Current situation
Driven by China’s enormous number of internet users (500 million in 2011), the e-commerce market in China has developed rapidly and is expected to be the largest globally within the next three years. At the end of 2011, the total transaction value of e-commerce reached 7 trillion RMB, a yoy growth of 40%. This figure is projected to rise to 18 trillion in 2015. Benefiting from the boom of e-commerce market, online shopping in China has become increasingly popular, with total transaction value exceeding 800 billion RMB at the end of 2011. Although China has 210 million internet shoppers, the total online shopping only accounts for 4% of total retail consumption in China, meaning that there is still significant growth potential.
How to profit as a Chinese e-retailer
The online shopping market’s growth has meant large profits for China’s e-retailers – actually, most of them are not profitable. On one hand, in order to obtain customers, they need to compete on price, and on the other they have high costs from operational costs such as IT infrastructure, logistics and inventory management. It seems that the only beneficiaries are the nearly 200 million online shoppers in China – they enjoy lower prices, better service and a wider range of products.
During the e-Tail conference, many specialists from large e-retailers shared their insights into this issue and discussed potential solutions. The advice from several was that in order to acquire a competitive edge and earn profits in future, China’s e-retailers should first focus on their core business – selling their products online. Outsourcing those non-core parts such as IT, logistics and after-sales service is a good way to save cost. Also, they should a specific focus area and become an expert in the area, rather than provide a comprehensive range of products. Finally, through providing personalized services and a better shopping experience, e-retailers can differentiate themselves with other competitors.
Future trends
There is no denying that China’s e-commerce, especially online shopping, will continue to grow in the future. We expect that more and more business innovations will emerge, such as O2O (online to offline services which enable customers to shop offline and then pay online or vice versa), mobile online shopping and LBS (location-based services). In addition, as more e-commerce companies realize the great opportunities from cross-border online shopping, there are more opportunities for global payment solution providers and logistic companies. Moreover, deep data analysis is essential for an e-commerce company to provide more personalized services and enhance the user-experience; therefore, BI (business intelligence) vendors will benefit these demands.