McKinsey points out that China was already the world’s second-largest e-tailing market in 2011, with a value of US$120 billion—around $70 billion behind that of the US. Japan was the next largest at $107 billion. The sector has seen a compound annual growth rate of 120 per cent since 2003 and drove $190 billion in sales last year. It is likely to grow substantially in line with an increase in the access to broadband internet.
The market has an altogether different structure to that of the US. Rather than being dominated by independent B2C merchants, up to 90 per cent of Chinese e-tailing is made up of marketplaces. More than six million sellers operate on the Taobao marketplace alone, according to McKinsey.
A surprise finding was that fourth-tier cities attract the highest ‘share of wallet’ online. While first-tier consumers spent the most overall, their fourth-tier counterparts directed the greatest percentage of their disposable income online — 27 per cent compared to 18 per cent in the first tier.
The most money is spent on apparel, followed by recreation and education and household products.
The market is highly concentrated. Tmall.com holds the lion’s share of the B2C space, while Taobao dwarfs competitors in C2C retailing.
The number of broadband accounts currently stands at 129 million — the highest in the world — but represents a penetration rate of just 30 per cent.
The PwC report is based on a survey of more than 11,000 online shoppers from 11 countries on four continents, including both mature economies and emerging markets.
Despite the fact that less than a third (30 per cent) of Chinese respondents have been shopping online during the past five years, compared to 44 per cent globally, they are much more enthusiastic.
The findings of the survey show that 58 per cent of online shoppers in China shopped at least once a week, compared with 29 per cent globally.
“China is a different story in many ways, leading the world in terms of online shopping frequency,” said Carrie Yu, China and Asia Pacific retail and consumer leader for PwC.
The most important factor is that it's cheaper and more convenient to shop online compared to shopping in-store.
More than half (56 per cent) in China have leapfrogged the retailer and shopped directly with a brand online, opposed to 35 per cent in other countries. This breaks the myth that retailers are inherently better positioned than brands as they are closest to the customer, pointed out Yu.
Chinese shoppers are ahead of the curve in terms of using new devices, with 39 per cent shopping on tablets and 35 per cent on smartphones at least once a month—compared with 17 and 16 per cent respectively for global consumers.
And in the next twelve months, nearly 25 per cent of Chinese consumers say they plan to use such devices more often to carry out their shopping.
Compared to their global peers, Chinese shoppers are also more actively engaged with social media: 57 per cent of them say they are following brands on social media, interacting with retailers, and providing comments on products, compared with 38 per cent of the global sample.
Seventy-seven per cent of Chinese shoppers (54 per cent globally) will spend more on their favourite retailers, especially if they sell across multiple channels. The top multi-channel retailers in China are: Li Ning, Womai, 66buy, Carrefour, Nike, Adidas, Gome, and Apple. Suning tops the list at 26 per cent.
Yu added that China's online shopping habits are very different and unique to the country.
Only 21 per cent of Chinese consumers click on search results to visit a specific online store (global average: 36 per cent).
For Chinese customers, the number-one attraction for any given online shop is the vouchers or coupons available—global shoppers rank that factor as fifth.
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