Ecommerce in China grows thanks to quick delivery and mobile payment

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Over the past couple of years, China has become a key B2C market and is expected to continue to grow in the coming years.

In the early 2000s China had only a few more than 2 million online users. In the first half of 2014, there were 640 million, 400 million of which were buying online … despite the fact that the rate of Internet penetration is still below 50%. According to the study “China’s E-commerce Market Herculean” by GroupM, nearly 25% of Chinese buy online when using the toilet and over half of them delay sleeping to buy late at night.

According to Jack Ma, Chairman of China’s ecommerce giant Alibaba “in other countries, e-commerce is a way of shopping, in China, it’s a lifestyle”.

Marketplaces in China

Marketplaces are essential in China. Top categories for Chinese online buyers include clothing and fashion accessories, electronic products and consumer durable goods. As in the UK, cosmetic products are also a top sector for Chinese ecommerce.

Alibaba has promised to withdraw counterfeits after it opens its official estore and also aims to create a site on Tmall for luxury goods, thus separating high end products and every day goods.

Read also: Alibaba and the nine merchants: a look at Chinese ecommerce

Express delivery in China

Contrary to what one might think, given the size of China, the delivery of products in China is both quick and cheap. This is also one of the factors facilitating online shopping. Alibaba subcontracts the delivery of its products to service providers such as China Post, meanwhile its competitor Jingdong (JD) has its own couriers, who are able to deliver in less than 3 hours.

World leaders UPS and FedEx have also been granted permission to make deliveries in 33 and 58 Chinese cities respectively. Delivery is one of the key factors to the success of ecommerce.

Payment, delivery and mobile

The Chinese market is dominated by a wide variety of local payment systems such as Alipay and Tenpay. Traditional Visa, MasterCard and Amex players are largely absent among Chinese consumers. Ecommerce sites need to incorporate these specific payment methods and optimise the exchange rates of currencies. Cross border payments can be problematic so prepare carefully using international payment platforms.

As in some European countries, payment upon receipt is very widespread in China. Cash on Delivery (COD) is however gradually being abandoned in favour of mobile payment via Alipay (Alibaba), Tenpay from Tencent or WeChat Payment. In general, mobile has greatly helped the development of ecommerce in China. Online sales are stagnating via desktop, however, mcommerce has increased from 0% in 2010 to 44.8% of online turnover in 2014, according to the China Mobile Internet Report 2014 from iResearch.

Alipay’s Annual Report “China Spending Report (Alibaba) 2013” found that consumption growth is gradually migrating from the wealthy provinces and cities, like Shanghai, Zhejiang and Jiangsu, to the poorer but rapidly growing interior provinces.  According to the Boston Consulting Group, within six years three quarters of China’s new consumers will come from small provincial towns. GroupM states that in terms of ratio online purchase/income, consumers from “Rank 4 cities” (cities are ranked by importance, rank 1 is for the biggest cities) were the biggest buyers with 27% of expenditures made on the internet.

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Kathryn Bird