China has the highest number of internet users in the world with 454 million, just over one-third of the population. This has had a significant impact on internet retailing. Consumers spent RMB160 billion on online retail in 2011, a growth of 90% from 2010. This made China one of the biggest markets for internet retailing in the world.
A 2011 report by Taobao, China’s largest online retailer, revealed that clothing and accessories were the most popular products purchased online, followed by cosmetics. Male consumers made up a slightly higher proportion of internet shoppers but purchased a smaller number of items. Consumer electronics products and sports footwear ranked as the most popular categories among male consumers. iResearch estimated that as much as 87% of all internet retailing is conducted via the country’s biggest internet retail websites. Taobao, the clear leader in Chinese e-commerce, alone accounts for 80% of all online retail sales.
The proliferation of smartphones across China continues, providing opportunities for the growth of m-commerce. Currently, 90% of the population has access to mobile phones but mobile web-enabled handsets are becoming the industry standard and more economically viable for many Chinese consumers. With 50% of smartphone users currently checking email regularly and 40% reading news websites (according to iResearch), it is expected that in coming years, consumers comfortable with the mobile web will increasingly turn to m-commerce sites to shop.
Security of online retail
Of course, many consumers are still concerned about the security of internet payments and the quality of delivered merchandise. As financial card issuers continually increase their security measures, many of the issues bothering consumers are being addressed. Online retailers themselves are also taking steps to improve the secure payment process and guaranteeing security and quality control. Regardless, cash-on-delivery remains popular among many consumers buying products through internet retail sites. This payment method accounted for roughly 20% of all e-commerce payments in 2011, according to an article in the China Daily newspaper. The option to ‘try before you buy’ has also become a popular trend among consumers shopping for clothing and accessories via the internet.
Initiatives to help prevent online fraud ramped up in 2011 as consumers were offered the services of China’s first credit rating system for online retailers. With only a small number of online retailers trusted to transact online payments, the new rating system will allow online retail to grow unimpeded by security concerns.
The increasing popularity of taobao.com, particularly its introduction of the Taobao Mall which allows independent retailers to set up shop online under the umbrella of taobao.com web space, has led to a rise in food shopping online. This tends to include only processed and packaged foods and snack items as the ability to organize fresh food deliveries in Chinese cities is hampered by the lack of effective transportation infrastructure. According to Taobao, sales of online food via its site increased by 95% between 2009 and 2010.
Daxue Consulting Market Research in China
Picture Source: e-commerce