China the growing E-Commerce engine

China the growing E-Commerce engine

In 2016, China will surpass the US to become the world’s largest retail e-commerce market, with sales expected to top $899.09 billion this year, representing almost half (47.0%) of digital retail sales worldwide.

China’s population is more than 1.3 billion, with a middle class of 200 million strong and growing. There are 688 million internet users and 413 million online shoppers. China’s e-retail market is estimated to grow to $1.5 trillion by 2020 and the share of online sales is set to increase to over 15% by 2017. As China’s growth continues, the conditions for the e-commerce are only improving.

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How to categorize the population in the different areas in China, influencing the e-commerce market;

Movers – China’s wealthiest citizens already make up a large part of global demand for high-end luxury goods
Population: 1.4 million
Annual income per capita: US$500,000
Urban Middle class – This is China’s blue collar urban middle class. Nearly half of them are on public payroll, so policies to income will have a strong impact here
Population: 146 million
Annual income per capita: US$11,733
Urban Mass – Migrant workers who have moved to cities to find better-paying jobs is expected to see the biggest rise in income
Population: 236 million
Annual income per capita: US$5,858
Rural workers – Half of China’s workers still live in rural areas. With lower incomes spending is concentrated on essential such as food and housing
Population: 387 million
Annual income per capita: US$2,000

Becoming the largest e-commerce market it also means rural times on China’s parcel market. Online purchases account for 70% of the 30 billion parcels delivered in 2016, China’s State Post Bureau says.

Internet Retailer reports the following; Booming e-commerce keeps Chinese delivery services hopping 

China’s State Post Bureau, which oversees delivery services, reported last week that online orders will account for 21 billion of the 30 billion packages that Chinese shipping carriers will deliver in 2016. The agency reported that there were more than 20 billion parcels delivered in 2015, but didn’t say how many of those were related to e-commerce.

As Chinese online retail giants like Alibaba Group Holding Ltd. and JD.com Inc. become bigger international players, they also are helping drive more shipments beyond China. The bureau reported that international parcels shipped from China grew 47.1% in the first three quarters of 2016 over the same period a year earlier, though it did not provide a figure for the volume of shipments.JD.com is No. 1 in the Internet Retailer 2016 China 500, and Alibaba operates Taobao and Tmall, the dominant web marketplaces in China, but it is not ranked in the China 500 because it is not the merchant of record.

Improved delivery to rural areas is bringing e-commerce to the countryside. The State Post Bureau reported that Chinese farmers sold more than 100 billion yuan ($14 billion) worth of products online in the first 10 months in 2016. More than 80% of Chinese villages now have at least one facility where consumers and farmers can drop off shipments or pick up online orders.

China’s National Bureau of Statistics separately has reported that Chinese consumers purchased 3.47 trillion RMB ($500 billion) of goods online in the first nine months of 2016, up 26.1% from a year earlier. China’s online retail sales grew by a third in 2015 to $589 billion, putting China well ahead of the United States as the world’s leading country for online shopping.

That demand has led to a massive buildup of delivery infrastructure throughout China.  Logistics companies now operate 183,000 shipping facilities throughout the country, including small offices that handle inbound and outbound shipments. In addition, shipping services plan to build another 200 large distribution centers around the country in coming years, the State Post Bureau reported.

Shipping companies are also testing new business practices such as sharing warehouses and employing individuals to make deliveries.

There are joint-distribution tests underway in more than 20 cities, including Qingdao and Zhengzhou. In those tests, several carrier companies built shipping facilities jointly in residential areas in large Chinese cities and work together to deliver parcels, aiming to speed shipping times and reduce costs. Rather than three carrier companies employing their own teams to service a given neighborhood, this model allows them to employ a single group of employees to handle deliveries to the area.

The bureau also says new technologies, including automated sorting systems and industrial robots, have been widely deployed by China’s carrier companies in 2016.

For more information about the Chinese market, please click here for the Internet Retailer 2016 China 500.

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