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China E-commerce Trends: What you NEED to Know for 2019

Emarketer reports that in 2018 Q1 2017 reports that Chinese national online retail sales of goods and services reached 1.4 trillion. RMB. That was an increase of 32.1% compared to data from three months prior to that. Several research organizations state that with the rising number of Chinese gaining international exposure by going aboard and concerns around local product safety, more and more consumers are turning to cross-border sales and domestic ecommerce.

According to data from China Internet Watch, the population of consumers who buy foreign goods online is estimated to exceed 200 million by 2020, and total online sales are predicted reach 1.9 trillion RMB. 

Thanks to the tremendous number of shoppers in China, the country keeps setting records for global retailing and has become a must-win market for retailers and online businesses alike. While having a strong understanding of the various China shopping apps is important, it’s also very important to understand the latest trends. To identify opportunities in the market, it is essential to know the latest China ecommerce trends, so check out the next section below!

The rise of lower-tier cities: New battleground for Ecommerce players

Ever since China embarked on economic reforms decades ago, the 1st tier cities like Shanghai and Shenzhen, have been taking the lead in contributing to the country’s development. However, in recent years, the 3rd and 4th tier cities, which made up 50.3% of China’s population, have turned into fuel for China’s next stage of consumption growth.

Contrary to the slowdown of development in 1st tier cities, the lower-tier cities are undergoing rapid economic growth. According to Invesco’s report, the major cities Beijing and Shanghai both registered a 6.6% rate of growth in 2018, while smaller cities such as Chengdu and Xi’an recorded 8% and 8.2% respectively – faster than the top-tier cities and above the national growth rate 8. The faster rate of growth in less developed regions has led to faster income growth. For 2018, growth of rural disposable income per capita was at 8.8%, while for the urban population it was at 7.8%. With higher disposable income, people are demanding more goods with higher quality, which turns the non-1st cities into new battlegrounds for ecommerce players. 

Growth in spending in lower-tier cities is higher than top-tier cities | Dragon Socialhttps://www.dragonsocial.net/wp-content/uploads/2019/06/Screen-Shot-2019-08-30-at-6.46.01-pm-300x173.png 300w" data-lazy-sizes="(max-width: 709px) 100vw, 709px" data-lazy-src="https://www.dragonsocial.net/wp-content/uploads/2019/06/Screen-Shot-2019-08-30-at-6.46.01-pm.png" sizes="(max-width: 709px) 100vw, 709px" srcset="https://www.dragonsocial.net/wp-content/uploads/2019/06/Screen-Shot-2019-08-30-at-6.46.01-pm.png 709w, https://www.dragonsocial.net/wp-content/uploads/2019/06/Screen-Shot-2019-08-30-at-6.46.01-pm-300x173.png 300w" data-was-processed="true" style="max-width: 100%; height: auto; margin: 0px;" />

Growth in spending in lower-tier cities is higher than in top-tier cities

The growing demand from lower-tier cities was evident across platforms during the 618 shopping festival. Alibaba’s gross merchandise volume (GMV) from 3nd to 5th tier cities grew by 100% year-on-year during the period. Beitun and Tumxuk, county-level and prefectural-level cities from China’s northwestern Xinjiang autonomous region, topped the of the 10 fastest growing areas during Alibaba’s 618 festival this year. Similarly, transaction volume growth was twice as high in lower-tier cities than the overall growth of transaction volumes on JD.com.

One of the significant factors contributing to the spike in sales is an expanding Ecommerce user base from lower-tier cities. Alibaba recorded a 100% year-on-year jump in the number of users from lower-tier regions on its platforms during the festival. Furthermore, the ecommerce giant recorded an increase of 102 million annual active consumers for the fiscal year ending March 2019, while more than 70% of them were from lower-tier regions and below.

