This article about eCommerce in China was co-authored with students from the Digital Major of HEC Paris Masters in Management, promo 2022. During the course, students have to learn how to optimize and create content to be published. For this, they dive into the trends impacting retail and e-commerce, and only a select few are published in the blog. 

We want to give special thanks to Varvara Dyudina & Raphaël Delannes, the two students who co-authored this post.

By the end of 2021, more than half of all retail transactions will come from eCommerce platforms. 

According to EMarketer, eCommerce in China will account for 52.1% of the country’s retail sales. It is a massive boost from just 44.8% last year. 

China will become the first country where most retail purchases come from online platforms. Researchers also forecast 58.1% of Chinese transactions coming from the eCommerce market by 2024. 

Huge online shopping and online payment platforms have emerged with the growth of Chinese eCommerce. Companies like Alipay and WeChat Pay are now a payment standard in the Chinese market.

So what does this mean for eCommerce entrepreneurs and retail managers, exactly? 

They should look closely at the Chinese market as it could impact global retail.

This guide will cover the state of Chinese eCommerce and the main actors involved. Then we will go over the key dates and trends for eCommerce in China. And later, we will discuss how it could become the blueprint for 21st century retail.

China’s success in developing its eCommerce market is unparalleled. 

In the United States, eCommerce purchases in the retail industry only amount to about 15%. European countries are even less involved in eCommerce at 12.8% percent.

Who Are the Main Actors of Ecommerce in China?

In the past decade, many platforms have emerged to handle the demand of Chinese consumers who shop via online marketplaces.

There are several actors, but one thing to keep in mind about the Chinese e-commerce market is that it’s highly concentrated.

As of 2020, the top three e-commerce players (Alibaba, JD.com, and Pinduoduo) concentrated 90% of all e-commerce in China. Compared to the US, this is a very high concentration, where the top three players (Amazon, Shopify, eBay) concentrate “only” 50% of the market.

Taobao (Alibaba)

Owned by the e-commerce giant Alibaba, Taobao offers both C2C and B2C sales opportunities for users. That is what sets it apart from many other Chinese eCommerce platforms,

Taobao is a genuine and well-established eCommerce marketplace founded by Alibaba. It allows users to build their online shops and sell through Taobao. 

Small and medium businesses can also sell on Taobao. Though large companies are more appropriate for Tmall, a marketplace is covered below.

Tmall (Alibaba)

Also belonging to Alibaba, Tmall is the biggest B2C online retail platform in Asia. 

Part of Tmall’s popularity comes down to the fact that you can buy anything on its website. From not-so-great low-quality wholesale items to sophisticated, luxury, high-quality products. 

At the same time, the requirements for the merchants to enter the platform are stricter. For example, only “validated” is allowed to guarantee the quality of the service.

Think of Tmall as China’s Amazon.

Pinduoduo

Pinduoduo or PDD is another eCommerce platform rising to fame in China. 

This platform is successful because it provides customized recommendations for consumers. Search-based eCommerce platforms do not usually offer personalization features.

Pinduoduo has excelled in providing personalized customer journeys. Users can even use their friends’ lists and favorites to access tailored recommendations.

Another value proposition unique for Pinduoduo is the group buying option. We will cover it in more detail later on. 

JD.com

JD.com is one of the largest retailers in China and a Fortune Global 500 company. In addition, it is well known for platforming cross-border sales. 

Like Amazon, JD.com is responsible for much of the platform’s inventory. They also fulfill orders in-house through a massive first-party logistics network. 

The JD.com business model has lower margins than huge enterprises like Alibaba. However, it also ensures better quality control over products and delivery speed.

Kaola

Kaola is the go-to platform for Chinese consumers purchasing products from Western countries. 

This cross-border eCommerce website sells products from foreign brands. In addition, it allows sellers to market their goods through various Kaola-based marketing channels. 

These channels include online forums, various portals, and several advertising options. 

Little Red Book (Xiaohongshu)

Little Red Book is a Chinese social shopping network based in Shanghai. 

This unique and disruptive platform has over 100 million users. It caters to individuals who want to find the hottest beauty and skincare products. It focuses on products from international brands that are not available in China. 

Tons of brands around the globe sell on Little Red Book, but it isn’t that much of a shopping platform. Instead, it’s a place where users can post reviews and tips on products they’ve used.

VIP.com

VIP is an eCommerce website based in Guangdong. With an impressive 52 million users, VIP is the third biggest eCommerce platform in China. 

There are a few different reasons why VIP is so successful. In particular, its focus on international sales and discount sales models.

VIP Shop, the owner of VIP, is currently also building a financial service platform. The latter’s purpose will be to handle.” online payments and insurance.

Suning

Another example of a large retailer in China is Suning. It is a B2C retailer with a massive online eCommerce platform and 9,000 stores around the country. 

Suning sells all sorts of physical products and services and content merchandise.

Douyin (Tik Tok)

A relatively new competitor in the Chinese eCommerce market, Douyin is the sister app to TikTok for the Chinese market. 

