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The Great Leap Online – China will become the world’s most valuable market for e-commerce.

Release Date

05 December 2012

When it comes to e-commerce, America is still top, with close to 170 million shoppers looking for bargains on the internet. However China is getting very close with 145 million online shoppers. It is a very real possibility that China will become the world’s most valuable e-commerce market within the next four years.

In a new report, The Boston Consulting Group (BCG) calculates that every year for the foreseeable future another 30 million Chinese will go online to shop for the first time. By 2015 they will each be spending close to $1,000 Australian Dollars a year – close to what Americans spend online now. BCG calculates that e-commerce could rise from 3.3% of China’s retail sales today to 7.4% by 2015. A similar jump took close to a decade in America.

The Chinese government has heavily subsidised the rollout of high-speed access, so internet penetration now approaches rich-country levels. That boosts e-commerce, of course. However so, too, do the shortcomings of China’s costly, inefficient bricks-and-mortar retailers.

For example, a quarter of Chinese shoppers seek products online because they are not available at physical stores. Also, until recently, China lacked a reliable and cheap method of shipping packages, so the e-commerce industry has invested in developing one. Purchasers on Taobao, an online Goliath that is a division of China’s Alibaba, are thought to account for a staggering 50% of all packages shipped in China. The cost of shipping parcels is now a mere one-sixth of what firms in America have to pay.

The biggest snag holding back e-commerce for years was a lack of trust. Consumers worried (quite rationally) that online firms were fraudsters, or that their credit cards would be abused, or that purchases would get swapped from counterfeits during shipment. Alibaba overcame this by creating Alipay, a clever online arrangement that releases payments to vendors once a client is fully satisfied.

Chinese e-shoppers are also big users of social media. Precisely because they do not trust sellers or advertising much, they devour online customer reviews of the sort made popular by eBay and Amazon. According to BCG, over 40% of Chinese online shoppers read and post product reviews online, making them twice as likely as American online shoppers to do so and four times more likely that Indians. The future of e-commerce is Chinese.

Sara Cheng is Manager, Greater China with Australian Business Consulting & Solutions International Trade team. If you have any questions, please contact her on 02 9458 7341 or sara.cheng@australianbusiness.com.au

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