618 Shopping Festival Users' City Tierhttps://www.dragonsocial.net/wp-content/uploads/2019/06/Ecommerce-passage-Pinduoduo-lower-tier-cities-300x217.png 300w, https://www.dragonsocial.net/wp-content/uploads/2019/06/Ecommerce-passage-Pinduoduo-lower-tier-cities-768x555.png 768w" data-lazy-sizes="(max-width: 1024px) 100vw, 1024px" data-lazy-src="https://www.dragonsocial.net/wp-content/uploads/2019/06/Ecommerce-passage-Pinduoduo-lower-tier-cities.png" sizes="(max-width: 1024px) 100vw, 1024px" srcset="https://www.dragonsocial.net/wp-content/uploads/2019/06/Ecommerce-passage-Pinduoduo-lower-tier-cities.png 1024w, https://www.dragonsocial.net/wp-content/uploads/2019/06/Ecommerce-passage-Pinduoduo-lower-tier-cities-300x217.png 300w, https://www.dragonsocial.net/wp-content/uploads/2019/06/Ecommerce-passage-Pinduoduo-lower-tier-cities-768x555.png 768w" data-was-processed="true" style="max-width: 100%; height: auto; display: block; margin: 10px auto;" />

As mentioned above, Pinduoduo has successfully become one of the Ecommerce giants in China by tapping into smaller cities with a team-buying business model. Noticing the market potential, other companies are also sharpening their focus on this market segment. For example, Dada-JD Daojia, the on-demand delivery arm of JD, has brought its one-hour delivery system to more than 50 lower-tier cities since mid 2018, the company has also launched its own group-buying app to compete with Pinduoduo. With China’s lower-tier cities becoming richer and more eager to spend, we can foresee the tense competition among ecommerce platforms in the coming years.

When It Comes to The China Ecommerce Market, Youngsters Rule.

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Millennials and Gen Z accounts for 85.1% of the online sales in China, according to China Internet Watch. From a numbers perspective, this means that 85.1% of China ecommerce users are aged between 16 and 35 years old.  When we look at users on a generational level, we can clearly see that these two generations are incredibly important for businesses that rely heavily on ecommerce, so this should be taken into account when forming a marketing strategy. For more on the generational differences check out our blog on consumer behavior below. 

Born in the age of Chinese economic reforms and under the one-child policy, the overwhelming majority of this young generation grew up with the undivided attention of their parents and grandparents. Since many of them are still studying or only recently graduated most are still unfamiliar with the working life and find themselves searching for ways to gain recognition from their peers or a sense of achievement. These generations have had a tremendous amount of foreign influence, as compared to previous generations,  with many traveling or studying abroad. This foreign exposure has led to a craving for international brands and luxury goods.

The younger generations in China are difficult to advertise to. As they’ve grown up around the internet and been under a constant barrage of advertisements their whole lives, they’ve learned to tune out most traditional advertisements. Brands have had more success with more engaging and interactive campaigns created specifically to target them. Their online behavior is also more fragmented meaning they visit a range of different sites for different purchases. Choosing the right China shopping apps for your products can be essential to getting your product in front of them.

Experiential Marketing & Pop-Ups has proven effective for targeting the younger generations of Chinese consumershttps://www.dragonsocial.net/wp-content/uploads/2019/06/xxl_153101353-300x200.jpg 300w, https://www.dragonsocial.net/wp-content/uploads/2019/06/xxl_153101353-768x512.jpg 768w" data-lazy-sizes="(max-width: 750px) 100vw, 750px" data-lazy-src="https://www.dragonsocial.net/wp-content/uploads/2019/06/xxl_153101353.jpg" sizes="(max-width: 750px) 100vw, 750px" srcset="https://www.dragonsocial.net/wp-content/uploads/2019/06/xxl_153101353.jpg 1024w, https://www.dragonsocial.net/wp-content/uploads/2019/06/xxl_153101353-300x200.jpg 300w, https://www.dragonsocial.net/wp-content/uploads/2019/06/xxl_153101353-768x512.jpg 768w" data-was-processed="true" style="max-width: 100%; height: auto; margin: 0px;" />

Experiential Marketing & Pop-Ups have proven effective for targeting the younger generations of Chinese consumers

In terms of categories, they are willing to spend a considerable amount of money on the pursuit of beauty and health. This has led to drastic increases in the YoY sales volumes of products in the cosmetics, skincare, and supplement categories. These generations are also having an enormous impact on the luxury industry, with brands scrambling to create marketing strategies to attract their business.