It’s an eCommerce platform that focuses on live streaming to sell products. 

It became famous after staging an offline event, “ecosystem conference.” The event challenged many Chinese Commerce giants, including Pinduoduo and Alibaba’s platforms.

Key Dates for Ecommerce in China

China has its specific holidays and festivals that set the pace for brands to launch their promotional campaigns. Therefore, it is an excellent chance to attract as many customers as possible.

Chinese consumers are particularly attracted to discounts. That fact makes these campaigns truly important for the merchants.

There are a few key dates in the Chinese calendar to consider if you want to succeed in eCommerce in China. 

Single’s Day is The Biggest Megasale Event in the World

Single’s day is a 24-hour super discount period on November 11th in China. It was initially launched by Alibaba and followed by all the significant players of e-commerce in China. It’s similar to “Black Friday” in the United States. 

“Single’s day” has become a very appreciated and anticipated event in China. It is also a crucial period for local companies. 

On 11.11, consumers tend to purchase products they would not in standard time. The practice of buying a year’s worth of ordinary daily life items is also mainstream.

12.12 or Double 12 Festival

The 12.12 festival is a sequel to Single’s Day (11.11 day). It was launched to benefit smaller Alibaba vendors that couldn’t compete against more prominent brands during Single’s Day.

The festival has rapidly become another famous shopping festival in the country.

Chinese New Year

New Year in China is one of the most, if not the most, events of the year. It also has the particularity of being one of the biggest shopping festivals. 

It is common to return to your hometown during this festivity to celebrate it with your family. So, weeks before the Chinese New Year, there’s a rise in consumption as people buy presents to bring home to their relatives.

Golden Week 

In China, the national holiday is also known as the Golden Week. It is one of the most extended holidays in the country after the Spring Festival and takes place from October 1st until October 7th. 

People usually travel during this week, while consumption skyrockets in the country.

This also illustrates itself within eCommerce in China. For example, Tmall Global saw a 79% spike in sales during the golden week of 2020 (compared to the same period in 2019).

How Did Ecommerce in China Grow So Much?

Many factors are involved in the most recent boost in digital transactions. But most evidently, it can be attributed to the COVID-19 pandemic. 

Writer Owen Matthews in his article broke down the pandemic’s influence on China’s online market as a whole.

“COVID-19 stay-at-home orders were a huge boost for eCommerce in China as elsewhere,“ the article reads, “Although the country’s overall retail sales are down, Chinese consumers will spend 144.44 trillion yuan ($20.8 trillion) on retail eCommerce in 2020, up 16% from 2019, according to Emarketer.com. Chinese e-commerce companies have also adapted rapidly to the COVID-19 reality, both by supporting government initiatives — for example, JD.com deployed autonomous vehicles to deliver essential medical supplies in Wuhan — and by launching new services such as contactless delivery to make it easier for consumers to continue shopping during lockdowns.“

The growth of Chinese eCommerce companies is simply astounding, seen by the sheer size of numbers during Singles Day. 

In 2020, Alibaba and JD.com racked $74B and $41B, respectively. So to give you some perspective taking the combined global revenues from Amazon and during Black Friday 2020, it is 7x and 4x, respectively.

Chinese eCommerce companies have been going above and beyond regarding tech innovations. The aim is to create a more dynamic experience for consumers. 

Today Chinese eCommerce companies are as competitive as the whole Chinese market. Alibaba ruled it with an iron fist with a market share of 81% no more than a few years ago. 

Now, other online platforms offer innovative technologies and better customer service. As a result, Alibaba’s market share dropped to about 55%, where it currently stands. 

Competition has allowed eCommerce companies to take advantage of new technologies. 

Chinese companies pushed innovations like live shopping, digital payments, group coupons, and deals. Later, they started merging social media and eCommerce and instant messaging integrations. 

While other countries are still sticking to point-and-click eCommerce, China has a thriving and competitive market exploring the boundaries between shopping and real life.

Mcommerce is the Cornerstone of Ecommerce in China 

According to the Bernstein Ecommerce Outlook, the Chinese market had around 900M internet users in 2020. 

Let that number sink in. 

There is no single country in the world with as many internet users. It has almost three times as many users as the US and nearly twice as many as the EU. 

But you have to consider that the high growth of internet penetration in China came at the same time with the invention of the smartphone. 

China is the world’s leading smartphone market, so smartphone penetration is very high. According to Bernstein, 90% of Chinese users access the internet through their phones. 

This, in turn, encourages them to conduct their purchases through their phones. As a result, since 2015, more Chinese consumers have made purchases via phones than via computers.

Several factors make mCommerce particularly popular in China:

• Mobile payment apps such as WeChat Pay and Alibaba’s Alipay.  They make it very quick, easy, and convenient for buyers to pay for items using their smartphones;
• Multi-functionality. Social media apps are utilized for many everyday functions. You can book appointments, order food, plan overseas trips and pay bills. WeChat allows to do all these within a single app; 
• Cost-efficiency. Investment in mobile has become more attractive in recent years. The reason lies in the lower costs of mobile networks and falling cost of mobile devices;
• Better access. Mobile allows people living outside of the main cities and towns to have brands they would not otherwise have.

