How Chinese Market Have Changed Cross Border E-commerce?
The arrival of the digital era has provided convenience and efficiency for the entire population. Anyone with the access to mobile device or computer make a purchase at the tips of our fingers with Wi-Fi or mobile data. With the convenience of mobile data and Wi-Fi, businesses locally and globally are provided with more channels to attract consumers, while providing ease of access to a larger population beyond offline retail stores, such as E-commerce. E-Commerce is the process of purchasing or merchandising of products on the internet and online platform, such as Ebay, Amazon, Kijiji and more.
Growth of E-Commerce
In 2014, Statistics have shown that the total global B2C (Business to consumer) e-commerce sale amount to $1.3TN (Trillion) dollars in USD and estimating an 246.15% increase to $4.5TN by 2021, nearly three times the amount.
Aside from the B2C e-commerce, there is also B2B (Business to business) e-commerce on the rise. The uprising of B2B e-commerce is contributed by self-serve and wholesale consumers. The simplification of transaction procedures globally and ease of access to products, wholesale consumers or businesses are able to actively reach out to supply chains.
There are three large regions divided to analyze the global growth of ecommerce, North America, Western Europe, and Asia Pacific.
Out of the three regions, Western Europe is expected to be the slowest developing ecommerce market globally, including Russia, United Kingdom, and Germany. While UK is the e-commerce leader among the Western Europe countries, and predicted to grow faster than other countries by 15% before 2021, the development and market size remains smaller than other regions. In 2016, the total B2C ecommerce sale from the Western Europe totals to $0.3TN USD, which is only approximately about 15% of the total sales globally. Whereas North America account for $0.4TN USD accounts for nearly a quarter of the sales with 21%, and Asia Pacific accounts for 58% of the B2C ecommerce sale, surpassing both regions by a large margin.
The two largest ecommerce market in the world is China and United States. According to Business.com, the annual online sales of the ecommerce total up to $672 billion USD, mainly led by Taobao, Alibaba, Tmall and other platforms for B2C ecommerce, doubling against United States, which is $340 billion USD.
The accelerating development of the ecommerce market is contributed by several reasons. First is the lower costs for the seller and buyer. Among all the ecommerce platform, Taobao as the top leading platform, provides free listings for sellers over several years, while charging zero fees for each transaction made, increasing the interests of merchandisers. The idea of merchandising on an ecommerce platform also eliminates expenses for a retail store, such as rent and property taxes.
Another reason for its growth is the convenience for consumers. The invention of platforms such as Aliwangwang, which is a platform that facilitates buyer-seller communication, Alipay, a secure and efficient payment tool, Cainiao Guoguo, a shipment tracking app that can track all shipments from ecommerce platforms. Consumers can receive real-time customer services from all the available platforms and real-time information for all their purchases.
Business Opportunities and Insight
With the increasing numbers of e-commerce platforms, everyone has access to all business models, B2B (business to business), C2C (consumers to consumers), B2C (business to consumers) because of the rapid development of platforms.
Take B2C as an example, businesses have access to multiple platforms to reach out to consumers, Tmall, Jingdong, Weipinhui, Suning, Guomei and more. Businesses are provided with more channels and a larger group of audiences. Aside from the growing numbers of platforms, the e-commerce market is also able to involve other industries to benefit. The entire transaction process requires multiple stages, involving several industries. Consider a transaction on Taobao for one item, the parties involved include buyer, seller, e-commerce platform, third-party service providers, shipping company, that is five parties involved for a one transaction, the amount of opportunities available between each steps is limitless, such as Cainiao Guoguo mentioned above.
If there is gain, there is most likely a loss elsewhere. Considering the immense growth in the e-commerce market, the impact on the offline retail have been unexpected. The term “New retail” was pioneered by Jack Ma in 2016, referring to the integration of online and offline retail components. Such as, products, services, logistics, marketing, management and so on. The business model, O2O (Online to offline) have been transformative to all businesses. For instance, Herma Supermarket is a supermarket with imported goods and fresh produces, they provided consumers with the opportunity to receive deliveries within 30 minutes in a nearby area through an app, accelerating store performances.
Think about the numbers of promotional events in western countries that isn’t black Friday or boxing day that would drive an enormous increase of revenue, little to none. However, China is quite the opposite, businesses take opportunities of every single possible event into a promotional event. To name several, Chinese New Year, Children’s day, Pre-Double 11, Double 11, Black Friday, Double 12, Christmas, and more, the unexpected aspects of the Chinese market is the equally valuable sales. In western countries, black Friday and boxing day is recognized as the most valuable promotional events of the entire year. The e-commerce businesses provide sales that are equally valuable but may differ in some aspect between these events, attracting surge of consumers.
For example, On November 11, 2017, Taobao, which is an online, shopping platform, dealing 14.8 billion transaction and 259 billion dollars in USD. In comparison, in the same week of Black Friday in United States, transactions totaling up to 50 billion USD, crowning China as the highest GDP (PPP) country worldwide.
The strength and potential of a population with 1.3 billion people is limitless, including the innovative, creativities and potentials of each and every one of them to achieve this current state of the e-commerce market. However, the competitiveness and challenges of contesting in the Chinese market is equally demanding, and this guide will help you gain necessary knowledge and understanding of the growing e-commerce market before stepping in.