The evolution of e-Commerce in China
Ecommerce is the way that so many around the world interact with brands and buy their favorite products.
"China, today, is characterized by mobile-first consumer behaviour, vibrant social commerce adoption, and a ubiquitous digital payments infrastructure. In addition, the market is fiercely competitive. Local and international brands compete for consumer's attention and wallet share,the internet giants race to build broad digital ecosystems to strengthen their existing network effects, and well-funded start-ups redefine customer experience. Only the most innovative survive in this dynamic retail environment….”- Michael Cheng , PWC (2017)
Ecommerce is the way that so many around the world interact with brands and buy their favorite products. I would bet if you’re reading this article right now, you’ve probably had your fair share of online purchases.
With the widespread adoption of mobile phones , internet access worldwide has been on a steady incline. According to recent data, “the number of Internet users increased from only 413 million in 2000 to over 3.4 billion in 2016.. and every day over the past five years, an average of 640,000 people went online for the first time
With more people around the world having access to the internet, this naturally leads to a strengthening of digital markets. Individuals are able to order what they want from who they want— resulting in a profound power shift in consumer spending.
Of course, with China leading the world in population size at more than 1.4 billion, they also have the largest amount of users online at 765 million, while India is in 2nd place at 391 million (as of 2015)
Perhaps what is most fascinating about all this is how China’s huge population, paired with tech innovations, and widespread internet usage have shaped the global market. Since China leads the world in total amount of internet users, we must take an in-depth look at the past, present and future of widespread internet adoption— a history that has not only evolved in the blink of an eye, but is largely a mystery to most people in the developed world living outside of the mainland.
Today we’ll be taking a brief look into some research, happenings, and predictions for the future of Ecommerce as it relates to China and the rest of the world.
We must start with the individuals who helped shaped e-commerce history in the region. In 1999, entrepreneur Jack Ma formed Alibaba in Hangzhou (Today, Alibaba runs several marketplaces and is the parent company for 6 other companies— spanning from print media to the film industry.) .
The company was set to improve and revolutionize commerce in Chinese industries. Today, consumers can visit alibaba.com and buy products directly from suppliers; increasing accessibility and productivity to small and medium size enterprises (other wise known as SMEs)
In 2003 Taobao was established by Alibaba which only further shaped the consumer habits in Chinese speaking regions. Taobao allows merchants and companies of virtually any size to sell to their products to consumers, utilizing artificial intelligence to recommend products personally to buyers. In the mainland, products ordered are often received within just a few days, purchased using online bank accounts.
Platforms like Taobao have not only reached the many metropolis’ across Asia but have also extended it’s reach into less dense, more rural regions.
“…fast forward to recent years, the e-commerce boom seems to be losing steam. The growth of online sales has slowed from close to 50 percent in 2014 to just 27 percent in 2018. "In the past there was very broad based growth across many categories. But that part of the demographic dividend is gone," said Vincent Lui, senior partner of Boston Consulting Group. That means most urban Chinese across big cities are already used to online shopping. A new phase of an e-commerce war is brewing, and the battleground is not in major cities. Data suggests that people living in lower-tier cities generally have less pressure and more free time, and are just as digitally connected as their peers in first-tier cities.” -CGTN
This phenomena will become an even larger global trend as more e-commerce markets in their respective regions attempt to corner the rural and small village consumer that has internet access (granted primarily through their smart phone). E-commerce will likely equalize the playing field in regards to access to consumer products globally. More communities, no matter their infrastructural standing will have more opportunity to buy and receive the same products as more modernized populations. We can only expect that communications between such rural and urban regions will be transformed as a result.
Comparisons to the US:
In 1995, the Pew Research Center reported that , 14% of adults in the US had internet access: “These are the principal findings of the Times Mirror Center’s second annual study of the way new information technology is being used by American consumers. The trend survey found the number of Americans subscribing to an online service swelling from 5 million in the winter of 1994 to nearly 12 million by June of this year. This year’s survey, conducted among a national sample of 4005 respondents, also found that 2 million Americans connect to the Internet directly without benefit of a commercial service.”
That same year, Ebay the e-commerce giant in the west (and perhaps the closes equivalent to Taobao besides Amazon) was founded in California. Still, China had less than 1% of it’s population online with approximately, 40,000 internet users in China, up from only 3,000 earlier that year.
It’s clear that the United States was ahead on widespread adoption of the internet ((According to research, in 1980, America's first large commercial chain, Walmart, began using a precursor to e-commerce: Electronic Data Interexchange (EDI) with suppliers.)
China shook up the world in rates of acceleration. In the year 2000 there were 22.5 million internet users in China.
It is quite astounding that while China was generally late to the wide adoption party of the internet and e-commerce it far exceeded in acceleration rates in developing their digital, cashless ecosystem.
China in 2013 became the largest online retail market in the world, which to some extent could signal its rising global influence.
Anyone that has been to Beijing, Shanghai or Shenzhen can testify that China is literally in the future when compared to the West— in time zone and in regards to technological innovation. China leads the world in smart cities and has made the everyday smart phone the ultimate tool to access the digitize urban ecosystem.
“Almost half of the world’s smart cities are in China, some 500 in total. While initially smart city applications have focused on areas like security and traffic management, 5G networks and edge computing advances are likely to usher in a new era for cities as integrated digital platforms.” - Mckinsey & Company