined China to become an e-commerce leader in the world in B2C and C2C channels a decade ago when the tech boom had hidden the US and other developed markets.

By 2000, China had not even developed two e-commerce applications with just 2.1 million internet users out of its more than a billion citizens. There were no physical delivery systems or payment systems that could facilitate e-commerce in China. However, by the end of the year 2013, Chinese internet users had reached 600 million, the e-commerce revenue was growing at 70% compounded annually and China was on its way to becoming the biggest e-commerce market in the world.

By the year 2015, online business transactions are expected to reach US $540 billion, and by the year 2020, this figure would become larger than the sum of the e-commerce market of France, Japan, Britain, and Germany.

The East is where e-commerce will be in the future. Chinese e-commerce is creative, sociable, gamified, and focused on the internet. A recent prediction states that in 2021, e-commerce would represent 52.1% of all retail sales in China. This is a 44.8% increase from the prior year.

For the first time ever, the bulk of a nation’s retail will take place online. The transition to digital is continuing apace. Brick-and-mortar sales in China are expected to fall another 9.8% in 2021, according to eMarketer, after falling 18.6% in 2020.

Early in 2020, the COVID-19 epidemic drove a substantial shift in customer purchasing behavior, shifting people from traditional brick-and-mortar stores to online retailers.

However, no other nation’s rise in e-commerce can compare to China’s. With 28.9% of its sales conducted online, South Korea comes in a distant second. The average internet sales in Western Europe are 12.9%, while the United States is much behind both at 15.0%.

China is expected to surpass the U.S. in terms of e-commerce sales by roughly $2 trillion in 2021, despite the fact that the U.S. will continue to dominate the global retail industry with $5.506 trillion in 2020 compared to China’s $5.130 trillion.

Chinese E-commerce

The coronavirus is not the only cause of China’s current e-commerce development; there are other others as well. To begin with, compared to the West, China’s consumer culture has long fostered a more progressive and creative online market environment. Their market fully utilizes online transactions, group discounts, social networking, instant messaging, brief films, and live streaming.

According to Michel Phan of the Emlyon Business School, you can purchase anything and everything online in China these days. However, he adds, “In Europe, e-commerce is only available to those who lack access to a store.”

Phan also points out that the ecommerce ecosystems in the U.S. and Europe are not as developed as those in China. China’s ecommerce is expanding because of the country’s effective mobile payment and fast delivery systems, which have been built by businesses like Alibaba, JD.com, and Tencent.

Chinese online shops now face intense competition. Alibaba and JD.com, two early adopters of Chinese e-commerce, no longer have the monopoly on the market that they once had since rivals like Meituan, Tencent, and Pinduoduo have set their own claims in the Chinese e-market.

Customers now have more options and motivations to purchase as a result. China’s recent ecommerce boom may be attributed to economic, social, and demographic factors, but their extensive embrace of four key digital trends has allowed them to swiftly become a global leader in ecommerce.

Mobile Commerce

The DTC ecommerce sector in China is quite important. Statistics from the beginning of 2021 show that the majority of internet access devices in China are smartphones, which are used by close to 851 million individuals. Government statistics show that 989 million people in China presently utilize the internet.

That is greater than the total population of the United States, to put it into context. 330 million or so. Given such numbers, it should come as no surprise that mobile devices account for 80% of all ecommerce sales in China.

As a result, Chinese businesses have made mobile optimization a key component of their ecommerce operations. The user experience has been optimized for all applications and e-commerce websites.

Shop Commerce

Social commerce is the fusion of e-commerce and social media, resulting in a buying experience on a single social platform. The Chinese market, which has some of the most connected customers in the world, accomplishes this better than any other market on earth.

79% of the 1.4 billion people in China use social media regularly and spend 5 to 6 hours online daily. In China, social commerce increased by 44.1% last year and will increase by another 35.5% this year, reaching $363.26 billion, according to a forecast by eMarketer.

Comparatively, social commerce will only be $36.09 billion in the United States this year. Unsurprisingly, China’s extensive mobile usage is causing a social commerce explosion that American markets have not yet seen.

Livestreaming

Live streaming is enormous in China and a key factor in the country’s explosive growth in e-commerce while being almost unknown as a selling item in the West. With live streaming, online retailers now conduct live video events to showcase their goods on their own websites or collaborate with social media celebrities. Leading platforms in this movement include Taobao Live, AliExpress, and AliExpress Connect from Alibaba.

Digital Wallets

You may save your money and make online payments with a digital wallet. A digital wallet may be used to store your bank account information, credit and debit cards, and to make payments to other persons or companies.

Loyalty cards, library cards, event tickets, and even driver’s licenses are now included in digital wallets. Carrying cash or physical identification could become obsolete soon.

Digital wallets come in a wide variety of forms, but they all function similarly. Customers fill out their wallets with the cards and information they want to carry.

They would then have all the information necessary to choose their chosen payment method whenever they engage with a business that takes digital wallet payments.

It makes sense that the bulk of China’s ecommerce payments is now made via digital wallets for a nation that is so firmly committed to a mobile-first culture.

While credit cards are the major form of payment in Western countries, digital wallets have taken over in China. In reality, Chinese internet sales of digital wallets total $620.5 billion.

In China, 77.6 million consumers will be paying with mobile wallets in 2020. Popular domestic digital wallets like WeChat Pay, WeChat Pay from Tencent, Alipay from Alibaba, and others are driving this growth.

The prevalence of digital wallet payments can be attributed to their convenience, the emergence of 5G, and their inherent fit for mobile commerce. According to recent surveys, Chinese e-commerce sales would increase by 11.0% in 2022.

Sales will reach the $3 trillion barrier, giving internet retail a total share of 55.6%. Despite projections for continued expansion, there is evidence that suggests a slowdown may be approaching.

China’s Digital Marketing Landscape and Opportunities for Business Development

The social media landscape in China is dominated by two players, IM service WeChat and micro-blogging service Weibo. Both of these players are still evolving, and similarly, so are the enterprise’s methods to use them for branding their products.

Weibo can be considered a viral media, whose strength can be understood from the fact that a Chanel ad that featured Brad Pitt reached 128 million people on Weibo.

On the other hand, WeChat is a social media app that is not a traditional marketing channel, but actually a tool to converse with friends in a closed circle. Brands have been using it as a tool to deliver a personal message instead of a broad message. This results in WeChat being used for precision marketing.

According to Jonathon Smith, who is the director at Hot Pot Digital, email marketing has never been successful in China and WeChat can replace email and become the channel for CRM. An example of this is the use of WeChat by the internal fashion firm Louis Vuitton.

The company allows consumers to send the message through the app and then the company assigns a person to contact the consumer and resolve the issue. Burberry also used WeChat to create personalized conversations with its consumers in 2014 during London Fashion Week.

The functionalities have increased a lot, and people can use WeChat to connect to their brand and make mobile payments, Airlines are using it to let customers check in and choose their seats.

This is considered just a start as it is believed that there are a lot more functionalities coming our way in the future that can help businesses in their business development methods.

Western Market

Western companies might not be able to fully imitate China’s ecommerce sector’s success. But they may start using a variety of cutting-edge, digital-first strategies to catch up.

Retailers should invest in social commerce prospects and optimize their mobile ecommerce experience. Investments in innovative online payment systems and e-commerce infrastructure are also essential.

In a congested market, leading innovative projects like live streaming or the gamification of shopping platforms may help businesses stand out.

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