Here’s what Alibaba, along with other experts, think eCommerce in China and mCommerce in China will look like over the next few years.

Nearly one quarter of retail sales will be conducted online by 2020

According to Bain & Company, by 2020 China’s online retail market will have more than tripled in value, from RMB 2.9 trillion in 2014 to RMB 10 trillion (US$1.5 trillion). According to the report, online will account for nearly a quarter (22%) of the total value of retail sales by 2020, with the biggest drive in sales growth being B2C eCommerce in China. Of the RMB 2.2 trillion in sales accounted for online, 70% (RMB 1.54 trillion) will come from mCommerce in China.

A particularly interesting part of the report was the section where it was highlighted that the businesses succeeding the most in China’s growing online B2C sector were small companies, including those based in a specific region, those operating entirely online, and those brands that have not yet built up significant recognition. It just goes to show that with clever digital marketing, China can be a lucrative place to do business regardless of the size of your company.

China’s consumer market will double to US$6.5 trillion

Research by the Boston Consulting Group presents evidence that by 2020 an additional 100 million Chinese households, which are currently earning around RMB 60,000 (US$9000), will have entered the middle-class and affluent (MAC) bracket. As a result, around a quarter of Chinese counties and cities will see a doubling of spending power, taking consumer spending to a total of US$6.5 trillion. By 2020 the increase in disposable income will mean that there will be 800 locations in China that have a greater level of disposable income per capita than Shanghai does today.

For this reason it is important to spend the time necessary to accurately identify potential emerging markets. Thanks to eCommerce in China, you can use digital marketing to target your business to specific locations. Many of those locations may be being overlooked by larger businesses, but in five years’ time could be as lucrative for you as operating in Shanghai would be today.

Digital marketing is key to breaking new markets in China

China still promises huge growth potential. Many of its developing rural areas hold great promise as consumer demand and levels of disposable income both increase. Research by the China Academy for Rural Development at Zhejiang University suggests that all rural areas of China will have internet access within five years. That opens up a world of possibilities for online retail, including mCommerce in China. From a long-term prospective, digital marketing is key to breaking new markets in China.

(Image source: Image created by blackzheep | www.freedigitalphotos.net)

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We take a look at some of the key moments in WeChat’s history that have turned it into a market leader.

Membership Card makes mCommerce platform accessible to small companies

In 2012 WeChat launched its Membership Card, which allowed brands access to a range of CRM features, to help them track and manage mobile commerce and customer data. On the 24^th of September 2013 the membership card was updated to version X1, giving commercial users an even greater range of features. The membership card was an important step forward for WeChat, as it allowed smaller businesses without the IT systems or resources in place to be able to manage their customer information via WeChat’s mCommerce platform.

First revenue generated

WeChat first started generating revenue in 2013, when mobile gaming in China started to become very popular, creating in-app purchases for games and stickers. Although this revenue was generated through purchases made within the app, these transactions were still very much limited to the kinds of sales traditionally associated with mobile apps, such as paying for additional content. At this point, WeChat was still not really involved in mCommerce as is known today.

Encouraging users to use mobile payment

WeChat helped to encourage users to pay through the app in mobile by offering a digital version of the traditional Hongbao – a red envelope containing money given at New Year and occasionally weddings. Launched in time for New Year 2014, WeChat’s new feature allowed users to send monetary gifts to one another in a digital red envelope, and could even determine how one sum of money would be distributed between several people. Because users have to link the app to their bank accounts in order to use the service, WeChat were hoping that this would lead to an increase in mCommerce activity.

WeChat payment transforms app into mCommerce platform

On the 5^th of March 2014, WeChat launched its WeChat Payment facility – the most important development in transforming the app into a mCommerce platform. Through the new payment system, users could buy all kinds of goods and services (such as coffee), pay for taxi rides, and even buy items to be delivered to their local store or straight to their homes.

Expanding to display ads

Although originally avoiding more traditional display advertising, in July 2014 WeChat gave access to its beta advertising platform to verified accounts with over 100,000 followers. This allows them to include advertisements at the bottom of their news-article style updates. These adverts do not appear in user’s messaging features, only when they click to read a celebrity or brand’s latest updates.

What’s next for WeChat? Check back regularly for news and updates.

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Flash forward three years, and a lot has changed. Chinese consumers can buy almost anything they want using their mobile phone, and mCommerce is growing at an astounding rate. What could another three years do for the marketplace? What will mobile eCommerce in China look like in a few years’ time?

Worldwide mCommerce forecast

The fact that tablets and phones are more popular than PCs is one of the driving forces between the rise of mCommerce. Across the globe mCommerce markets are growing, with global sales expected to increase nearly five-fold in the next four years. This is up from $133billion in 2013 to $626billion by 2018. In the US alone, 2017 mCommerce sales will total more than eCommerce sales across the globe in 2013 (source: Evigo).

