Chinese E-Commerce Potential

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In 2012, online retail sales accounted for 1.3 Trillion Yuan (200 Billion USD) representing 6,3% of China total retail sales for consumer goods. In 2020, this amount is expected to be almost multiplied by 10 to reach 10 Trillion Yuan and 16% of retail sales. (Source: Chinainternwatch and AliResearch)

In comparison to USA market 210 Billion USD in 2012, Chinese e-commerce already surpassed USA in transaction amount. By 2014, the gap will reach 74% in favor of China sustained growth. (Source: http://techcrunch.com/2010/03/08/forrester-forecast-online-retail-sales-will-grow-to-250-billion-by-2014/)

Few factors can explain the situation in China:
-The penetration rate of online retail in growing much than in US, with 10% instead of 8% in America. This is related to specificities of the online business which has been particularly well adapted to Chinese culture with the possibility to bargain, discuss directly with the sellers, control the product authenticity or to pay without credit card. -With more than 8% GDP growth per year, the Chinese middle class is no longer a niche market and they are fashion oriented, willing to spend a significant part of their revenue in high end products and brands, no matter the actual costs.

2)Future challenges
Those predicting figures however don’t consider various issues the Chine market is facing. Recent news regarding unpaid tax for online activities (http://qz.com/62483/new-tax-rules-could-put-a-dent-in-chinese-e-commerce-sites-like-taobao/), which allowed sellers to increase their margin by 30%, will likely lower the expectations of consumers if prices are suddenly rising. Secondly, the market is over dominated by Alibaba’s group Taobao, owning about 80% of Consumer to consumer activity and Tmall with 50% of the B2C trades. This lack of competition will likely have impacts on the long run with less innovation and higher platform costs through their monopolistic situation.

However, even considering the figures...
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