Growth of e-commerce in China
E-commerce in China has grown rapidly over the past few years – in 2016, the size of China’s e-commerce market was approximately US$403.458 billion, which increased to US$499.15 billion in 2017 and is expected to exceed US$956 billion in 2022. This growth can be attributed to a variety of factors, such as the increase in smartphone penetration, poor shopping experience in physical stores, and fierce competition in the e-commerce market.
What drives the growth
The middle-income group is the main force of cross-border shopping. They have strong purchasing power and a higher pursuit of quality of life (including the pursuit of high-quality products/well-known brands). This means that as long as the price is satisfactory, they are willing to buy products from overseas through cross-border online retail channels (as long as the overseas retail price of the product plus shipping costs and tariffs is lower than the retail price in China). In the next five years, the size of China’s middle-income group will continue to expand (annual growth rate of about 3%), and the income level will further increase (average annual growth rate of 5%~7%), which will further enhance the purchasing power of this group. Strong purchasing power and demand for high-quality products will further drive the growth of the cross-border online retail market.
In addition, the Chinese government is also strongly supporting the development of cross-border online retail in order to transfer overseas consumption back to China. China has established several major free trade zones in the country to promote the development of cross-border e-commerce industries (such as bonded warehouses).
Technology also plays a key role in promoting the development of cross-border e-commerce: nowadays, consumers can easily browse products from all over the world without leaving their homes with just a tap on their mobile phone screens. Retailers no longer exist only in the form of physical stores, but are increasingly moving to online websites, social media and mobile applications to provide consumers with a variety of sales channels. In addition to bringing omni-channel retail, emerging technologies have also significantly improved logistics service capabilities. After the seamless integration of online sales channels and logistics networks, logistics information will become more transparent, allowing consumers to check and track orders anytime and anywhere. The convenience of online shopping will continue to drive the growth of cross-border e-commerce.
The following pictures show the footprint of Chinese products in foreign markets
Driven by e-commerce platforms dedicated to promoting cross-border trade, demand for Chinese products in the European and American markets has grown rapidly
The previous growth of China’s cross-border retail market was a sudden release of consumer demand for cross-border spending, as well as “irrational” growth in a loosely regulated market
In the past few years, many cross-border e-commerce retail markets have emerged, such as Kaola, Amazon Global Shopping and AliExpress. They provide consumers with a full range of services from product selection to delivery, providing consumers with great convenience in purchasing overseas products, thus releasing consumers’ demand for overseas products
The customs supervision of emerging cross-border e-commerce retail has not kept pace with the times in terms of taxation and commodity inspection, and tax evasion and non-compliance are commonplace, which makes products purchased from overseas sources have price advantages and increases their attractiveness to individual consumers