It’s well known that China is the largest e-commerce market in the world, but you might not realize the huge untapped opportunity it represents for foreign manufacturers and retailers. Online sales currently contribute just 11% of total retail sales in China (U.S. at 8%), but it’s growing at a rate of 53% year-over-year.
The sheer size of the opportunity is mind-boggling: There are 380 million online shoppers today in China, and it’s predicted that over 50% of China’s consumption will be conducted online within 10 years. In addition, an increase in mid- to high-income online shoppers has driven an overseas online purchasing craze in China. A recent Nielsen survey found 38% of shoppers in Tier 1 cities and 27% in Tier 2 currently make cross border purchases online.
Savvy manufacturers and retailers outside of China are now using e-commerce as a platform to enter market and find new growth opportunities. Product categories such personal care, diapers, infant formula, grocery food, nutritional supplements and household items are all growing at high double digits and represent a sizeable opportunity for foreign and domestic manufacturers alike.
With retailers of all sizes and nationalities looking to tap into this large and eager consumer base, understanding what’s driving these shoppers is essential for success. To better understand this important consumer market, Nielsen has partnered with Alibaba’s Taobao, TMall and other key online mass and niche retailers such as baby specialty stores, health and beauty stores to create the Nielsen’s China e-Commerce Sales Audit, covering 90% of actual online sales of over 30 product categories which we can then project to 100%.
So, what are these consumers looking for? While China’s shoppers have been quick to join the e-commerce trend thanks to frequent promotions and low prices, they’re no longer just looking for the lowest price. China’s online shoppers are growing more mature or “rational,” and rational shoppers make up almost 40% of urban online shoppers. These more mature consumers see the e-tail space as a place to find quality with the reasonable prices and better shopping experience they want. China’s online shoppers spend 176% more per purchase when buying from overseas than domestically. And 11% make purchases over ¥5,000 ($782) and a quarter spend between ¥1,000-3,000 ($156-$469) per international purchase.
In urban areas, mobile has helped fuel e-commerce growth. In 2015, 71% of urban online shopper used mobile phones to shop online, up from 51% in 2014. With more options for consumers thanks to new technology, both browsing and purchasing with e-tailers are on the rise. And shoppers all over China are joining this trend. In fact, among rural netizens, online shopping penetration grew 41% from 2013 to 2014 (more than growth in cities, which was 16%). Social media has also contributed to e-commerce growth in China. In 2015, 26% of respondents to our global survey on new products cite social media postings as a top source of new product awareness, up 11% from 15% in 2012. As a result, social media can be an efficient way for manufacturers and retailers to reach shoppers.
China isn’t just the largest market for e-commerce. It’s also one of the most evolved. To win in today’s e-commerce universe, e-tailers and brands need to fully understand the shopping and consumption needs of the Chinese consumer to engage with them effectively. For more information on the Chinese economy, watch Louise Keely, senior vice president, Nielsen, and president, The Demand Institute, on “Bloomberg <GO>.” Contact us for more information about Nielsen’s China e-Commerce Sales Audit.