With E-commerce sales reaching nearly US$300 billion in 2013, China became the world’s largest online retail consumer in the world, surpassing the United States market. Estimates show that Chinese online retail sales could account for more than 20 percent of the nation’s annual economic growth within 10 years. A 123-page report from McKinsey & Company’s Global Institute, a business and economics research center, found Chinese online sales last year bested that of the U.S. by US$25 billion. Authored by six economic researchers, the report analyzed Chinese consumption patterns in more than 250 cities that were home to more than 70 percent of national online sales.
“China’s remarkable economic rise has coincided with the Internet revolution,” researchers said. “The convergence of these two powerful forces is transforming the retail landscape and unleashing a surge of innovation and entrepreneurship. In a nation where many other sectors are rapidly expanding, e-tailing stands out for its astonishing growth.”
According to researchers, some Chinese retail industries now sell to consumers almost exclusively online. Around 90 percent of Chinese electronic retailing take place online in mega-platform online storefronts similar to eBay and Amazon Marketplace. Mega-sites like Taobao, Tmall, and PaiPai lead the way and they are owned by even larger e-commerce groups. Giant online retail portals Alibaba, which owns Taobao and other online marketplaces, and 360buy.com, the giant electronics e-tailer, are listed among China’s top 10 retail companies.
One takeaway from the report was the shift of Chinese economic emphasis from investment-oriented economic development to a more consumer-centric model. Researchers estimated that e-commerce in China would grow 15 to 20 percent annually reaching between US$420 billion to US$650 billion by 2020. That figure would equal all e-commerce sales in the U.S., Great Britain, France, Germany, and Japan — combined. More than 600 million Chinese, nearly half of the nation’s population, had Internet access last year compared to 277 million Americans where Internet access is exercised by almost 90 percent of the population.
Researchers said Chinese online retail sales were marked by an average of 10 percent earnings above expenses. The researchers also found that online retailing has grown more sophisticated and efficient. Companies have created elaborate logistic, supply, marketing, and IT service systems that are better when dealing with supply and demand within China, an area where the economy has been weak in past years. However researchers cautioned that the rapid growth also meant a shortage of skilled talent, a condition that would result in higher labor costs.