By Robin Daverman
China’s retail market is expected to exceed the US in 2018
China has long been known as the “workshop” of the world. This year, China is on track to hit another milestone: Retail sales in China is expected to hit $5.8 trillion, according to Mizuho, a Japanese bank.
For the first time, the U.S. businesses will be facing a unified, single-country retail market as big as its own. And more importantly, this market is still growing at 10% a year.
However, the Chinese retail market is quite different from the U.S. retail market. The most marked difference is the use of technology. While internet sales accounted for 27.4% of retail sales in the US, China’s e-retail is twice as large, and the gap is growing.
More and more Chinese shop online through the use of smart phones. The popularity of smart phones and the maturation of transaction technology through mobile platforms have been the main driver for the explosive growth of shopping from a smart phone terminal.
More collaboration than competition between retail giants to build consumer eco-systems
One of the remarkable features of the Chinese consumer market is the degree of collaboration between potentially competing retail giants and supporting industries. In the last 5 years, China’s retail giants have not only embarked on a major cross-over holding of each other’s stocks, but cross-over holding of social media, financing, logistics, to improve customer loyalty and “stickiness”. For example, in the “Single’s Day” event (Nov. 11th) in 2015, new shoppers from WeChat and Tencent’s Mobile QQ accounted for over half of the new JD.com users. New business models are emerging from China, where various businesses are actively collaborating with each other to create a consumer eco-system with social media, local services, logistics, financing, and entertainment.
Cross-border e-commerce a major growth area
Driving by the increasing size of China’s middle-class consumers, and the perception of higher quality and lower price of foreign goods, cross-border e-commerce into China has experienced explosive growth.
But the retail sales of cross-border trade still accounts for a relatively small portion of China’s retail market. Cross-border retail e-commerce buyers are expected to reach ~ 300 million by 2020. However, U.S. producers looking to sell into the growing Chinese market need to first climb over the hurdle of marketing to Chinese domestic consumers, and cross-border service and logistics.
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