China’s Trend Toward Mobile

by | Feb 23, 2016 | Chinese Market, Emerging Markets | 0 comments

In 2013, China became the world’s largest online retail market with total sales reaching $307 billion (USD). Forrester Research predicts that the e-commerce market in China will grow at an annual rate of nearly 20% to reach $1 trillion (USD) by 2019. However, it’s not just e-commerce that is increasing at an incredible rate in China, it’s m-commerce—mobile purchasing.

In fact, investing in mobile apps is crucial for e-commerce companies in China because most people use mobile devices to access the Internet. New data from Emarketer reveals that, in 2015, mobile sales in China were expected to reach $333.99 billion (USD). That’s nearly 450% more mobile sales than the U.S. It’s also 49.7% of China’s entire e-commerce sales market and 7.9% of China’s total retail sales market.

It’s only the beginning. Emarketer predicts that China’s mobile commerce will continue to grow vigorously, and, in 2019, will account for approximately 71.5% of all online retail and 24% of all retail sales.

The shift to mobile commerce is not a surprise. In 2007, China had approximately 210 million Internet users and only 50 million mobile users. But, by 2014, China had 557 million mobile Internet users out of a grand total of 649 million web users, according to TechInAsia.

When comparing China’s m-commerce data to the U.S., the shift is, even more, impressive. In the U.S., retail m-commerce represented just $74.93 billion (USD) or 22% of e-commerce and 1.6% of total retail sales. By 2019, predictions place U.S. mobile commerce as 28% of all e-commerce and 2.7% of total retail sales. It’s a vast difference, and, in truth, 69% of Chinese consumers VS 46% of US consumers have purchased a product or service using their smartphones.

These figures make it clear that China’s retail market is far more digital—specifically mobile—compared to the U.S. and it shows a significant difference between China and the U.S.—China is powered by mobile while the U.S. is still powered by the desktop and store. For China, the sheer number of mobile Internet users has pushed retail e-commerce toward mobile devices in a way that has not yet been seen in the U.S., and the gradual shift is expected to continue based on data by Alibaba and JD.com, China’s top e-commerce companies.

IMAGE: Insert graph from TechInAsia of mobile vs Internet users. https://www.techinasia.com/china-50-percent-mcommerce-ecommerce-spending-2015

The e-commerce market is currently divided between two websites, Alibaba’s Tmall and JD.com, which respectively hold 57% and 21% of China’s B2C e-commerce market, according to TechCrunch. However, Alibaba dominates the mobile market thanks to its mobile apps for both Tmall and Taobao. In fact, its mobile apps hold a combined market share of 85% compared to JD.com at 7.1%, and VIP.com at 1.6%.

At the end of 2014, Alibaba mobile purchases accounted for an astounding 42% of total purchases on both its Taobao and Tmall marketplaces. That was a 20% increase over 2013. By the third quarter of 2015, the mobile shopping revenue share amounted to 61%, up 29% from the same quarter the previous year. So, Alibaba’s shoppers definitely seem to be ahead of the curve on China’s shift to mobile.

However, all of China’s top online e-commerce players have been growing their mobile sales. JD.com, in particular, recently made a strategic partnership with Tencent, making it the first shopping channel to be integrated into WeChat, China’s top messaging app with 600 million monthly active users.

According to recent reports, the new agreement will allow JD.com to set up a shopping channel to reside on one of WeChat’s three main home pages. Such a prominent placement on WeChat presents a unique opportunity for JD.com to convert users into shoppers.

Imagine going out to dinner with a group of friends and receiving a QR code with the check that allows each diner to automatically pay their portion of the bill with a tap of their phones. Then, imagine using that same app to buy movie tickets after dinner and to hail a cab home at night. Further, the app can be used to create a pair of custom Nikes, send an order to Starbucks, browse Burberry’s latest runway collection, count steps walked, plan a family vacation, upload and share photos with friends, order delivery, host a conference, and check the news.

It’s possible, and it’s happening with WeChat. WeChat is a seamless experience and a daily fact of life for the Chinese, according to DigiDay, and it’s changing mobile commerce and responsible for a good portion of China’s m-commerce growth.

The most successful mobile sales platforms in China have gone above and beyond basic sales to provide users with interesting content and social experiences. For example, Mogujie—one of the fastest-rising fashion e-commerce platforms on mobile according to Jing Daily—offers a Pinterest-like functionality on their mobile site. It allows users to create digital “collections” of clothes that can be purchased, and it demonstrates the popularity of interactive experiences for Chinese mobile users.

Another big part of the success of m-commerce in China, particularly for WeChat and Alibaba, are the simple online payment systems available to users. Alipay and WeChat Wallet are the two leading mobile payment processes used in China, and they make it easier to make mobile purchases without stopping to enter credit card information or having to bounce between apps and tabs. It’s the seamless nature of the mobile payment systems that has helped China’s m-commerce market.

A robust logistics network is also vital for e-commerce companies to succeed in the m-commerce market. For example, Alibaba poured $16.3 billion into its package delivery infrastructure to get packages to any address in China within 24 hours. Meanwhile, JD.com offers same-day delivery in 111 counties and districts in China.

Those companies who want to resonate with their Chinese customers need to embrace the country’s m-commerce revolution in creative and relevant ways. Whether brands choose to create their own mobile platform, use WeChat sales, mass market platforms, or something else entirely, it’s becoming increasingly important for companies to create a rewarding mobile experience for users.