A summary of ecommerce market details relating to China.
Last Published: 12/29/2016

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eCommerce is rapidly increasing in China and in May 2015 accounts for around 10.6 percent of all retail sales. There are over 632 million Internet users in China, of which 47 percent are online shoppers—slightly fewer than the entire population of the United States.

eCommerce sales in China totaled USD 449.12 billion in 2014, up 49.3 percent from USD 300.74 billion in 2013, according to the Chinese government’s National Bureau of Statistics (CNBS). In comparison, web sales in the U.S. totaled USD 304.91 billion in2014, up 15.4 percent from 2013, according to U.S. Department of Commerce estimates (February 2015). China’s ecommerce market is growing more than three times faster than that of the United States.

Although the official average income of Chinese online shoppers is much less than that of their American counterparts, personal income of the Chinese middle class grew by 10 percent (CNBS). The Chinese research firm iResearch forecasts that China’s e-commerce market will grow at a 27 percent rate over the next four years.

U.S. companies planning to sell products via Chinese e-commerce platforms can choose:
  • To establish a business presence in China or can use cross-border ecommerce to sell the products directly from abroad. A presence in China can be a subsidiary company, a joint venture, a wholly owned entity, or a local distributor or agent.
  • Bonded online shopping—allows cross-border online shopping via government-approved websites. This method provides a mean for foreign brands to sell products to Chinese consumers. What this means for cross-border ecommerce is that goods imported by "bonded import" will be exempt from certain import duties, consumption tax, and value-added tax and are liable only for personal postal articles tax.

Market Entry

In 2014, approximately 18 billion Chinese consumers purchased an estimated USD 161 million in foreign goods. Upward of 2,000 Chinese enterprises focused on cross-border
ecommerce, but only a handful are realizing significant volume: Tmall Global, USA Shop, and a few others.

Digital Advertising

Digital ads can be placed in all the vertical venues available in the West: ecommerce sites, focused portals, search engines, blogs, bulletin board sites, and forums. Placing them programmatically is a problem, however, given China’s strict licensing rules for advertisers. Consumer preferences depend on the offering and the context, of course. But as to what works best, in terms of conversion, efficiency, and scalability, search engine advertising is hard to beat. Although typically less than 1 percent of people who view an ad click on it, those who do so have prequalified themselves as serious prospects. The low bid prices and easy testing parameters further distinguish search engine marketing as a go-to tactic.

IPR

Copycatting is a byword for doing business in China. However, the huge publicity around that problem has provoked steps that have made the issue considerably easier to avoid. China now has a streamlined process for registering copyrights and trademarks. The process can total less than a few thousand dollars, including legal fees.
  • Luxury brands have suffered the most from intellectual property theft, with other iconic Western companies finding copyright claim-jumpers awaiting them in China.
  • For the relatively unknown Western brand, the threat of piracy is overstated; issues arise chiefly for companies that sell products that China has a vested interest in developing and making domestically, such as defense components, cloud software, and aerodynamics equipment.
  • Legal remedies are evolving rapidly, particularly in the e-commerce space, as the government is promoting a transparent ecommerce ecosystem as a pillar of its consumer economy. U.S. companies will benefit.

Mobile eCommerce

Chinese consumers spent close to USD 150 million on their smartphones and tablets in 2014, up 239 percent from 2013, according to the Chinese research firm iResearch. The primacy of mobile over desktop in China cannot be overstated, nor can the potential for online to offline shopping.

Current Market Trends

Authenticity and diversity of goods have become the two biggest priorities for online consumers, leading to major growth in China’s cross-border ecommerce industry, whose import value was roughly USD 161 million in 2014, driven by approximately 18 million Chinese shoppers.

The importance of mobility as a driver of shopping experiences cannot be understated, as more than 80 percent of Chinese use mobile devices as their primary means for accessing the Internet. Also, more and more e-commerce sites that specialize in segments, such as imported food, baby products, and independent designer brands, are growing fast and getting funded by serious venture capital. Such sites are not necessarily eating into Alibaba’s market share, though, as the 30 percent average annual growth of the industry as a whole means that many ships can rise with the tide.

eCommerce Regulations and Initiatives

The government has taken a very public stance in promoting e-commerce with initiatives to stimulate development of the industry, as well as highly publicized crackdowns on online sellers of fraudulent goods. Streamlined regulations have been created to govern transactions in support of the consumer.

The sticking point comes with Western goods that are marked in China without a Chinese license. However, a platform can advertise on behalf of a Western company without a license, provided that the company’s products are clearly advertised as coming from overseas.

Certification of products for the Chinese market for big categories, such as cosmetics and health supplements, is quite strict and time-consuming. Cross-border commerce enables Western goods to clear customs rather than be licensed for sale in China, an advantage that has helped fuel the rapid rise of cross-border e-commerce in China.

Popular Online Payment Services

Alibaba’s payment gateway, Alipay, has roughly half of China’s online payment market share, with the remainder dominated by Tencent’s Tenpay and UnionPay. However, credit cards are a growing option, with Visa and MasterCard services offered through China Construction Bank and HSBC (Hongkong and Shanghai Banking Corporation Limited).

Popular eCommerce Sites

Alibaba is the emperor of China e-commerce, accounting for 50 percent of the online B2C market with its Tmall platform, and more than 90 percent of the consumer to consumer (C2C) market on Taobao. JD.com is the chief rival, depending on better logistics and a reputation for selling authentic, non-fraudulent products, to secure its 25 percent market share. Other big players include NASDAQ stalwart Dangdang and Walmart-invested Yihaodian. But they, and even Amazon’s China operation, have less than 3 percent market share.

Efforts to make more U.S. and other foreign goods available to Chinese buyers are ongoing. Chinese middlemen generally buy such goods and take care of licensing the products for sale in China, which is not a simple process. A Chinese buyer can avoid the process by purchasing a product from an e-commerce marketplace and having it shipped from abroad. Those products are treated as sold outside the country and thus do not need in-country licensing. For example, last year Alibaba unveiled a new marketplace, Tmall Global. Its purpose is to help non-Chinese vendors sell to Chinese consumers. Jingdong Mall (JD) also is working to sell more U.S. products through a similar channel that is much better for smaller companies. A seller using Alibaba’s in-country platforms, such as Tmall or Taobao, must properly register the products, a process that requires a Chinese partner or expertise in the Chinese market.. If this option is desired, the U.S. Commercial Service office in China can provide assistance.

Popular Social Media Networks

Recently, WeChat has been gaining in popularity. Former champion Weibo began hemorrhaging active users in 2013, following a variety of events in the China’s online community.
  • WeChat is a mobile app that provides much more intimacy than Weibo did, as well as voice messaging and other added-value features. It has quickly grown to approximately half a billion users. As a result, parent company Tencent has made in-app stores possible and integrated with Alibaba rival JD. Although there are C2C success stories for those stores, JD integration has not been the threat to Alibaba that was expected, and Tencent is now even selling products on Tmall. Tencent now is concentrating on in-stream targeted ads—Facebook style—and the app’s main ecommerce value will most likely be in online to offline use, which its mobile-first user experience is suited for.
  • Other once-big social sites based on microblogging, such as Renren and Kaixin, have basically fallen by the wayside in the rush to mobile multimedia communication.  Interestingly, Tencent’s QQ application, the predecessor of WeChat, has over 700 million users and is most Chinese people’s instant messaging application, preferred over e-mail and phones for a wide variety of communication.




 

Prepared by the International Trade Administration. With its network of 108 offices across the United States and in more than 75 countries, the International Trade Administration of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



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