Asia Pacific took Europe’s crown as the world’s largest region in e-commerce in 2013, with a combined turnover of €535bn – and Ecommerce Europe estimates that sales in China alone reached €500bn in 2014.
Unveiling its latest Top 500 list of the largest e-retailers in China, Internet Retailer points to growth rates in the country three times those of the US and Europe. Online sales in China already take the highest share of total retail for any country in the world (at nearly 11 per cent). The proportion of sales made via mobile devices is also the highest (33 per cent).
And Chinese retailers aren’t just gaining strength at home. E-commerce giant Alibaba’s record-breaking IPO in the US last year was partly to fund its global expansion. In PayPal’s “Modern Spice Routes” report, China was identified as the second most popular shopping destination for consumers in the US (after the UK), the UK and Brazil (after the US) – and in the top five for those in Australia and Germany. Nearly 70 per cent of cross-border orders made in Russia in 2014 came from China, up 30 per cent year on year, according to East-West Digital News.
As more and more Chinese retailers are looking abroad for growth, logistics companies are also making it easier for them to do so. Leason Chan, business development manager at Asendia Hong Kong, says there are now more options to export ever-popular electronics, for example, despite restrictions on putting batteries in the post.
For retailers elsewhere in the world, the rise of the Chinese e-commerce can be seen as a threat. But the market also represents a massive opportunity for those looking to expand abroad.
There are more than 600 million Chinese consumers online. More than 300 million shop online and a third of them have already shopped across borders, according to Nielsen.
Leason Chan points to health supplements, perfume, cosmetics and other luxury goods as the most popular categories. He also emphasises the importance of trust and quality among Chinese shoppers, especially when fake goods are prevalent and the country has been rocked by food safety scandals in recent years. As a result, well-known brand names can find a ready audience in the market.
There are 90 foreign retailers in Internet Retailer’s 2015 China 500, taking 9 per cent of online sales between them. US retailers dominate, led by Amazon – and clothes retailer Gap posted the fifth fastest growth of all 500 over the past 12 months.
“There are more than 600 million Chinese consumers online. More than 300 million shop online and a third of them have already shopped across borders, according to Nielsen.”
To improve chances of success, Chan says that it is necessary to reach Chinese consumers in their own language (Mandarin) and currency (RMB), which can be a challenge. But Alibaba has recently opened up its Alipay product to foreign retailers, which is the local equivalent to PayPal, helping them to offer consumers a payment option they are familiar with.
The Chinese government has also focused on promoting e-commerce and improving logistics challenges – such as customs.
“But it is still important to understand the rules and regulations when sending goods to China,” says Chan. “A lot of people say they can do it, when in reality they smuggle it in.”
Chan adds that some retailers are happier entering Hong Kong first. It’s a tiny market in comparison, but one that’s very international, which breaks down some of the language barriers.
Hong Kong’s consumers have similar tastes to mainland China – particularly around luxury goods, perfumes and cosmetics – but its tax regime is particularly business friendly.
Here smartphone penetration is also one of the highest in the world, at 63 per cent. Importantly, according to Nielsen, four out of five residents at least research products online and nearly two thirds highlight convenience as their main motivation for buying personal care, health and beauty, food and drink and baby supplies online.
Although the size of the market in Hong Kong has meant e-commerce has been slow to take off, the market is now growing at around 17 per cent a year to reach €3.5bn. As more local retailers build their multichannel offerings, there will be more international success stories too.
Of course, China and Hong Kong are only part of the growth picture in Asia Pacific. Besides Japan and South Korea, which are already large and mature e-commerce markets, yStats has called Indonesia, India, Thailand and Malaysia “rising stars”.
In each of these markets infrastructure is improving rapidly. India, for example, is already seeing growth rates above 50 per cent and the government is looking at easing restrictions on foreign investors that could further open the floodgates.
Ecommerce Europe also highlights that e-commerce turnover in Indonesia doubled in 2013, showing just how much promise the region holds for retailers thinking about expansion.
About Leason Chan
Leason Chan is Business Development Manager at Asendia Hong Kong and specialised in E-Commerce for Asian markets.