Worth RMB30 trillion or US$4.5 trillion, China’s online retail sector is the largest in the world. The pandemic made the pie grow larger. During the first seven months of 2020, China’s online retail sales rose by nine percent from the same period in 2019 to RMB6.08 trillion, accounting for 25 percent of its overall retail sales. By comparison, the world average is around 15 percent, and it is 14 percent in the United States, 11 percent in Europe, and less than 4 percent in Southeast Asia.
The market size, growth speed and business model innovation of China’s e-commerce ecosystem have been the envy of many countries. In 2021, China’s e-commerce sector will continue to impact the world.
Shoppers will see more offerings from a growing e-commerce sector, albeit at a slower rate compared to previous years. Primarily, this is because the sector has been gradually reaching saturation. Already, 80 percent of China’s netizens, or 749 million of them, have been shopping online.
Cross-border e-commerce continues to thrive
Some areas will see faster growth than others. One thriving area is cross-border e-commerce. With their rich experiences in managing online businesses, Chinese firms have long ventured into overseas e-commerce. This is necessary due to increasing competition and saturation of the domestic market. The number of Amazon.com sellers based in China has surpassed U.S. sellers: 49 percent versus 47 percent. Just in a single year, China-based sellers on Amazon.com have grown their share from 38 percent to 49 percent. This trend will continue.
For Chinese sellers, Southeast Asia will be one of their top targets. With a combined population of 655 million, a young demographic, high internet penetration and growing purchase power, Southeast Asia is another bonanza for e-commerce. China’s biggest tech companies have invested heavily in regional e-commerce platforms such as Lazada, Shopee, and Tokopedia.
On the other hand, Chinese e-commerce brands do not have a strong presence in the region. When China formally joined the Regional Comprehensive Economic Partnership (RCEP) on 15 November 2020, the entry barriers for China’s e-commerce foray into ASEAN were greatly reduced. Due to cultural differences and diversity of the Southeast Asian region, Chinese sellers need to focus more on branding and localisation when selling to customers in Southeast Asia. One way is to put up listings on local platforms such as Shopee and Lazada. Another tactic is to focus on high-demand categories such as consumer electronics, household items, beauty and health, and fashion and accessories.
Cross-border e-commerce has also brought foreign products to consumers in China, especially those who are affluent. The importing e-commerce sector will be further consolidated. In 2019, Alibaba acquired Kaola, China’s largest cross-border e-commerce platform and integrated it into its Tmall Global Marketplace, with a combined market share of 53 percent. This acquisition boosted Alibaba’s dominance in cross-border e-commerce. In 2021, we will see more imports via these platforms.
Livestreaming e-commerce gets hot and hotter
Another popular trend is livestreaming e-commerce. A combination of entertainment, product demonstration and influencer advertising, livestreaming had experienced exponential growth in the past four years. Data from iiMedia Research showed that the market size for livestreaming went up from RMB19 billion in 2017 to RMB133 billion in 2018, RMB434 billion in 2019 and RMB961 billion in 2020. The growth in 2020 was partly due to Chinese consumers shopping on their smartphones during pandemic lockdowns.
Even big brands join the livestreaming bandwagon. During the 2020 Singles’ Day, Cartier hosted its first live-streaming show on Taobao Live, showcasing a US$28.3 million necklace to 800,000 people. According to Alibaba, 400 company executives and 300 celebrities held livestreams during the 2020’s Singles Day. The sales will likely double in 2021. Some even predict that, in the future, all retail companies may have to do livestreaming to attract customers.
Why do consumers like to buy via livestreaming? Deep discounts, instant product information, expert-like advice, and trust for the influencers are the major drivers. Compared with conventional marketing tactics, livestreaming has its unique appeal: Hosts often claim to have the lowest prices across all channels to attract price-sensitive buyers; they carefully select products to cater to their fans; they often use lucky draws to get viewers engaged and employ a flash-sale strategy such as limited-quantity and limited-time offers.
Livestreaming hosts sell an increasingly wide range of products, from apparel, fashion, cosmetics, jewellery to electronics, cars, vacation packages, etc. Some hosts are able to draw huge numbers (often up to millions) of shoppers and have high conversation rates. According to a survey by AlixPartners, two-thirds of Chinese consumers said they have purchased products via livestreaming in the past 12 months. We expect to see more sales via livestreaming in 2021.
Short-video apps will increasingly fill your screen
If you like watching short videos, you are not alone. Short videos will next take the centre stage of e-commerce. “The next Amazon competitor is going to look like a social or video app, not a shopping app,” said Connie Chan, general partner of a leading venture capital firm, Andreessen Horowitz. E-commerce is moving towards more entertaining platforms where the lines between content and commerce are disappearing: Influencers create content to engage with followers and sell to them at the same time. The integration of entertainment with commerce has been described as social commerce, or retailtainment. Some even say that the letter e in “e-commerce” now stands for entertainment.
Short videos are rich in content, entertaining in nature, and more persuasive in selling. Short videos are providing a modern means for retailers and brands to interact with consumers and promote their products.
The short-video industry is thriving in China: It had 888 million users as of June 2020 and increased by 68 million in one year, according to the China Internet Network Information Centre under the Chinese government. Short-video apps such as TikTok, Kwai, Bilibili, Pear, Xigua, and Huoshan all have tens of millions of active daily users. These platforms also deploy big data and artificial intelligence to encourage users to spend more time on their platforms, such as dishing out personalised video recommendations to them.
With increasing popularity among users, especially young users, short video platforms started to incorporate e-commerce into videos and monetise content. For instance, in October 2019, TikTok added a new e-commerce feature called Marketing Label, which assigns a label to content in order to help retailers target consumers who want to search for products. In November 2019, TikTok extended its restrictions to allow all users to sell products through the platform. This move will help to transform TikTok into a video-based e-commerce site.
Selling via short videos will be a trend that marketers need to take note of.
Increasing regulations on e-commerce
As many e-commerce companies grew, even towards monopoly, promoting fair competition and protection of consumer rights and data privacy have been put on the agenda of the Chinese government. In 2021, we will see more regulation of e-commerce giants in China. This may not be bad news. Instead, it may help create a more healthy e-commerce environment for both firms and consumers.