With a huge population, robust economy and growing culture of consumerism, it’s no wonder that ecommerce is booming in China. The nascent ecommerce market in that country stands at $376 billion, exceeding the US market’s $322 billion – and it’s growing at twice the pace of the US market.
While both countries are enjoying robust ecommerce markets, there are few similarities between the two markets – both in culture and in user behavior. It’s these differences that are driving growth in China, and they merit a closer look.
Marketplace versus 'main street' shopping experience
American shoppers have effectively taken “Main Street” online in their digital shopping. Users may go to one site to look at shoes, then compare prices at another before ultimately buying on a third site. While shoppers in the US enjoy this experience of shopping niche vendors, they also enjoy bargain-hunting with giants like Amazon and eBay. It’s similar to the way they shop offline – from boutique to big box store.
The Chinese shopper, in contrast, prefers to do all their shopping in a single marketplace. Alibaba and AliExpress, for example, offer millions of products across all categories – and from millions of sellers. While this is not so different from Amazon’s Marketplace, it’s much bigger and much more transparent. Shoppers can contact and leave messages for suppliers, have items personalized and even create custom items. They get far more information about each item they’re considering for purchase, and ultimately, they pay far less.
This difference also highlights a key distinction between the behaviors of eastern and western shoppers: the American consumer shops for reasonable bargains from stores and brands they know and trust. They’re confident the quality will be as expected. If something is wrong with an order, they know they can contact customer service for an exchange or refund.
At the same time, through Alibaba's marketplace, a shopper in China can build a relationship with the vendor, ask questions, request alterations or personalization and pay very little for the item. Where the American purchases key items carefully, the Chinese shopper purchases more items for less.
Convenience – the key to the growing China market
The level of convenience offered to Chinese shoppers goes beyond the marketplace experience – as if the ability to buy almost anything from a single website wasn’t convenient enough! The payment solutions from players like Alibaba (Alipay) and WeChat (WeChat Pay) make it simple for customers to login and buy goods without ever having to open their wallets. The mobile payment systems are accepted both within the platforms and at brick-and-mortar establishments. Nearly half a million businesses within China use Alipay and more than 300 merchants outside the country use it to transact business with Chinese consumers. Of course, having a payment system embedded within the country’s largest ecommerce site makes it even easier to shop for anything at any time, whether a credit card is handy or not.
While cashless and primarily mobile payment systems might seem like magnets for fraud, the benefits largely outweigh the risks. Shoppers embrace the convenience of these two leading platforms – which offer far more than simple payments – as much as their transparency.
Global expansion appears easier from East to West.
Amazon, eBay and other larger ecommerce players have had great success in North America, but have struggled to expand beyond that. A full 70% of Amazon’s business came from the US in 2015, and the US accounted for more than 90% in 2016. Japan, the only Asian country in which it saw significant revenue, accounted for approximately 10% of profits last year.
Alibaba, on the other hand, has seen significant global expansion. While the majority of its growth outside of China has been largely in APAC countries like Singapore and it’s only just set its sights on India, the company is making progress in its westward expansion. AliExpress, Alibaba’s B2C marketplace, is the leading ecommerce site in Russia, and is growing in popularity throughout Eastern Europe. The main reason for the site’s popularity is that it serves underserved populations. People in rural areas and villages in Russia have access to 100 million products in 30 categories – many of which cannot be purchased locally. Purchases can be delivered relatively quickly and in areas most western e-retailers don’t serve. Furthermore, Alibaba is also recruiting Russian retailers to offer their goods on AliExpress, both to the Russian market and the Chinese.
What can we learn?
While there are many reasons eCommerce in the east may be growing faster, the reasons extend beyond China’s massive population. Certainly, it helps that the Chinese are quick to adopt and embrace new technologies, like the payment systems offered by WeChat and Alibaba.
The real growth drivers focus more on innovation and willingness to adapt and change, and a global growth strategy that appears carefully considered. From a company that works closely with some of these large ecommerce players abroad, we can feel the market growing. We see the effort these companies are putting into the promotions and events like Singles Day, and people react accordingly.
Western eCommerce has been established for years and there’s little appetite for change. Perhaps it’s time for Amazon, eBay and their ilk to experiment with some new approaches or initiatives. It’s something China does very well – and it’s paying off.
Alice Melnik is COO of GDM Group.