SHANGHAI: Online spending in China is on course to reach almost half (45.7%) of the country’s total per capita retail spend in 2017, but there are signs that online retail sales are reaching a peak, according to a new report.
Research firm Mintel said it expected total business-to-consumer (B2B) and consumer-to-consumer (C2C) online retail sales in China to reach RMB 6.4 trillion by the end of this year.
That equates to a CAGR (compound annual growth rate) of 37.9% since 2012, or a roughly fivefold increase in value in just five years.
Mintel also forecast that B2C online retail will account for more than 60% of total e-commerce sales in 2017, while mobile online shopping is expected to make up more than 80% of B2C sales.
The data suggests that China’s online retail market has reached a “critical mass”, Mintel said, as it noted that Chinese consumers are increasingly opting for a mix of online and in-store shopping, as characterised by Alibaba’s “new retail” proposition.
“Mintel research reveals that online per capita spend in China is close to reaching a peak … One issue is that consumers are increasingly buying experiences and services online, rather than products,” said Matthew Crabbe, Mintel’s Research Director APAC.
“The other issue is that consumers are already adapting to ‘new retail’; they are embracing greater integration between online and in-store shopping. This will mean much tougher competition between retailers,” he added.
“It will also likely mean more pressure for further consolidation in the market, resulting in more mergers, acquisitions and strategic partnerships.”
According to Mintel, China’s ‘new retail’ experience has seen consumers purchasing different products from different sources. For example, 72% of in-home food shoppers prefer to shop in-store, compared with 60% of consumers who prefer to shop online for toys, games, clothing, and accessories.
The research also revealed that 62% of urban Chinese consumers say the ability to try, see, and experience products in-person before buying encourages them to shop in-store.
And the same proportion (62%) shop in-store to ensure the freshness of produce, with 55% saying in-store shopping means they can get what they want faster.
On the other hand, 65% of urban Chinese consumers say they find products cheaper online, while 63% say that online offers more choice.
Commenting on the trend towards retail integration, Crabbe said: “As online retail platforms invest in and collaborate with physical retailers, who in turn look to increase their online exposure, these new business models will create the ideal ‘new retail’ experience for shoppers.”
Sourced from Mintel; additional content by WARC staff