The Pet Economy: Pets Have Become The Masters

The growing popularity of pets in China has made the country a magnet for companies in the industry. The China Pet Product Association reported that the rate of pet ownership has been growing at 15% per year. Since over 70% of Chinese pet owners are Millennials this has also led to a significant increase in pet products being purchased through online shopping sites.

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The younger generations in China have increasingly put off getting married and as a result, many live alone or with their parents. Many Millenials and Gen-Z have turned to pets as a solution to offset loneliness and offer companionship. The market for pets and pet-related goods has tripled in the last 5 years.

According to You Chong Research, the pet market in China reached RMB 175 billion in 2018 and is on track to grow to 198 billion in 2019. However, this trend is really only just getting started. With the number of pets owned standing at only 0.065 per person in China, far below the 0.57 rate in the US, the market has enormous potential and will certainly see growth as more and more Chinese choose to add pets to their families.

There's plenty of options for pet owners on China Ecommerce platforms like Taobao and othershttps://www.dragonsocial.net/wp-content/uploads/2019/06/Taobao-Pets-300x81.jpg 300w, https://www.dragonsocial.net/wp-content/uploads/2019/06/Taobao-Pets-768x208.jpg 768w, https://www.dragonsocial.net/wp-content/uploads/2019/06/Taobao-Pets-1024x277.jpg 1024w" data-lazy-sizes="(max-width: 1100px) 100vw, 1100px" data-lazy-src="https://www.dragonsocial.net/wp-content/uploads/2019/06/Taobao-Pets.jpg" sizes="(max-width: 1100px) 100vw, 1100px" srcset="https://www.dragonsocial.net/wp-content/uploads/2019/06/Taobao-Pets.jpg 1100w, https://www.dragonsocial.net/wp-content/uploads/2019/06/Taobao-Pets-300x81.jpg 300w, https://www.dragonsocial.net/wp-content/uploads/2019/06/Taobao-Pets-768x208.jpg 768w, https://www.dragonsocial.net/wp-content/uploads/2019/06/Taobao-Pets-1024x277.jpg 1024w" data-was-processed="true" style="max-width: 100%; height: auto; margin: 0px;" />

There’s plenty of options for pet owners on China Ecommerce platforms like Taobao and others

New Growth Avenues: FMCG and Grocery Ecommerce

China’s ecommerce market is reaching saturation in categories like clothing and cosmetics, while growth opportunities for some categories are still untapped. According to a report conducted by PwC, the ecommerce penetration rate of the fast-moving consumer goods (FMCG) and grocery sectors is around 5%, which is foreseen as the next major growth driver in the market. In PwC Total Retail 2017 Report, surveys indicates that 62% of Chinese consumers (29% globally) would research grocery products online, while the same proportion of them (62% in China V.S. 22% globally) also prefer to buy their groceries online.

One of the key enablers of grocery ecommerce is the well-developed logistics system throughout China. Several Internet giants, such as Alibaba (Cainiao Alliance) and JD.com (JD-DaoJia), provide same day or next day delivery service in over 200 cities.

Within the FMCG category, fresh food is the largest segment but also the most difficult one to operate online, due to the perishable nature of the goods and the costly cold chain logistics requirement. Still, although the market of online fresh food is underdeveloped, some platforms have already sparked keen competition, including ecommerce giants, traditional supermarkets (FeiNiu, a part of RT Mart etc.) and various well-funded startups (YiGuo and Fruit Day etc.).

