Next Up for China: E-Commerce
Editor:English.news.cn Create time:2013-12-15 Hits:
China’s export-based economy drove growth for years. But the global downturn, higher wages, taxes and import/export duties, and competition from other Asian cou...
China’s export-based economy drove growth for years. But the global downturn, higher wages, taxes and import/export duties, and competition from other Asian countries have reduced income in this area.
The government is now turning to consumer spending — the mainstay of Western economies — for economic growth. In the process, opportunities will arise for companies, both foreign and domestic, that have mastered procurement, logistics, IT and relevant data capabilities, and other services.
Based on figures from the China e-Business Research Center and a recent report by the website Transport Intelligence, e-commerce accounted for 6.8 percent of retail sales in China in the first half of 2013. By the end of the year, e-commerce is forecast to be 7 percent of retail sales.
In the U.S., which has a longer history of e-commerce, retail e-sales accounted for around $67 billion in the third quarter this year, or 5.9 percent of total retail sales, according to the Commerce Department. Forecasts for this year’s Cyber Monday, Dec. 2, called for retail e-commerce sales of $2.27 billion, which would be the largest one-day turnover ever recorded for retail e-commerce in the U.S.
While China has many challenges to overcome before it can rival the West in consumer spending much less e-commerce, it has lofty goals. The central government will provide policy and financial support for cross-border and domestic e-commerce retailers, while incentivizing small and midsize companies to enter the market, encouraging customer service initiatives, and promoting the establishment of overseas subsidiaries and warehousing — no doubt to improve the availability of goods. Private companies are already building or expanding private warehouses in China for the storage and transfer of goods.
China has e-commerce businesses in place, of course, so there are models for companies and the government to observe. These include Alibaba Group Holding Ltd., the country’s largest e-commerce business, which on Nov. 11, known on Singles’ Day in China (a youth-oriented holiday) posted sales of 19.1 billion yuan ($5.75 billion) — almost twice as much as last year and much larger than this year’s projections for U.S. Cyber Monday. Alibaba, which is reportedly considering a U.S. stock listing, has been valued at $190 billion by analysts; Facebook, in contrast, was valued at $104 billion when it went public. Alibaba recently opened a San Francisco office to invest in e-commerce technology firms.
The U.S. will probably be a major enabler of China’s e-commerce capabilities. Suning Commerce Group Co. Ltd., one of the country’s largest privately owned appliance retailers, with 1,600 stores, set up an R&D facility in Palo Alto, Calif., in November to standardize retail operations, among them logistics, IT, and cash flow; improve the information available to consumers and retailers; develop a platform for global shoppers; and devise an efficient system of payments and financing for suppliers and customers.
Suning also wants to hook up with major technology companies and plans to add similar R&D centers in Seattle and New York. There are reports it may open stores in the U.S. next year.
Apart from consumers and retailers — and, of course, Beijing — beneficiaries of the e-commerce initiative will include companies with established global networks and operations in China (e.g., FedEx, UPS, and DHL), as well as software vendors and related businesses that can improve data analytics and other services.
China has one-fourth of the world’s population and a growing middle class with increasing amounts of discretionary income. So it’s easy to see how a successful effort at developing retail e-commerce would generate a lot of economic growth and concurrent opportunities for many businesses.
This could be the country’s next “shot heard ’round the world.”