Given how the pandemic boosted ecommerce engagement in much of the rest of the world last year, it is not inconceivable that other countries could soon find themselves making transformational leaps akin to China’s. Ecommerce adoption has a momentum of its own, regardless of public health concerns, and there may be an as-yet-undetermined tipping point beyond which ecommerce’s share of sales suddenly and inexorably spirals upward.
That said, China’s ecommerce success also derives from many idiosyncratic factors, and it’s possible that no other region will emulate the country’s ecommerce transformation—or at least not to such an extreme degree.
Ten years ago, ecommerce’s share of total retail in the US and China were nearly identical (4.9% and 5.0%, respectively). China’s share shot up soon after that for a range of reasons, some of which will be familiar to outside observers, and some of which might be surprising. The foundations of China’s ecommerce story can be traced to handful of storylines from the 2000s and early 2010s:
- The emergence of Alibaba, the revolutionary, ubiquitous, easy-to-use Chinese ecommerce platform, gave consumers affordable and reliable access to almost everything imaginable, and swift delivery for just about anything. Not long after, JD.com emulated Alibaba’s successful formula, providing another massive and easy option for new shoppers.
- Innovative digital payments systems, like Alibaba’s Alipay and Tencent’s WeChat Pay, were years ahead of their Western competitors in terms of accessibility, ease of use, and the speed in which they became embedded into online (and brick-and-mortar) checkout options.
- An inconvenient, non-customer-centric, and often confrontational in-person shopping culture helped motivate shoppers to embrace the straightforward reliability of ecommerce, particularly the ease it offered for making returns and securing refunds.
- A nearly limitless supply of low-cost delivery services, provided by China’s millions of migrant laborers, enabled companies like Alibaba and JD.com to provide same-day delivery anywhere in the country for just pennies—a very attractive benefit for uncertain first-time buyers.
- A smartphone-driven mcommerce culture existed right from the start, thanks to China’s stage of economic development, and the fact that most shoppers skipped the PC era and joined the internet age directly via mobile devices.
Not all of these factors are still in play. Labor costs in China have skyrocketed, and most buyers and sellers can no longer arrange for consumer products to be delivered within hours for just a few cents. Similarly, the in-person shopping experience has improved dramatically, thanks perhaps to competition from ecommerce. However, both of these elements played a key role in the consumer’s initial embrace of ecommerce. In the early years, it was often cheaper, easier, and more pleasant to use ecommerce than it was to go to the store. That was not the case in the US.
Thanks to this early enthusiasm—and, of course, thanks to its enormous population—China today is far out in front of the world in terms of overall ecommerce sales. Despite the US remaining just ahead of China in overall retail sales ($5.506 trillion versus $5.130 trillion in 2020), China will outpace the US by nearly $2 trillion in ecommerce this year.