China Dominates the Global E-Commerce Space

hina-dominates-the-global-ecommerce-space

China Dominates the Global E-Commerce Space

 

Chinese fashion scene used to be dominated by Mao suits that come in gray or black that are worn by men and women. Now the story has changed. The country’s fashion culture is very creative and diverse, and this has pushed Chinese designers up the ladder. Given the country’s huge population and a booming number of the middle class who like luxury fashion and can afford it, they tend to order luxury fashion labels online thereby dominating e-commerce. Yet, Chinese fashion apparels are not exactly buyers’ top choice, as buyers would rather buy European or American fashion label.

How the Pandemic Affected China’s Fashion Space

Fashion will be the least of your worries when you are at risk of contracting a fatal virus, well, except, if you already got the virus under control as China did. In 2020, Europe and the US fashion industry suffered low demands, but China, on the other hand, recorded a 48% surge in demand for luxury fashion causing the country’s luxury market to reach a whopping $52 billion. So, while most countries’ commerce reduced to only essential items for the better part of 2020, Chinese fashion needs grew.

 

We cannot talk about Chinese fashion culture without mentioning the “Daigou agents” who travel to other countries to buy luxury goods and resell in China. These professional shoppers are responsible for meeting the demands of the luxury market. Even though the Chinese buyers still wanted foreign luxury fashion, international travel reduced, preventing the Daigou agents from leaving the country. As a result, Chinese buyers had to find an alternative way to meet their fashion needs. Thankfully, China also produces luxury fashion apparel — Chinese luxury online penetration increased to 23% in 2020 from 13% in 2019.

China’s Cross-border E-commerce Culture Still Thrives

As we hinted above, China-based buyers prefer foreign goods to Chinese produced goods. According to RetailX, 68% of Chinese buyers believe that foreign products are better in quality than domestic products, hence, Chinese buyers would rather buy imported products than buy home-made products.

 

So, in a way, Chinese shoppers still import luxury products but without the help of Daigou agents. Instead, they use trusted e-commerce platforms such as Tmall, and cosmetics, makeup, and beauty products make the bulk of the imported goods.

The Influence of Duty-Free Shopping on China’s E-commerce

For a decade now, China has a duty-free shopping policy that is in place in Hainan, which allows buyers to shop without paying duty on their purchase. However, the duty-free policy did not make much impact until 2020. Due to the coronavirus travel restrictions and policy changes that increased annual duty-free by 300% per person, duty-free sales increased by 98% in Hainan. As a result, Hainan covers 55% of China’s duty-free sales.

 

You might ask how duty-free onsite shopping in Hainan affects China’s e-commerce. Well, in cases where a buyer does not finish their duty-free credits, they can make more purchases online and have their order delivered to them at home. Of course, that also led to an increase in China’s e-commerce shopping.

Social E-commerce

Chinese shoppers engage in social selling, which involves interacting with sellers and making purchases via social media. Pinterest is the biggest gainer of China’s consumer behavior, as it is the most popular social media in the country with about 45% of Chinese social media users. Besides Pinterest, Chinese shoppers also like shopping directly via live streams which is usually popular on November 11, a day known as Singles Day. Buyers also make purchases via instant messaging apps such as WeChat.

 

This consumer behavior is the major driver of mobile payment which is integrated into messaging apps. WeChat, for one, is currently the world’s biggest independent mobile app.

China Is E-commerce Biggest Player and Spender

Some of the biggest e-commerce brands in the world are from China; Alibaba Group, Pinduoduo, and JD, and other noteworthy brands. According to eMarketer, JD, Pinduoduo, and Alibaba alone accounted for 83.6% of the e-commerce retail market in 2020. Given China’s 1.4 billion population and technological penetration, it is only logical to expect that China will dominate global e-commerce. According to Statistics, 710 million Chinese residents shop online, and 64 % of Chinese internet users participate in e-commerce. The popular products in China’s e-commerce are toys, accessories, apparel, and hobby products.

 

Statistics predicts that buyers in China will spend about $1.1 trillion online this year. While this seems like a big number, one must remember that China-based consumers spent $826.6 billion online in 2019, which is way more than how much consumers in Europe and consumers in the US spent in the same year; $351.9 billion and $360 billion, respectively.

So, Did The Pandemic Affect Chinese E-commerce?

The short answer is yes. Coronavirus affected every country in the world, China’s economy also experienced hiccups, however, by April 2020, China started recovering. Just like other countries with COVID-19 restrictions and social distancing, Chinese buyers started shopping online. According to a survey by Ipsos, 50% of China-based online buyers increased the rate at which they shop online as well as how much they spend when shopping online.

 

The long answer is coronavirus boosted China’s e-commerce and further established the country as the biggest e-commerce player.

Bottom Line

China is one of the most technologically advanced countries in the world, the country’s internet penetration, mobile payment culture, and cashless system are admirable. All these are no doubt factors that contribute to the growth of e-commerce. More importantly, the country’s poverty population is low, which means that several people can afford to buy the things they want. This is evident in the type of products that are popular among buyers, for example, hobby items are some of the most popular products China shoppers spend on.

 

Chinese consumer behavior is exactly e-commerce needs to grow; therefore, China is currently the e-commerce paradise of the world.

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