The Chinese retail market is poised to become the first in the world to be dominated by e-commerce transactions as Lunar New Year retail sales beat expectations amid a pandemic-driven economic slowdown.
Research firm eMarketer expects 52.1 per cent of China’s total retail sales to come from e-commerce transactions in 2021, increasing from 44.8 per cent last year.
“That means that for the first time anywhere, a majority of retail sales for an entire country will transact online,” said the firm in a report.
No other country comes close to China in terms of e-commerce sales. South Korea is expected to see 28.9 per cent of its retail market based online this year, while the United States will hit 15 per cent, the report said.
Research firm eMarketer expects 52.1 per cent of China’s total retail sales to come from e-commerce transactions in 2021. Photo: XinhuaThe Chinese retail market has also defied odds over the Spring Festival with spending on retail and dining rising 28.7 per cent to 821 billion yuan (US$127 billion) compared to the same period last year, although it remained below the $1 trillion yuan figure booked in 2019, according to the latest data from China’s Ministry of Commerce.
Throughout 2020 retail sales remained subdued, but rose towards the end of the year as consumer spending confidence recovered from the impact of the coronavirus, the ministry said. This occured alongside a surge in industrial activity and a broader economic rebound.Reduced foot traffic in China due to fresh Covid-19 disease outbreaks before Lunar New Year celebrations did not deter consumers who spent big online and drove up express deliveries, making up for lost spending in shops, ANZ Research senior China economist Betty Wang said in a note.
Deliveries for online shopping – mostly alcohol, food, small home appliances and pet food – quadrupled compared to the same holiday period in 2019, Wang said citing data from Cainiao Smart Logistics.
China seemingly reached a behavioural tipping point over the past few years, wherein e-commerce enthusiasm accelerated rather than levelled off eMarketer
The pandemic has boosted online transactions that were already growing steadily thanks to China’s ubiquitous e-commerce platforms like Alibaba, which owns the South China Morning Post; innovative digital payments systems such as Tencent’s WeChat Pay; a “nearly limitless” supply of low-cost delivery services manned by migrant labourers; and an agile smartphone-driven shopping culture, eMarketer said.
“China seemingly reached a behavioural tipping point over the past few years, wherein e-commerce enthusiasm accelerated rather than levelled off,” eMarketer said.
“While the pandemic did not create this trend, it certainly buttressed it, and China’s most recent e-commerce boom did not decelerate even after the country got a handle on the virus and the economy fully reopened.”
EMarketer said bricks-and-mortar sales would likely fall by 9.8 per cent this year, after an 18.6 per cent drop last year, while e-commerce sales grew 27.5 per cent in 2020 and would likely lift by another 21 per cent in 2021.But the continued evolution of e-commerce in China, particularly social commerce – a blend of social media and online shopping including WeChat Mini sales programmes, Pinduoduo and “live-streaming” or “live commerce” – is set to boost e-commerce even further, eMarketer said.
“Chinese consumers are spoiled by e-commerce retailers, with high-touch presales and after-sales customer services, swift last-leg logistics, convenient online payment options. Just to name a few,” said Ophenia Liang, director of digital marketing agency Digital Crew.
The pandemic has largely accelerated the expansion of e-commerce and the digitalisation of traditional trade-in China Diane Wang
“Hence the speed of e-commerce adaptation was exponential in the recent decade in China. Additionally, social media sprouted across the digital landscape in China and even ventured overseas, providing extra boosts for e-commerce.”
Increased e-commerce sales also mean more business-to-business trade, a growing sector that is competing strongly with traditional import and export, said Diane Wang, founder of cross-border business DHgate.
Last month, Chinese Customs said cross-border e-commerce imports and exports last year totalled 1.69 trillion yuan, an increase of 31.1 per cent. Total exports transacted on e-commerce platforms rose more than 40 per cent to 1.12 trillion yuan while imports trade on e-commerce sites rose 16.5 per cent to 570 billion yuan.
“The pandemic has largely accelerated the expansion of e-commerce and the digitalisation of traditional trade-in China,” Wang said.
“Cross-border e-commerce will play a more and more important role in promoting international trade-in 2021 since digital transformation has emerged as a key pathway to mitigating the impact [of the pandemic] on traditional trade … I believe sales volume in cross-border e-commerce will account for over 30 per cent of China’s foreign trade-in 10 years.”
In a survey conducted by investment firm CICC last month, an e-commerce platform serving small and medium-sized export and import companies said its trading clients have filled up their orders between January to May this year.
The only deterrents to these traders taking on more orders were changes in exchange rates and rising freight costs which could hurt profit margins. (Source: scmp.com)