Ecommerce sales set to boom in China

20 July 2012

BEIJING: Ecommerce sales are set to enjoy a fivefold increase in China by 2016, boosted by rising internet penetration and digital engagement among consumers, according to predictions from McKinsey.

The consultancy reported that online retail revenues in the country will reach RMB2.2tr in 2016, measured against RMB400bn in 2010 and RMB16bn in 2005.

One driver of this trend will be the growing number of people making purchases, expanding from 190m today to 351m as the forecast period ends, when web penetration should near 80% in major cities.

The experience offered by the internet is also due to make an impact. "Once Chinese consumers try online shopping, they tend to like it and become repeat customers," the company argued.

In evidence of this, almost 85% of the existing base of buyers regarded this activity as "good or better" than the offline alternative. Further, only 6.2% complete their first transaction and opt to abandon this channel.

Uptake varies by category, with the net delivering 13% of total consumer electronics sales in 2010, or RMB137bn. By 2016, it will supply RMB576bn, or 34% of sector revenues.

Some 7% of returns in the apparel segment were drawn from this medium two years ago, an amount due to hit 20% in four years' time, equivalent to a lift from RMB107bn to RMB634bn.

Elsewhere, 8% of sales for the home improvement market came from digital in 2010, yielding RMB88bn. By 2016, an estimated 19% of industry revenues, worth RMB548bn, should come from the same route.

However, just 1% of retail grocery sales, or RMB10bn, could be attributed to the internet in 2010. These figures are pegged to stand at 3% and RMB196bn in 2016.

When dividing up the Chinese internet retail audience, McKinsey suggested 8% do not research or buy anything online, while 16% look for information on the web but make every purchase from physical outlets.

Another 25% are "variety lovers" that value the wide product assortment available online, 19% are "price hunters" focused on cost and 13% are "lazybones" who enjoy the convenience. An additional 19% generally seek all three benefits.

"The rise of ecommerce has highlighted the flaws – specifically, the high costs – of China's traditional retail model," the study concluded. "Chinese consumers are speaking with their fingertips. The force of ecommerce cannot be wished away."

Data sourced from McKinsey; additional content by Warc staff