China's e-commerce sector is rapidly growing, with projections estimating the market to reach $1.5 trillion by 2020, fueled by a large population of internet users and a significant rise in mobile shopping. Major drivers include increased internet penetration, GDP growth, and the dominance of platforms like Alibaba's Tmall and Taobao. The landscape features a mix of consumer-to-consumer and business-to-consumer sales, showcasing a youthful, urban consumer base that increasingly engages with international online retailers.

1. E-COMMERCE IN CHINA
J u l y 2 0 1 6

2. China’s p o p u l a t i o n i s m o r e t h a n 1 . 3 b i l l i o n ,
w i t h a m i d d l e c l a s s o f 2 0 0 m i l l i o n s t r o n g a n d g r o w i n g .
T h e r e a r e 6 8 8 m i l l i o n i n t e r n e t u s e r s a n d 4 1 3
m i l l i o n o n l i n e s h o p p e r s . C h i n a ’ s e - r e t a i l m a r k e t i s
e s t i m a t e d t o g r o w t o $ 1 . 5 t r i l l i o n b y 2 0 2 0 a n d t h e
s h a r e o f o n l i n e s a l e s i s s e t t o i n c r e a s e t o o v e r 1 5 %
b y 2 0 1 7 . A s C h i n a ’ s g r o w t h c o n t i n u e s , t h e c o n d i t i o n s
f o r t h e e - c o m m e r c e a r e o n l y i m p r o v i n g .
C H I N A H A S T H E W O R L D ’ S L A R G E S T O N L I N E P O P U L AT I O N

3. I N T E R N E T I N C H I N A
China has become one of the world’s most wired retail markets
232million mobileaccounts
In the US, there are 234 million mobile accounts with a penetration rate of 75% and
88 million broadband accounts and penetration rate of 28%
penetration rate 17%
174million broadbandaccounts
penetration rate 13%
Source: https://en.wikipedia.org/wiki/List_of_countries_by_number_of_broadband_Internet_subscriptions

4. F O U R T I E R S O F C H I N A ’ S C O N S U M E R S
Future growth will come from two key groups – the white-collar “Urban
Middle” and the blue-collar “Urban Mass”
Movers
&
Shakers
China’s wealthiest citizens already make up a large part of global
demand for high-end luxury goods
Population: 1.4 million
Annual income per capita: US$500,000
Urban
Middle class
Urban mass
Rural workers
This is China’s blue collar urban middle class. Nearly half of them are
on public payroll, so policies to income will have a strong impact here
Population: 146 million
Annual income per capita: US$11,733
Migrant workers who have moved to cities to find better-paying
jobs is expected to see the biggest rise in income
Population: 236 million
Annual income per capita: US$5,858
Half of China’s workers still live in rural areas. With
lower incomes spending is concentrated on essential
such as food and housing
Population: 387 million
Annual income per capita: US$2,000

5. More than 50%of all e-commerce sales are done on mobile
T H E C H I N E S E C O N S U M E R
26%of Chinese consumers buy goods from foreign sites. US websites are the
most popular country followed by Hong Kong and Japan. UK websites are the fourth
most popular
50%of e-shoppers are between the ages of 24and 30
Average online order for clothing is US $485, for consumer electronics is
US $1,229 and for cosmetics US $512 (Source: Paypal)
The Chinese consumer is young, mobile, urban and growing

6. By 2020, China’s e-commerce market will be larger than the US, UK
Japanese, French and German markets combined
Source: Economist, McKinsey
C H I N A ’ S G R O W T H I N E - C O M M E R C E
China’s e-commerce sales was $120 billion in 2011, surpassing online sales in
Japan ($107 billion), the UK ($56 billion) and Germany ($32 billion)

7. C H I N A ’ S E - C O M M E R C E D R I V E R S
E-commerce
drivers
Internet penetration rate
Popularity of online shopping
GDP per capita
Ease of paying online
Rural customers
Reduction in delivery time

8. T H E M A R K E T P L A C E M O D E L
Tmall
(Alibaba
Group)
51%
360buy.com
17%
amazon.cn
4%
Suning.com
3%
Others
25%
(Alibaba Group)
90%
PaiPai
(Tencent)
9%
ebay
1%
China’s e-commerce market is dominated by the marketplace model and Alibaba
Group dominates both marketplace models
B2C (business-to-consumer)
Market size = RMB 179 billion
C2C (consumer-to-consumer)
Market size = RMB 595 billionSource: McKinsey 2013

9. No e-commerce strategy can ignore China’s three digital powerhouses and it
cannot be compared to Google, Amazon or Facebook
largest search engine
largest online shopping mall e-commerce
leader in gaming and social networking
C H I N A ’ S D I G I T A L L A N D S C A P E
The company has multiple platforms, including Taobao, its consumer-to-consumer site
and Tmall, its business-to-consumer site. These platforms do not hold inventory or
operate fulfillment centers like Amazon. The platforms make money by collecting fees
from listing merchandise and charging for search engine and digital advertising
placement.
Tencent differs from Facebook its main source of revenue is not advertising but selling value added
online services, such as emoticons, games, and other virtual products. In 2005, Tencent launched
Tenpay, a digital-payment system a move far earlier than Facebook.
Baidu has 90% of the nation’s online search queries and Google China ranks a distant second
with a 10% share. The Chinese language is complex with some words having multiple
meanings. Baidu’s search algorithms place a lot of relevance to the context in which the
words are used in the content, which enables it to better optimize its search technology.

10. 50%
(350M users)13%
260M users
Other
18%
Alipay and Tencent represent 69% of the online payment volume in China
19%
200M users
T H E M O S T P O P U L A R O N L I N E P A Y M E N T S

11. C O N N E C T I N G W I T H C H I N A ’ S W I R E D C O N S U M E R
Adopt an integrated platform strategy
• 70% of internet users shop online regardless of the size the cities in which they live
• Use digital platforms such as Tmall (business-to-consumer marketplace) like British
luxury brand, Burberry giving them access to traffic beyond its own online shop
Understand China’s vast network of distributors
• Consumer-to-consumer accounts for 50% of China’s e-commerce sales which makes a
critical platform for companies
• However, consumer marketplaces such as Taobao presents challenges for global brands
because they have little control over how products are presented or priced
• Kimberly-Clark have partner with its largest distributor on Taobao providing them with
stable product supply in return for complying with branding and pricing guidelines
Harness the power of social media
• Social media is important in China
• The Chinese consumer do not trust official sources such as government or big
corporations
• Purchasing decisions are influenced by word of mouth
• China’s dominant social media is Tencent
Source: McKinsey 2013