E-commerce

From Condoms To Crayons: China’s E-Commerce And Mobile Web Industries Are Booming

(JUST MEANS) - If there is any doubt that China’s e-commerce sector is alive and well, one needs to look no further than the Chinese website www.meituan.com. Recently, on Meituan, over 50,000 brand name condoms sold out within hours of going on sale. The condoms were sold for a price of one yuan (15 cents) each, reduced to a third of their normal market price. While few predicted that such an offering would be attractive, the success of this, as well as the online sale of other similar branded goods, reflects the continuing surge in Chinese e-commerce activity. Consumers are moving from consumption to community building, creating networks of purchasers with significant decision power. For example, following the sale of the condoms, activity on related chat boards flourished, with many successful purchasers successful re-selling their prized plastics at a premium. While Meituan continues to make waves - being active for only 4 months and accumulating over 200,000 registered users during that time - the collective growth of similar e-commerce operations is mind boggling. In the first 6 months of 2010, over 33 million Chinese citizens joined the online shopping bandwagon, bringing the total number of regular E-Commerce shoppers in China to just over 142 million. These figures indicate that 1 out of every 3 Chinese Internet users, or one out of 10 Chinese consumers, now purchase regularly online. While the sheer volume of users is exciting, what remains intimidating for many international operators is the issue of access. With China’s strict import rules, many international companies face barriers that prevent them from efficiently providing Chinese customers with product. While these barriers are slowly dissolving, they have enabled domestic producers to entrench themselves within the Chinese e-commerce market, create a domestic competitive advantage that seems sustainable. Yet, while few have questioned the sustainability of Chinese e-commerce operations, questions continue to swirl regarding the ultimate size of the Chinese e-commerce market. Will China see a plateau in the number of regular e-commerce users? If so, when will this plateau materialize? Finally, if China hopes to sustain the exponential growth in e-commerce and mobile web technology, what factors must it address to ensure that domestic operators maintain a competitive advantage?

While all eyes continue to fixate on the future, a quick review of China’s e-commerce history reveals staggering results. Chinese online retail sales increased 117 percent (year over year) between 2007 and 2009. Chinese e-commerce sales are predicted to each 450 billion yuan ($66.45 billion) this year, a figure that will rise as the internet becomes a network driven by applications and mass participation. Today, Chinese consumers buy everyday articles as well as luxury items online, including cameras, laptops, and diamonds. Interestingly, a number of Chinese automakers have recently announced plans to sell vehicles on line, initiating a trend that may potentially change the way consumers evaluate and purchase automobiles globally. For many Chinese consumers, online shopping has brought convenient access to a product assortment that has been unparalleled historically. Online shopping has allowed Chinese consumers to develop buying groups to evaluate products, united consumers with similar interest, while encourage price and product attribute competition. Historically, technological limitations, specifically the lack of secure online payment systems, threatened the viability of the Chinese e-commerce industry as a whole. Fortunately, over the last 5 years, technological development has closed many of these gaps, providing Chinese consumers with the confidence needed to purchase online. In fact, during the spring of 2009, an estimated 128 million people used online payment systems, while 122 million Chinese citizens used online banking services.

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