Mobile China online shopping forecast

China’s mCommerce market is showing strong signs of growth, partly thanks to the monetisation of popular social app WeChat. mCommerce revenue in China is anticipated to reach $51.62billion; an increase of almost double the figure from the previous year, and representing a fifth of the anticipated total eCommerce in China sales for the entire year (source: Tech in Asia).

By 2018, China is set to be the world’s second biggest mCommerce market, behind the USA. In the next four years, its mCommerce market is expected to triple in size, having seen year-on-year growth of 165.4% in 2013 and an expected 91.1% growth by the end of 2014 (sources: Euromonitor, Go-Globe).

Currently the Alibaba Group dominates mCommerce, with a 76.1% market share. Its closest rival – JD.com – has a 5.2% share. Alibaba’s Taobao platform has more than 4 times the number of active accounts of JD.com (at 119.09million), and is used more than twice as frequently each month. On Singles Day, mobile devices were used to purchase $877million worth of goods on Alibaba (source: Go-Globe).

The popularity of smartphones in China, which has more phone subscribers and smartphone users than any other country in the world, is fuelling the demand for mCommerce. Factor in the fashion for flash sales, which see everything from beauty products to limited edition phones selling out in huge numbers. Then consider that mobile purchases are over a minute quicker than on a PC, and it is not hard to see why China is the perfect place for mCommerce to flourish and thrive

(Image source: ‘Online Shopping Concept’ | www.freedigitalphotos.net)

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WeChat overview

WeChat is a social chat app that combines a huge array of functions. It allows users to connect with each other and share a wide range of content, from text messages to photos and videos. The app can be used for individual and group chats, sharing photos, locating friends nearby, sending videos and broadcasting messages (source: WeChat).

The app has enjoyed widespread popularity, with its user base across the world reaching more than 355million as of 2013 Q4. This represents a jump from Q3 of over 30 per cent, equating to almost 85 million new users (source: Tech in Asia).

WeChat’s mobile commerce platform potential

When developing the app, Tencent wanted to focus on creating close and valuable interactions between genuine friends. Unlike Weibo, to which the app was often compared, WeChat is a platform for which users who already know each other can share content and socialise. It is this close connection between users that has made WeChat the perfect platform for m-commerce.

Most other applications have opted for display advertising to make their platforms profitable. Banner adverts can be displayed to huge groups of people in order to create a far-reaching message across a target market. WeChat makes this difficult, but the way its users are connected gives it great potential as a mobile commerce platform. Word of mouth is, as we’re sure you know, still the most effective form of marketing, and with Chinese consumers in particular valuing social recommendation, Tencent has an m-commerce platform with huge potential (source: Clickz).

WeChat – interesting facts

Mobile commerce spending in Q1 of 2014 totalled $10.3billion, representing a 140.8% year-on-year increase (source: Observer Solutions). WeChat works both for online sales, where the retailer takes money and goods or services are delivered; or offline, where retailers scan a QR code in store that has been generated by the app during the transaction. By teaming up with other apps WeChat has made it easy for users to pay for all kinds of services. This is perfectly illustrated by their partnership with a taxi app that resulted in 2million people using WeChat to pay for taxi rides in just one day in February this year (source: Tech in Asia). All kinds of companies have since teamed up with WeChat to offer in-app payments, with McDonalds being the first major company to do so (source: DMR).

From coffee to smartphones, WeChat users have already shown their willingness to purchase a range of goods and services via the app.

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80% of Chinese internet users are mobile

In 2013 China had 618 million internet users. Of these, a staggering 80% were users who went online via their smart phones or other mobile devices. The numbers of users who went online with their smart phones specifically in order to watch or download video content reach 250 million alone. That represents an increase of 83% on the number of mobile internet users accessing video in 2012. It is believed that as 4G networks are rolled out across the country mobile internet use, and specifically video consumption, will continue to rise (source: CNNIC).

Mobile internet user demographics

As of 2013 there was a fairly even split in gender usage of mobile internet, with men accounting for 6% more of the market than women. Mobile internet users tend to be young, between the ages of 18 and 31, with the age bracket 25 to 30 being the largest single demographic, with over 31% of users falling in to this group. Only 13% of all mobile internet users were aged 40 or over (source: CNNIC).

Online Behaviours

As of 2013 Q2, online shopping held the biggest share of the mobile market, with over 38%. 17% of users listed online shopping as their top activity. Nearly 72% of mobile internet users admitted to going online several times a day, with the most popular times for mobile browsing being whilst waiting for transport (54.2%) and while commuting (47.3%) (source: CNNIC).

The rise of the mobile commerce platform

These statistics help to explain why mobile shopping is becoming so popular. We have already noted in previous blog posts that the older generations in China tends to be more frugal with their spending. The young age, affluence, and technological savviness of mobile internet users makes it the perfect way for companies to do business with their target markets. The popularity of the instant messaging, news, and mobile commerce platform app WeChat, which now has 355 million registered monthly users, is proof that mobile commerce trends of growth are set to continue for some time yet (source: Tech in Asia).

(Image source: ‘Commerce Definition On Smartphone Showing Commercial Activities’ | www.freedigitalphotos.net)

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