Five trends driving China's e-commerce surge
China is growing from follower to leader in the world of e-commerce, with its consumers showing extraordinary flexibility and willingness to embrace innovation, said McKinsey & Company, a consultancy firm, in a report.
There is robust growth in the country's social commerce and online-to-offline services, a trend toward transforming physical retailers into mere "showrooms", and a dramatic increase in online food purchases and e-commerce users among rural regions, it said.
"Given the rapid rate of experimentation among China's businesses, and the rapid acceptance of new business models by its people, we believe China will lead the way in defining the next generation of social and mobile commerce experiences," said McKinsey.
Let's take a look at the five trends shaping the biggest e-commerce market in the world in 2015.
1. Getting social, going shopping
Social platforms like QQ and WeChat are not only helping 500 million users in China to communicate and access entertainment, they are also shaping behaviors in significant ways, according to the McKinsey iConsumer report.
The survey shows social engagement and purchasing behavior are so intertwined that Chinese interviewees rank their friends' recommendations, both online and offline, as the most important factor in their online shopping decision.
The consultancy expects to see more companies directly selling recommendation-driven products such as cosmetics, healthcare and insurance through social network platforms.
"We believe that mastering social marketing and becoming the first pilot advertisers on platforms like WeChat will separate the winning retailers from the rest," said the report.
2. Showrooms: Good for window shopping only?
The survey shows that a showrooming effect, where shoppers browse in stores but buy elsewhere, has become particularly intense. Only 16 percent customers, among those who have Internet access, bought electronic goods at physical stores.
To retain sales, more brands are choosing to collaborate with online shopping platforms and place QR codes next to their products and sending customers digital coupons and daily tweets.
"Given the increasingly drastic effects of showrooming, we expect some retailers to go so far as to reduce the number of physical stores in 2015, focusing instead on differentiation through quality offline services and offline-to-online conversions," said McKinsey.
Digital engagement can also help retailers get to know their prospective buyers, according to the report.
3. O2O: Even bigger than you think
The survey shows that Chinese consumers are embracing O2O at an even faster rate than previously expected, as 71 percent of consumers are already using O2O services, and one third of those who haven’t used claim they would like to try in the coming six months.
Heralded as a game-changing trend in Chinese e-commerce, O2O are expected to draw the most market demands in entertainment, healthcare, and housing and motorservices.
"To capture the ever-experimental and fast-learning Chinese consumers, companies will need to expand their O2O offerings and find innovative ways to engage and serve their customers in a multichannel fashion," said the report.
4. Rural gurus
The report shows that despite lower Internet penetration, over 60 percent of rural digital consumers shop online, making them just as active as their urban counterparts.
"Some of China's leading retailers are moving fast to exploit this trend, creating county-level operations not just to facilitate the transport of goods to rural areas, but also to speed the journey of farm produce to the cities," said the report.
The survey shows 25 percent more rural shoppers, compared with dwellers in the first- and second-tier cities, feel more "empowered" and see themselves as "online gurus" who are eager to be the first to try out new products.
5. A "hungry" digital nation
Packaged and fresh food tops the carts among online shoppers, with average 34 times a year, compared with 22 times a year for apparels, according to the survey by McKinsey.
About 40 percent consumers buy food online, in contrast to just 10 percent of their US counterparts, said the report, thanks to improved delivery service. Forty percent retailers offer same day or next day delivery, up from 29 percent in 2011.
"The way to the Chinese digital consumer's heart appears to be through their stomach, and addressing this important basic-need category will be critical to drive stickiness and frequency to e-commerce sites," said the report.
"Given the rapid rate of experimentation among China's businesses, and the rapid acceptance of new business models by its people, we believe China will lead the way in defining the next generation of social and mobile commerce experiences," said McKinsey.
Let's take a look at the five trends shaping the biggest e-commerce market in the world in 2015.
1. Getting social, going shopping
Social platforms like QQ and WeChat are not only helping 500 million users in China to communicate and access entertainment, they are also shaping behaviors in significant ways, according to the McKinsey iConsumer report.
The survey shows social engagement and purchasing behavior are so intertwined that Chinese interviewees rank their friends' recommendations, both online and offline, as the most important factor in their online shopping decision.
The consultancy expects to see more companies directly selling recommendation-driven products such as cosmetics, healthcare and insurance through social network platforms.
"We believe that mastering social marketing and becoming the first pilot advertisers on platforms like WeChat will separate the winning retailers from the rest," said the report.
2. Showrooms: Good for window shopping only?
The survey shows that a showrooming effect, where shoppers browse in stores but buy elsewhere, has become particularly intense. Only 16 percent customers, among those who have Internet access, bought electronic goods at physical stores.
To retain sales, more brands are choosing to collaborate with online shopping platforms and place QR codes next to their products and sending customers digital coupons and daily tweets.
"Given the increasingly drastic effects of showrooming, we expect some retailers to go so far as to reduce the number of physical stores in 2015, focusing instead on differentiation through quality offline services and offline-to-online conversions," said McKinsey.
Digital engagement can also help retailers get to know their prospective buyers, according to the report.
3. O2O: Even bigger than you think
The survey shows that Chinese consumers are embracing O2O at an even faster rate than previously expected, as 71 percent of consumers are already using O2O services, and one third of those who haven’t used claim they would like to try in the coming six months.
Heralded as a game-changing trend in Chinese e-commerce, O2O are expected to draw the most market demands in entertainment, healthcare, and housing and motorservices.
"To capture the ever-experimental and fast-learning Chinese consumers, companies will need to expand their O2O offerings and find innovative ways to engage and serve their customers in a multichannel fashion," said the report.
4. Rural gurus
The report shows that despite lower Internet penetration, over 60 percent of rural digital consumers shop online, making them just as active as their urban counterparts.
"Some of China's leading retailers are moving fast to exploit this trend, creating county-level operations not just to facilitate the transport of goods to rural areas, but also to speed the journey of farm produce to the cities," said the report.
The survey shows 25 percent more rural shoppers, compared with dwellers in the first- and second-tier cities, feel more "empowered" and see themselves as "online gurus" who are eager to be the first to try out new products.
5. A "hungry" digital nation
Packaged and fresh food tops the carts among online shoppers, with average 34 times a year, compared with 22 times a year for apparels, according to the survey by McKinsey.
About 40 percent consumers buy food online, in contrast to just 10 percent of their US counterparts, said the report, thanks to improved delivery service. Forty percent retailers offer same day or next day delivery, up from 29 percent in 2011.
"The way to the Chinese digital consumer's heart appears to be through their stomach, and addressing this important basic-need category will be critical to drive stickiness and frequency to e-commerce sites," said the report.
