E-Commerce in China

Overview

E-commerce in China is a gigantic growth market. The Chinese set a new record within 24 hours in November, 2016: They spent USD 17.8 billion (approx. EUR 16.3 billion) during the annual Single's Day holiday, which corresponds to Black Friday in the West. For the sake of comparison, the total sales of Amazon in Germany for the entire year (2016) was around USD 14 billion.

Online marketplaces

The largest portion of B2C online trading takes place in marketplaces. The largest market is TMall with around a 60 percent market share, followed by JD Mall. Both offer almost all groups of products and each has a segment which is limited to foreign brands obtained through vetted import channels: TMall Global and JD Worldwide. These segments meet the needs of customers in China who would prefer to purchase products from foreign countries directly. They address concerns about counterfeits, doubts about the quality of domestic Chinese brands, or the general lack of availability of the desired products in China. The platforms impose strict guidelines on new dealers to minimize the risk that counterfeit products are offered. 

This is a lucrative area for foreign companies. Using an online platform with a wide reach allows access to a large market without incurring the cost and complexity of establishing a physical presence or working with traditional agents or distributors. Using a cross-border store avoids cumbersome legal steps, such as obtaining a Chinese business license, let alone an e-commerce license. 

Chinese are very strong users of mobile devices. Almost 70 percent of all online purchases in 2016 were handled through smartphones and tablets, hardly surprising considering that up to 95 percent of the population has mobile internet access. Online marketplaces have leveraged this trend by developing their own apps and special features for optimum mobile use of their platforms.

WeChat phenomenon

Another trend is social shopping, which basically means combining e-commerce shops and online marketplaces with social platforms. The Chinese internet giant Tencent has succeeded with a very clever move. The company currently operates the largest Chinese social network with the WeChat app. WeChat has more than 800 million active users, approximately 80 percent of internet users in China. Tencent's important innovation and a main feature of WeChat today is an electronic wallet called WeChat Pay. This has enabled Tencent to open the floodgates for e-commerce on WeChat and integrate directly into the app their own services as well as those of third parties, from booking hotels, flights, and taxis to paying utility bills.

Payments are processed directly through WeChat Payment. This makes it possible to establish and implement a webshop much faster and easier than through a small or mid-sized company. Companies can also represent their own business using an “official account,” of which there are now over 12 million. Such accounts are used by companies large as small, as well as by organizations and notable personalities. Brands such as Adidas, Starbucks, and BMW offer their followers on WeChat, aside from information, exclusive content, such as discounts, in order to strengthen customer loyalty.