China’s retailing sector is being revolutionized by the rapid uptake of online shopping by millions of consumers, and the trend is accelerating, according to a new report from Goldman Sachs.
Online sales in China will reach RMB 3 trillion in 2015 (up from about RMB 1.2 trillion in 2012), increasing at a compound annual growth rate of nearly 40% between 2011 and 2015, Goldman analysts predicted. The report cited six factors that supported China’s high growth and huge untapped potential:
- Industry concentration for conventional retailers is low in China in comparison with developed nations, leaving bricks-and-mortar shops more vulnerable to online competition.
- The price difference between online and offline goods is relatively large in China, and Chinese consumers are more cost-conscious.
- In China, online shopping is comparatively easier than finding products in shops; it is also moreefficient, aided by price comparison websites and price comparison software.
- The consumption habits ofyoung Chinese spendersborn in the 1980s-90s lean towards online shopping.
- China’s shipping market is maturing quickly and delivery costs are relatively low.
- There is lower e-commerce taxation in China versus other countries.
By 2015, China will have 700 million Internet users (up from 564 million currently, according to the CNNIC) and 55 percent of them will shop online (up from current 43 percent), spending an average of RMB 8,000 per year, Goldman Sachs analysts predicted.
“As online penetration in China continues, the implications of this tectonic shift in consumer behavior are slowly but surely starting to sink in,” analysts wrote. Traditional retailers and other consumer companies are being forced to respond and adapt to the e-commerce boom morerapidly in China than in more developed markets, according to Goldman.