Online Retailing in China 2011: A Market Analysis

Countries covered: China This report covers the existence and development of private label (otherwise known as own brand and store brand) goods within the retailing industry in the People’s Republic of China, and includes coverage of both food and non-food products offered as private label by leading retail chains in China. KEY REPORT FEATURES This new report includes: An historical analysis of the development of online retailing in China to date by sector up to 2010; Case studies and examples of key online retailing developments and retailers within the key retail sectors; An historical timeline of key recent developments in the online retailing market over the past two and a half years. Analysis of the developments in logistics and payment methods helping the online retail market to grow and spread; Data on the growth of the online advertising industry up to 2010; Consideration of key trends among online consumers, including demographics, socio-economic status, as well as shopping habits and spending patterns; Analysis of market shares in the C2C and B2C segments, and comparative performance among the leading online retailers; Forecast analysis of the total online retail market up 2015; Profiles of the leading B2C online retailers in China; Overview of China’s demographics and macroeconomics

Additional Information

Executive Summary

Having failed to really take off during the early part of the century, China’s online retailing market value has been roughly doubling in value each year for several recent years, and continues to show a rapid pace of growth. Meanwhile, every six months the population of China’s cyberspace increases by about a third. China’s Internet has suddenly become a viable means of selling things, but its current rapid growth potential is impaired by a stifling lack of necessary logistics infrastructure in the background.

In 2007, China’s online retail market reached a milestone in its B2C (business-to-consumer) retail sector outgrew its C2C (consumer-to-consumer) sector for the first time, and began to take away overall market share from the C2C market, and this trend is continuing. The online retail market in China is therefore starting to be organised under structured businesses, both virtual and bricks-and-mortar retailers.

Compound annual growth rate for the 2004 to 2010 period were 95.9% for the total online sales market, including C2C, compared to 87.4% for B2C over the same period, but B2C has now accelerated to become the fastest growing segment of total internet transactions volume. Increasingly the issue of trust in suppliers and payment methods, as well as privacy of information are driving more consumers to buy from online retailers, especially those identifiable as bone fide companies.

For existing bricks-and-mortar retail companies, online sales are creating new avenues to new consumers in regions of China they have not yet managed to cover without the need to invest in the building physical store chains or management of franchisees. What does lag, and stalls the more rapid growth of retailer penetration across more of the country via the Internet, is the lack of product delivery infrastructure and on-going weaknesses in the transaction clearing infrastructure.

For emerging online-only retailers, there is the prospect of creating the kind of strong competition with the traditional retailers that can act as a strong lever for increasing capital investment, or negotiating into partnerships with the traditional retailers, where established online retail expertise and technologies are hugely valuable.

The now very rapid pace of online B2C sales means that there has been a sudden focus by many participants in the retail market in China, and the Chinese Internet, on quickly establishing some kind of active Internet retail platform and online market share. The current rush to market will most benefit the technology developers and infrastructure providers to begin with. Drawbacks will be a failure of regulation to keep a lid on widespread bad practices.

Based on even a strong slowdown in annual growth rates, compared to the past few years, the B2C online retail market will continue to grow faster than the C2C sector, and have an expected compound annual forecast growth rate for 2011 to 2015 at about 73% per annum, compared to about 40% per annum for total Internet transaction volume over the same period. By 2015, total Internet transactions are forecast to reach over RMB2.5trn (or about 20% of total national retail sales in China), while B2C online retail sales are likely to reach RMB950bn, or about 9%+ of total retail sales.

It is therefore little surprise that the retail industry is currently very rapidly investing large sums of money in the Internet technology, delivery infrastructure and transaction systems that will allow them to secure a significant slice of this market into the future.