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Country Spotlight: Understanding Consumers and Cross-Border E-Commerce in China

One day in China’s e-commerce market is bigger than a year in Brazil’s. That’s as of November 11th, also known as Singles’ Day, which this year was the most successful 24-hour online shopping sale of all time, racking up $17.8 billion in total sales.

The world’s most populous country and, along with the U.S., one of the world’s two largest economies, China is in a league of its own when it comes to e-commerce. Already the largest e-commerce market in the world, Forrester predicts China will be the first country to break the 1 trillion USD threshold in e-commerce sales as early as 2019. And by 2020, at least a quarter of the population will be shopping directly on foreign-based e-commerce sites or through third-party cross-border retailers.

It’s clear that international e-tailers need to develop a China strategy to tap into the world’s biggest audience, and we’re here to help you get started.

Unless otherwise noted, figures in this article are sourced from:

Chinese Consumers

Already the largest e-commerce market in the world, the market potential in China is astounding. Though Tier-3 and Tier-4 cities have a lower e-commerce penetration rate than the largest cities (62% vs. 89%, respectively), the consumer base in the lower tiers still amounts to 257 million online shoppers, a larger number than every other country in the world besides India and the U.S. As usual, the most urbanized parts of the country are leading the adoption of e-commerce, but particularly in the last couple of years even rural villages in China are happily going online.

Considered all together, Chinese consumers account for nearly half of global online retail sales, a total value of $581.61 billion in 2015, 33.3% higher than the previous year, and expected to grow 20% YoY through 2020. The biggest spenders are young, urban, and highly educated and are for the most part viewing e-commerce as not merely a convenient alternative to brick-and-mortar retailers, but as a replacement for shopping in physical stores.

The online payment market in China is highly concentrated. Credit/debit cards are the most popular payment method, with domestic card provider, UnionPay, used by 54% of cardholders. The leading e-wallet provider, Alipay, owned by e-tailing giant Alibaba is a close second, processing one out of every four online transactions in China. Chinese shoppers are accustomed to having a variety of payment options available to them, including cheque or cash-on-delivery (which together account for 10% of the market), payment cards, bank transfers and e-wallets.

The most popular online product categories are consumer electronics, apparel, and sporting goods, and Chinese consumers mostly make cross-border purchases from merchants in the U.S., Hong Kong, Japan, the UK and Australia.

Drivers and Barriers

Driver: Mobile

On Singles’ Day, 82% of sales were done via mobile devices. China’s top e-commerce players are investing in and developing their mobile sales at a rate that surpasses their U.S. counterparts, with 67% of businesses having already developed m-payment strategies. M-commerce is growing at a rate of 168.6% YoY and has surpassed computers as the most popular way to connect and to shop online. Offering a mobile-ready web store and accepting m-payments is key to tapping into the bulk of the Chinese e-commerce market.

Barrier: Fraud

According to Strategic IP Information, up to 10% of all products sold online in China are suspect. The Chinese e-commerce market is not heavily regulated and it’s not uncommon for products purchased online to be fakes. For this reason, Chinese consumers are highly influenced by the comments of past customers and nearly 80% of shoppers leave a review after making a purchase online. The more online reviews for your products, you more you can leverage them to build consumer trust in your brand.

Driver: Rural Adoption

Since 2013, rural e-commerce adoption in China has been skyrocketing. This has been facilitated by the Chinese government’s large investment in expanding internet penetration to all parts of the country with the goal of raising the standard of living and creating jobs. Following the government’s lead, the two largest e-commerce retailers in the country, Alibaba and, have created programs to promote and support local retailers in villages across the country, with the latter even launching a new drone delivery service to coincide with last week’s Singles’ Day.

Barrier: Large Domestic Providers

The main challenge when it comes to expanding your e-commerce business into the Chinese market is the sheer size dominance of domestic retailers, Alibaba and in particular. However, the growth of e-commerce in a wider geographic area has driven development in China’s logistics sector and brought more consumers online, leaving plenty of room for alternatives and niche retailers to gain a foothold in the world’s largest e-commerce market.

Chinese E-Commerce Facts

  • The world’s largest e-commerce market.
  • The highest m-commerce penetration in the world.
  • 24% of Chinese shoppers make mobile purchases every day
  • Singles’ Day, November 11th, is the biggest online shopping day of the year.
  • 79 of the top 500 retailers in China are from outside of the country.
  • By 2020, a quarter of the population will be purchasing products from international retailers.

The Chinese e-commerce market is already the largest in the world and expected to triple in size within the next five years. Much of the growth is driven by m-commerce and the increase in e-commerce penetration in rural areas. These are highly tech-savvy consumers who respond to being given a lot of choice and a niche appeal, but whose trust needs to be earned.

China is key to driving much of the growth in cross-border e-commerce, expected to grow by 27.4% over the next five years, double the rate of worldwide B2C shopping as a whole according to AliResearch, Alibaba’s research arm. The country’s large and growing middle class, equal in size to the entire U.S. population and expected to reach 630 million by 2022, is hungry for authentic, high-quality foreign products. The time is now to develop your business strategy for China.

Expanding into a new international market is a risky venture but a very rewarding one if done right. For the latest information about how you can build and maintain a strong e-commerce enterprise and keep it compatible with legislation and buying habits at home and abroad, subscribe to the Payza Blog and follow us on Facebook and Twitter for the latest industry news.