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China: the rise of the next e-commerce power

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By: NMK Created on: June 3rd, 2012
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China is on its way to becoming the world’s next e-commerce power, overtaking the US by 2015. China’s emerging middle class, increased access to the Internet and desire for brand-name goods are giving the e-commerce market a boost. This offers a great opportunity for Western brands to enter the Chinese market via the online channel. By Marie Mure-Ravaud.

 

By Marie Mure-Ravaud

China has 485 million Internet users – more than the USA and Japan combined. Yet China’s Internet penetration remains low at just 37%. With a population of 1.3 billion inhabitants, improvements in high-speed Internet access and the new craze for smartphones and mobile internet, China is expected to have more than 700 million Internet users by 2020. As Internet usage increases, so too will e-commerce.

According to iResearch, 147 million Chinese shopped online in 2011, spending RMB 7 trillion (840 billion euros), representing year-on-year growth of 46.4%. iResearch analysts expect the number of online shoppers to more then double by 2015 to 329 million with spending almost quadrupling to 26.5 trillion Yuan (3.1 trillion euros) - over-taking the USA as the world’s largest e-consumers.

It’s easy to understand why this is happening – with salaries going up 12% per year in China, and an increased appetite for the-good-life, the Chinese are becoming the world’s most prolific shoppers. Online shopping is one of the best ways for Chinese consumers to learn about new brands and new trends. E-shoppers spent on average 3,100 Yuan a year in 2011 (367€). Analysts expect this figure to double in 5 years, reaching 6,220 Yuan (737€) - the same amount spent by American e-shoppers today.

The luxury-goods sector is seeing the same explosive online growth. According to EnfoDesk, online transactions for luxury goods in China reached 16 billion Yuan (1.9 billion €) in 2011. China’s 2010-2011 Global E-commerce Report predicts that luxury e-commerce sales will exceed 20 billion Yuan (2.3 billion €) by 2013. “The Internet represents a huge opportunity for luxury brands in China. We expect online luxury sales to literally explode by 2015 while it is still today in its infancy” says Allen Yang, CEO of VIPStore..

Yet only a few luxury brands have launched their own mono-brand sites. This is due to the complex nature of e-commerce in China. Chinese online customers behave differently from the West – sites need to offer cash-payment services because credit-cards are still a relatively new phenomenon; sites also need large customer-service departments since many luxury-consumers contact sites before making purchases – inquiring about product details, payment options and style advise. Finally, the delivery system can be daunting in a country as vast as China.

As a result, increasing number of European brands are working with Chinese online retail platforms – trying to benefit from their expertise of the Chinese ecommerce market, without taking risks. For many companies, it is safer to work with Chinese partners who understand the market, the trends, the competition, and the whole business game in China.

About the author

Marie Mure-Ravaud works as the Responsible for Public Relations in Europe for a Chinese private sales platform called VIPStore. She obtained a Master degree in Marketing from a renowned business school in France and worked notably in the communication department of the internationally-known jeweler, Cartier.

About the company

VIPStore.com was launched in 2009 and has quickly become the leading online retailer of global Luxury brands in China. VIPStore was co-founded by three of China’s top e-businessmen and is supported by top international investment companies. The company is located in its Beijing headquarters and has branch offices in Los Angeles and Paris. The objective of VIPStore is to provide superior products and a preferential shopping experience to China's consumers.

VIPStore

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