YiGuo (易果生鲜) sells fresh fruits and other groceries online | Dragon Socialhttps://www.dragonsocial.net/wp-content/uploads/2019/06/Screen-Shot-2019-09-04-at-9.59.08-pm-300x170.png 300w, https://www.dragonsocial.net/wp-content/uploads/2019/06/Screen-Shot-2019-09-04-at-9.59.08-pm-768x436.png 768w, https://www.dragonsocial.net/wp-content/uploads/2019/06/Screen-Shot-2019-09-04-at-9.59.08-pm-1024x582.png 1024w" data-lazy-sizes="(max-width: 1199px) 100vw, 1199px" data-lazy-src="https://www.dragonsocial.net/wp-content/uploads/2019/06/Screen-Shot-2019-09-04-at-9.59.08-pm.png" sizes="(max-width: 1199px) 100vw, 1199px" srcset="https://www.dragonsocial.net/wp-content/uploads/2019/06/Screen-Shot-2019-09-04-at-9.59.08-pm.png 1199w, https://www.dragonsocial.net/wp-content/uploads/2019/06/Screen-Shot-2019-09-04-at-9.59.08-pm-300x170.png 300w, https://www.dragonsocial.net/wp-content/uploads/2019/06/Screen-Shot-2019-09-04-at-9.59.08-pm-768x436.png 768w, https://www.dragonsocial.net/wp-content/uploads/2019/06/Screen-Shot-2019-09-04-at-9.59.08-pm-1024x582.png 1024w" data-was-processed="true" style="max-width: 100%; height: auto; margin: 0px;" />

YiGuo (易果生鲜) sells fresh fruits and other groceries online

Apart from the logistics issues which are more related to the speed of delivery and freshness of food, safety and quality are also some of the most important attributes for consumers. Such concerns have greatly increased the demand for imported foods. For example, Australian brands like Blackmore and Swisse have been thriving in China’s booming nutritional supplement market. It is worth noticing that in 2014, fewer than 2% of Chinese shoppers had made a cross-border purchase. However, according to a report from Deloitte China, international ecommerce penetration has risen sixfold to 10.2% in 2017, which again indicates great opportunities for international brands.

While with products of good quality, leveraging on a trustworthy, high-quality online platform to sell your products is also essential. PwC survey indicates that 40% of Chinese consumers shop with their favorite retailers simply because they trust the platform. Therefore, it is advised that brands should cooperate with ecommerce platforms whose brand names have been well-established in China.

The Rising Popularity of Social Ecommerce

More and more Chinese consumers have begun to tune out traditional advertisements due to the overwhelming amount of them they see on a daily basis. This trend has led to the increasing popularity of a new form of China Ecommerce, Social Ecommerce.

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If you wanted to define Social Ecommerce in a simple way, it’s essentially just the combination of Ecommerce and social media.   People ask for comments and reviews of products in their personal networks and receive recommendations from people they know about and trust.

Weibo Window is an example of ecommerce and social media combined. Users can view product recommendations, make their purchase, and show it off all on one platform!https://www.dragonsocial.net/wp-content/uploads/2019/06/1-1-300x172.jpg 300w, https://www.dragonsocial.net/wp-content/uploads/2019/06/1-1-768x441.jpg 768w, https://www.dragonsocial.net/wp-content/uploads/2019/06/1-1-1024x589.jpg 1024w" data-lazy-sizes="(max-width: 2284px) 100vw, 2284px" data-lazy-src="https://www.dragonsocial.net/wp-content/uploads/2019/06/1-1.jpg" sizes="(max-width: 2284px) 100vw, 2284px" srcset="https://www.dragonsocial.net/wp-content/uploads/2019/06/1-1.jpg 2284w, https://www.dragonsocial.net/wp-content/uploads/2019/06/1-1-300x172.jpg 300w, https://www.dragonsocial.net/wp-content/uploads/2019/06/1-1-768x441.jpg 768w, https://www.dragonsocial.net/wp-content/uploads/2019/06/1-1-1024x589.jpg 1024w" data-was-processed="true" style="max-width: 100%; height: auto; margin: 0px;" />

Weibo Window is an example of ecommerce and social media combined. Users can view product recommendations, make their purchase, and show it off all on one platform!

This greatly simplifies the customer’s deliberation process and helps quicken the customer journey.  Along with these social media elements users now have access to advanced payment methods like WeChat Pay and Alipay, making the entire shopping process incredibly smooth. All of this has led these apps to become increasingly more popular. Platforms like XiaoHongShu are growing rapidly, and it’s likely we’ll see it get into the ranks of the top 5 China shopping apps in the coming years.

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XiaoHongShu has skyrocketed to popularity in recent years. Particularly among young female millenials and Gen-Z

While consumers have always used social media to do their product research and look for recommendations platforms like XiaoHongShu (Little Red Book) allow users to find authentic reviews from their network and make a purchase all on one platform.

