Eye on Retail: China is the hotbed of eCommerce

For the first time anywhere, a majority of retail sales for an entire country will happen online.  

Fifty-two percent of China’s retail sales will come from e-commerce in 2021, up from 44.8% last year, according to a forecast by eMarketer. No other country in the world comes close to the China metric. 

The country with the next highest rate of e-commerce as a share of total retail sales is South Korea, where 28.9% of retail sales will occur online this year, eMarketer projected, followed by the U.K., at 28.3%. In the United States, online will make up 15% of retail sales this year, rising to 16.2% in 2022, according to the eMarketer Insider Intelligence report.

Despite the U.S. remaining just ahead of China in overall retail sales ($5.506 trillion vs. $5.13 trillion in 2020), China will outpace the U.S. by nearly $2 trillion in e-commerce this year.

Several factors can be credited for the recent boom that pushed e-commerce over the 50% share threshold in China, according to eMarketer, including social commerce, which grew by 44.1% in China last year and will grow by another 35.5% this year, reaching $363.26 billion. By comparison, social commerce in the U.S. will total  $36.09 billion this year.

In 2022, eMarketer projected that e-commerce will expand to reach 55.6% of total retail sales in China. Only two things will prevent nearly endless standout e-commerce expansion in China, said eMarketer forecasting writer Ethan Cramer-Flood, of Insider Intelligence.

“Firstly, China’s overall retail sales growth is expected to be far more constrained in the coming years than it has been over the past decade, as China’s economic engine is not what it once was,” he said. “And second, several hundred million people in China are not yet online at all, and thus growth from these consumers will have to wait until a little later down the line.”

Several factors can be credited for the recent boom that pushed e-commerce over the 50% share threshold in China:

• Social Commerce:  eMarketer estimates that social commerce grew by 44.1% in China last year and will grow by another 35.5% this year, reaching $363.26 billion. By comparison, social commerce in the US will be just $36.09 billion this year.
• WeChat’s Mini Programs: As ubiquitous as Tencent’s super app has been in China for nearly a decade, it was only recently that its interface began to skillfully facilitate third-party e-commerce. Mini Programs allow businesses to better leverage WeChat’s user base and have proven to be extremely popular among both merchants and consumers.
• Pinduoduo (PDD): The groundbreaking group-buying-meets-social-networking phenomenon has shot up from a 0.5% market share in 2016 to a projected 13.2% of China’s e-commerce market this year (Alibaba will claim 50.8% and JD.com will have 15.9%). PDD unlocked China’s rural e-commerce participation more effectively than any other platform.  
• Livestreaming “Live Commerce”: Live Commerce is almost by definition a social media activity, but in first instance the traditionally non-social Alibaba properties led the way on livestreaming commerce. Eventually, however, everyone else jumped on the bandwagon, and the organically video-centric platforms like Douyin have an obvious edge going forward.
• The coronavirus: Although China suppressed the coronavirus threat far more quickly than did any other country – and has been operating with a mostly normalized economy for almost three consecutive quarters – it is still true that consumer behavior was altered last year. Online grocery shopping surged thanks to the virus lockdowns, and this preference may prove to be sticky over the long term.

Going forward, eMarketer anticipates more of the same from China. In 2022, eMarketer projects e-commerce sales growth of 11%, and that its share will reach 55.6% of total retail. The $3 trillion threshold for e-commerce sales should be breached as well (with a forecast $3.085 trillion for next year).

“Only two things will prevent nearly endless standout e-commerce expansion,” said eMarketer forecasting writer Ethan Cramer-Flood, of Insider Intelligence. “Firstly, China’s overall retail sales growth is expected to be far more constrained in the coming years than it has been over the past decade, as China’s economic engine is not what it once was.  And second, several hundred million people in China are not yet online at all, and thus growth from these consumers will have to wait until a little later down the line.”