As previously reported, China’s domestic e-commerce exceeds 50% of all retail sales.That’s a BIG percentage that account for e-commerce sales vs. traditional brick and mortar.
Why is online shopping so popular in China? And who are the big players?
First and foremost – the majority of products are made in China and if people are buying inside China, the logistics and delivery should be way less complicated. 85% of the world’s toys are manufactured in China so one would assume delivery would be convenient, fast and cheap. Secondly – the fact that the Chinese population are very accustomed to using their phones and going online for digital payment via payment apps and platforms. They are one of the most advance cashless societies in the world and with the roll out of the digital Reminbi into China, the transactions become seamless, fast pace and well suited to online shopping. Finally, with the recent emergence of the middle class, where they only started having disposable income after the mass adoption the internet. Around 61% of the population in China is using the internet now so people are very accustomed to shopping for daily things online vs. heading into a store to make purchases. Personally speaking, if I can order diapers, groceries and toys sitting in my house in my pyjamas and it is delivered to my doorstep affordably, I wouldn’t bother going to the stores either.
Who are the major players in China? They are not well known in our Western society, but we should take note because these major Chinese players are in the top 6 companies that make up the world’s global e-commerce landscape. Taobao, Tmall, Amazon, JD.com, Pinduoduo and E-bay) are the top 6 global players.
The 3 top players in China are: Alibaba, JD.com and Pinduoduo. They own more than 80% of the e-commerce market share in China.
Alibaba is the biggest and controls about 50% of the market. Some of their websites include Tabao.com and Tmall.com. Taobao.com is a site where one would go for a low-priced trinket and both individuals and companies can buy and sell there. I used to buy Halloween costumes to latest trendy accessories on there. Tmall.com is where recognized companies go to sell their products. When I was in China, we worked hard to ensure we put up the Peppa Pig flagship store on TMALL.com. It is similar to an Amazon branded page where you would go through documentation to prove your trademarks and copyrights. One reason why Alibaba is so strong is they have integrated their mobile payment platform Alipay into their site.
Jd.com pronounced Jingdong holds approximately 17% of China’s e-commerce market. Walmart China has partnered with JD instead of developing it’s own e-commerce platform. JD has been investing and innovating automated and drone deliveries such as constructing a drone airport to ensure they can provide contactless delivery.
Pinduoduo is the newest e-commerce platform. It started in 2015 and has become China’s fastest growing e-commerce company where they control about 7% of the market share. The difference between this platform and those aforementioned is that they have a group buying model, where customers are invited to form groups with others who want the same product which will lower the price of the purchase. This is a direct to manufacturer model (C2M). Culturally, the Chinese really love the sport of achieving the best price possible and scoring a great deal with your friends as a team. This group buying is most useful for the sale of perishable agricultural and fresh products where the speed for matching supply with demand is crucial.
Some smaller e-commerce players are suning.com, VIP.com and Little Red Book (xiaohongshu). Suning.com used to be a brick-and-mortar home appliance store that has pivoted it’s business model to focus on e-comm. VIP.com says it’s point of differentiation is that it is a women led business with a focus on women. And Little Red Book is a fashion centric app.
With the emergence of all these e-commerce platforms, the Chinese digital currency and the logistics, it is no wonder e-commerce is BIG business in China. There are many notable online shopping holidays but China’s singles day which occurs on 11.11 generated $80B USD in 24 hours on Alibaba in 2020. I only expect this number to grow further in the future.