Social commerce has been found to be a major driver of impulse purchases. In a recent report from Nielsen China where they interviewed 3,531 online shoppers, they found that 54% spent more on online shopping than they anticipated and 80% stated that social recommendations drove impulse purchases. 

Wechat Stores, Weibo Window,  Pinduoduo and Xiaohongshu are all examples of this growning new trend of social ecommerce.

Omnichannel fulfillment – Seamless online-offline integration for New Retail initiatives 

At Alibaba’s 2016 Computing Conference, Jack Ma focused his speech on five areas that are being transformed by technology, which included new finance, new manufacturing, new technology and new energy with New Retail at the center.

New retail is Alibaba’s strategy to redefine commerce by enabling seamless engagement between the online and offline world. It’s not about converting online users to offline customers or vice versa, but building a retail ecosystem that blends online and offline channels in a unified way for better customer experience.

In light of the maturation of online sales, companies have started to open bricks-and-mortar stores to bring their ecommerce offline. Still, it is not simply a traditional offline store, but an experiential marketplace with more advanced services, such as in-store virtual reality experiences and product customization.

In 2018, China’s popular social Ecommerce XiaoHongShu, decided to take some of its most highly-ranked products and brands to the community by opening its first offline concept store RED Home in Shanghai. Given that the core feature of XiaoHongShu app is product reviews. Instead of having customers pulling out their phones to search for reviews online, digital screens are installed throughout the store that customers can check the details and reviews of a particular product just by bringing it to the screen. Besides, customers can test out beauty products by interacting with an augmented reality make-up tool, which greatly drives purchase intention.

XiaoHongShu's RED Home in Shanghai | Dragon Socialhttps://www.dragonsocial.net/wp-content/uploads/2019/06/0-300x195.png 300w, https://www.dragonsocial.net/wp-content/uploads/2019/06/0-768x500.png 768w, https://www.dragonsocial.net/wp-content/uploads/2019/06/0-1024x667.png 1024w" data-lazy-sizes="(max-width: 1105px) 100vw, 1105px" data-lazy-src="https://www.dragonsocial.net/wp-content/uploads/2019/06/0.png" sizes="(max-width: 1105px) 100vw, 1105px" srcset="https://www.dragonsocial.net/wp-content/uploads/2019/06/0.png 1105w, https://www.dragonsocial.net/wp-content/uploads/2019/06/0-300x195.png 300w, https://www.dragonsocial.net/wp-content/uploads/2019/06/0-768x500.png 768w, https://www.dragonsocial.net/wp-content/uploads/2019/06/0-1024x667.png 1024w" data-was-processed="true" style="max-width: 100%; height: auto; margin: 0px;" />

XiaoHongShu’s RED Home in Shanghai

To encourage customers to spend more time in the store, it features a café and ice cream shop deliberately located adjacent to the home goods department, offering customers a social space for hanging out with friends.

RED Home offers some key insights on how offline retail spaces can integrate technology in a way that complements the seemingly one-way ecommerce business, and capture the attention of young Chinese consumers. In fact, apart from XiaoHongShu, many Ecommerce giants are also tapping in the field of experiential offline stores. For example, JD.com is planning to open one million unstaffed convenience stores which allow customers to pay with facial recognition. Luxury e-commerce platform Secoo created “offline experience centres” that provide high-quality membership services to heighten consumer experience.

Another popular way of immersing online and offline experience is by combining ecommerce with offline events. During the Double 11 Shopping Festival in 2017, Tmall organized the “See Now, Buy Now” online fashion show with famous brands like M.A.C, Pandora and TAG Heuer. While watching the show, audiences could purchase outfits they saw on the catwalk in real-time, either by a link shown on left side of the screen on Taobao or Tmall, or by shaking their phones to visit the product page if they were watching it on TV. Online games were also provided that players could get product discounts for purchase during the festival.

