Report: Chinese E-commerce to Surpass U.S. in Four Years

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Report: Chinese E-commerce to Surpass U.S. in Four Years

Amid thegrim global economic news of late, it’s nice to hear that there are business sectors that are still growing briskly. A report released this week by The Boston Consulting Group, the global management consulting firm, highlighted just such a market. Chinese e-commerce is expanding so fast that it is expected to surpass the U.S. as the world’s largest online shopping market as early as 2015.

The BCG report was loaded with headline-friendly statistical superlatives for China’s e-commerce sector:

  • The number of Chinese who buy things on the Web today stands at 145 million (versus 170 million in the U.S.), but that number is expected to leap to 329 million by 2015.
  • Over the next four years, BCG projects, the percentage of the urban Chinese population shopping online will jump from 23 percent in 2010 to 44 percent.
  • Within five years, the average online shopper in China will be spending RMB 6,220 ($980) per year, twice what they are today and close to the U.S. average of $1,000.
  • E-commerce in China will go from representing 3.3 percent of the country’s total retail spending today to 7.4 percent in 2015–achieving in four years a milestone that took 10 years to reach in the U.S.

The BCG report, which included a survey of more than 4,000 online shoppers in China,cites some interesting reasons for the boom. Low shipping costs, for example, makes buying online an attractive proposition.It costs $1 on average to ship a 1-kg. parcel in China versus $6 in the U.S.

Then there’s the relatively low penetration of bricks-and-mortar retailers in many fast-growing cities.Up to a quarter of e-commerce demand in China is for productsconsumers cannot find in physical stores, BCG says. There are many consumers, especially younger ones, whose first contact with a brand or type of product occurs on the Internet. “China is unusual in that Internet access has far outpaced the reach of the top physical retailers, which means that e-commerce development probably will not mirror the pattern in other countries,” said Waldemar Jap, a Hong Kong-based partner at BCG and coauthor of the report.

The country’s online-shopping ecosystem isunique in other ways. BCG said most consumers in other countries begin shopping with a Google search. In China,buyers start by searching online shopping malls run by e-commerce giant Taobao, which hosts hundreds of thousands of e-tailers offering more than 800 million products. Taobao accounted for nearly 80 percent of online sales in China in 2010.

Read “The Taobao Phenomenon” from BCG

In addition, Chinese consumers are the most likely in the world to check for product recommendations on social networking sites, largely due to a general distrust of merchants. Forty percent of online consumers in China say they’ve read and posted reviews, which is more than double the rate in the U.S. Chinese aren’t much for visiting the official websites of major brands and manufacturers, either. While 40 to 60 percent of online shoppers in Japan, the U.S. and Europe go to official sites, only 19 percent of Chinese do.

Read “Selling to China’s E-Shoppers” from BCG

AmericasBoston Consulting GroupChinese E-Commerce
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