China’s e-commerce industry is growing at an extremely rapid pace; it is expected to become the world’s largest e-commerce market by 2015. With a population of 1.3 billion, there is a vast untapped market for online sales in China. However, growing competition has lowered the margins and fuelled price wars in the region. What does the future of e-commerce look like for the growing nation?
The fast paced online Chinese market is not yet fully mature, and many experts believe that it is currently entering a period of high-speed growth. In 2009, China’s e-commerce market totaled over $38 billion, with 105% year over year growth. Much of this growth is due to an increase in consumer to consumer sales. This increases the number of formal companies selling products online, leading to an increase in China’s business to consumer online market.
There are an estimated 25,000 online stores in China currently, with nearly 173 million Chinese shopping online, generating sales in excess of $188 billion a year. A major inflow of capital into the sector and relatively low barriers of entry have caused a multitude of e-commerce companies to begin operations in China. The Chinese government has also been very supportive of e-commerce, due to its economic benefits and job creation. However, the increase in online retailing does have its downsides.
With so many online stores in the nation, competition is heating up. The e-commerce market in China is now set for a period of intense competition and shake-out because of the massive increase in online sellers. The upswing in competition can adversely affect many businesses, driving margins down and making it very difficult to make money. Heavy logistic spending, steep discount promotions, and massive advertising costs are what it takes to be a major e-commerce player in this type of market.
The future of e-commerce in China looks very bright, but only time will tell and it will be very interesting to see where the nation’s online retailing industry is in the near future. To learn more about doing business in China, visit our country insights section here!