"See Now, Buy Now" fashion show | Dragon Socialhttps://www.dragonsocial.net/wp-content/uploads/2019/06/see-now-buy-now-stage-wide-1-300x177.jpg 300w, https://www.dragonsocial.net/wp-content/uploads/2019/06/see-now-buy-now-stage-wide-1-768x452.jpg 768w" data-lazy-sizes="(max-width: 800px) 100vw, 800px" data-lazy-src="https://www.dragonsocial.net/wp-content/uploads/2019/06/see-now-buy-now-stage-wide-1.jpg" sizes="(max-width: 800px) 100vw, 800px" srcset="https://www.dragonsocial.net/wp-content/uploads/2019/06/see-now-buy-now-stage-wide-1.jpg 800w, https://www.dragonsocial.net/wp-content/uploads/2019/06/see-now-buy-now-stage-wide-1-300x177.jpg 300w, https://www.dragonsocial.net/wp-content/uploads/2019/06/see-now-buy-now-stage-wide-1-768x452.jpg 768w" data-was-processed="true" style="max-width: 100%; height: auto; margin: 0px;" />

“See Now, Buy Now” fashion show

To ensure seamless unification, one of the basic measures is to integrate brands’ offline loyalty programmes with online platforms, such as Tmall, to ensure customers would be able to claim benefits wherever they are shopping.  For example, coupons released by JD.com can be used in the brand’s online JD store, WeChat stores, as well as offline stores. Consumers’ memberships and corresponding discounts can also be converted freely online or offline. It creates a seamless purchase experience in diverse channels.

The New China Ecommerce Law of 2019: The Death of Daigous? 

China has long had a reputation for producing and selling fake, counterfeit, and “Knock-off” products. This latest law is an effort from the Chinese government to clean up the country’s reputation and hold platform operators, third-party merchants, and individual online retailers accountable.

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There have always been laws preventing the sale of illegally sourced online goods, but under previous laws, only individual sellers could be charged. With this new law in place, the Chinese government has given ecommerce platforms and shopping apps the responsibility of policing their own sites to ensure that counterfeit goods are not sold on the platform.

While the primary reason for the law is clear, including in it are provisions for other important aspects of ecommerce, like consumer protection, data management, cybersecurity, and more. This law primarily affects those engaged in cross-border e-commerce. For more details on these laws check out the blog below:

How to Sell In China: Top 3 China Cross-Border E-Commerce Platforms

One area that consumers and businesses alike may notice significant changes in is the daigou industry. What is a daigou you ask? Have you ever seen Chinese shoppers in foreign countries purchasing large amounts of luxury goods, baby products, or a local delicacy? Chances are you’ve spotted a Daigou, which roughly translates to “Buy on Behalf”.

Daigous stuffing products into suitcases is a common sight in Hong Kong, Japan, Korea, and elsewhere.https://www.dragonsocial.net/wp-content/uploads/2019/06/1000x-1-300x200.jpg 300w, https://www.dragonsocial.net/wp-content/uploads/2019/06/1000x-1-768x511.jpg 768w" data-lazy-sizes="(max-width: 1000px) 100vw, 1000px" data-lazy-src="https://www.dragonsocial.net/wp-content/uploads/2019/06/1000x-1.jpg" sizes="(max-width: 1000px) 100vw, 1000px" srcset="https://www.dragonsocial.net/wp-content/uploads/2019/06/1000x-1.jpg 1000w, https://www.dragonsocial.net/wp-content/uploads/2019/06/1000x-1-300x200.jpg 300w, https://www.dragonsocial.net/wp-content/uploads/2019/06/1000x-1-768x511.jpg 768w" data-was-processed="true" style="max-width: 100%; height: auto; margin: 0px;" />

Daigous stuffing products into suitcases is a common sight in Hong Kong, Japan, Korea, and elsewhere.

Daigous are individuals who operate in a sort of “grey market,” purchasing goods overseas and selling them to domestic Chinese buyers in exchange for a fee.  Due to high Chinese taxes, this process is often cheaper than buying something domestically. Many businesses and research institutes estimate that the daigou industry is worth tens of billions of dollars each year, and since goods brought back are designated as “personal items” the government misses out on some large potential tax revenues.

However, this new law aims to change that, by forcing daigou merchants to register and pay taxes on goods that they bring back to China or face massive fines. This has the potential to hurt China’s ecommerce growth and businesses that rely on daigous in the short-term.


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