Another major factor is that western buyers embraced e-commerce long before smartphones emerged. With the internet being late to come to China, many Chinese netizens have bypassed desktop use. 

As a result, mobile internet access has a more prominent position in China than in Australia.

5 Trends Driving Ecommerce Growth in China

We have established that the growth of e-commerce in China is unparalleled anywhere else in the world. 

There are specific structural differences with other markets like the US, like the share of mobile e-commerce and market concentration. These differences encourage players in these countries to argue that China shouldn’t be the blueprint for 21st century Retail.

But despite these differences, there is no doubt that underlying innovations are pushing the growth of e-commerce in China.

Let’s look at five of these trends fueling the growth of Chinese e-commerce. 

1. Live Shopping

One of the biggest trends shaping eCommerce in China has to be live shopping. 

In an interview with Financial Times, technology entrepreneur Dan Dan Li noted the similarities between the old-school American shopping channel and the newly emerged trend of selling products via mobile video demonstrations. 

Live video is a massive part of China’s eCommerce apps like Douyin, Taobao, JD.com, and Pinduoduo. But Lin noticed that in the West, the nature of eCommerce is still very static and unchanged.

“Almost everything else is mobile-first,” said Li in the FT interview, “Entertainment is mobile-first, social is mobile-first, but eCommerce [in the US] is in the Stone Age.”

These dynamics can cause a significant change in other countries. For example, China’s growth in eCommerce has been casting a shadow on American and European markets for some time now.

2. Omnichannel engagement

Another quite popular trend in Chinese eCommerce is the use of omnichannel marketing. 

Omnichannel marketing is something that marketers are starting to pick up on in the US or Europe. 

In China, it’s already been an established must-do for eCommerce entrepreneurs. A cross-channel strategy isn’t just effective, but it could also be inexpensive. 

A unified approach to content creation across different marketing channels can result in significant synergies. Thus, reducing the cost of organic social media marketing and search engine marketing.

3. Social commerce

Social media shopping is another hot topic for Chinese eCommerce. Experts forecast such sales to reach $363 billion in 2021, tripling the results of 2018. They are also expected to account for 13 % of total eCommerce sales this year. 

Online social networking became an essential part of our lives, and advertisers took over social media platforms. So the latter’s transformation in an ecosystem for eCommerce was a question of time.

The multi-functionality of Chinese social media encouraged the development of social eCommerce. 

Mini Programs introduced by WeChat boosted the trend. These subcategories ease the experience for both merchants and customers. 

The Programs also became popular with residents of smaller cities who tend to use cheaper mobile data providers. It is preferable to have a single app for them instead of downloading several new ones.

Digital payment options like WeChat pay also contributed to the social eCommerce trend. As a result, customers can have a smooth, unified experience without exiting the platform.

4. Group buying

The growing popularity of group-buying also answers the Chinese eCommerce peculiarities. 

Pinduoduo is a significant contributor to the trend. Its unique value proposition made it the fourth largest eCommerce platform in China. One of the key features was the engagement of customers from rural areas. 

Group-buying implies bulk purchases by a community. But, first, a community leader creates a WeChat group to disseminate product offerings.

Then, he organizes bulk orders of different products directly from brands and distributors. First, the order arrives on the name of the leader. And later, he distributes individual orders among the community.

Such a method engages around 100-150 customers at once. It allows community members to benefit from low-cost delivery. It also helps to order items not available in the local stores.

5. Low-tier markets

One more trend occurring with Chinese eCommerce entrepreneurs is targeting low-tier markets in China. 

It makes sense to market and sell to consumers in big cities like Beijing. 

But consumers in smaller towns deal with lower living costs. Thus, they have more disposable income. Therefore, marketing to this demographic is clever as the Chinese market is big enough.

Is Ecommerce in China the Blueprint for Ecommerce in Other Countries?

Here is the million-dollar question: Could China’s eCommerce model become a global trend? 

Prominent American and European corporations have often underestimated Chinese companies. So the possibility of them adopting Chinese eCommerce trends seems a bit iffy. 

It doesn’t help that the Chinese market has few connections to other markets. But, again, it can be partly explained by the distance and protectiveness from the government. 

While this seems grim, a lot is still up in the air. It looks like China could be the blueprint for eCommerce in other countries. 

A whopping majority of retail sales are occurring through online platforms. It isn’t only inspiring for eCommerce entrepreneurs. It could very well become a reality in other countries.

As we’ve established, there are structural reasons why the Chinese e-commerce market might be unique. There is an unparalleled penetration of commerce, and the market is highly concentrated.

But players worldwide take a page out of the Chinese e-commerce playbook. Instead, players like Amazon or L’Oreal are dabbing into live shopping or social commerce outside the Chinese market.

So despite the structural differences, it is worth looking towards China for inspiration in the coming years. Or at least the most prominent global players are doing it. 

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