The Boston Consulting GroupAlibaba 1
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What China Reveals
about the FutuRe
oF shopping
By Chris Biggs, Amee Chande, Erica Matthews, Pierre Mercier, Angela Wang, and Linda Zou
I
magine being in the middle of Times
Square, surrounded by fashing lights,
fast-talking vendors, street performers, live
music, noisy trafc jams, and endless other
distractions. Now imagine you’re online
and surrounded by the same energetic
chaos. Welcome to China’s digital market-
place, where shopping is an adventure—a
fre hose of rapidly changing content, ofers,
products, colors, and choices. For Western
shoppers accustomed to simple, transac-
tional online buying, it’s a culture shock.
China has more e-commerce activity than
any country in the world today. According
to China’s National Bureau of Statistics,
Chinese consumers spent $750 billion on-
line in 2016—more than the US and the
UK combined. That is a jaw-dropping num-
ber, but even more interesting is how dif-
ferently China’s digital marketplace, tech-
nology platforms, and online behaviors
have evolved compared with those in West-
ern markets. These differences provide a
glimpse into the future of shopping—and
offer valuable insights for companies
around the globe. This article, the first in a
series on the future of retail, provides an
overview of e-commerce in China today
and explores some of those key differences.
the Digital Revolution goes
Mobile
When Amazon and e-tailing disrupted US
shopping in the 1990s, retailers and con-
sumers alike had to rethink their deeply in-
grained habits. By contrast, physical retail
in China was less developed. The digital
revolution coincided with the growth of
disposable income and consumption. As a
result, e-commerce quickly became the
norm, and its development was fast-tracked
to the point where China pulled ahead of
the West. (See Exhibit 1.)
China is also a pioneer in mobile commerce.
(See Exhibit 2.) Many consumers skipped
the PC era entirely, going right to smart-
phones. This may explain why Samsung
phones with larger screens took hold in Chi-
na well before they did in Western markets.
According to industry estimates, online pur-
chases made with mobile phones will ac-
The New Retail: Lessons from China for the West
The Boston Consulting GroupAlibaba 251520 40 60 80 100
E-commerce share of retail (%)
Internet penetration (%)
US
UK
South Korea
Japan France
CHINA
Thailand
India
Malaysia
Brazil
2010 2015
Sources: Economist Intelligence Unit, Internet World Stats, International Telecommunication Union, World Bank, Euromonitor, BCG analysis.
Note: Internet penetration = the number of internet users divided by the population. An internet user is someone at least two years of age
who has been online in the past 30 days.
Exhibit 1 | E-Commerce Exploded in China from 2010–2015, Pulling Ahead of the West
1,174
1,048
888
720
521
324
151
44112500
1,000
1,500
2020E2019E2015E201420132018E2017E2016E20122011
Retail m-commercesales in China
($billions)
3112127
34
33
51
39
61
41
68
43
71M-COMMERCE AS
A SHARE OF TOTAL
E-COMMERCE (%)
China
US
Global average: 35
45
73
46
74
Sources: Criteo; iResearch; eMarketer; BCG analysis.
Note: Converted at an exchange rate of US$1=RMB6.24. M-commerce = mobile commerce.
Exhibit 2 | Mobile Commerce in China Is Growing Far Faster Than in the US
The Boston Consulting GroupAlibaba 3
count for 74% of total e-commerce in China
by 2020, compared with just 46% in the US.
The pace of e-commerce doesn’t seem to
be slowing: the industry is expected to
grow by 20% annually in China over the
next five years—twice as fast as in the US
and the UK. This growth will be driven not
only by increased individual spending but
also by an expected influx of hundreds of
millions of new consumers, many from
smaller cities and rural areas, who have yet
to go online.
As part of this growth, we expect to see
higher e-commerce penetration in product
categories that may be surprising for the
West. Today, Chinese consumers buy every-
thing from organic foods to luxury cars on-
line. Over the next five years, online shop-
ping will spread and deepen across a wide
range of categories. According to some pro-
jections, just five categories in the US—
such as books and clothing—will capture
more than 40% of e-shoppers. In China,
15 categories, from snacks to financial ser-
vices, will reach this level of penetration.
e-Commerce edge
China’s unique retail history has given rise
to one of the most advanced digital mar-
ketplaces in the world. With its sophisticat-
ed shoppers, massive volume of transac-
tions, rapid rate of innovation, and
integration of social media, multimedia,
and other channels, China’s online environ-
ment offers a glimpse into the future.
A few key characteristics of consumers,
brands, and shopping platforms in China’s
online landscape clearly differentiate it
from online marketplaces in the West.
spend money—and they spend a lot
of time shopping
.
In China, shopping
is about more than just the transaction.
It’s about entertainment, discovery,
and social engagement with friends,
cele brities, and internet infuencers.
On average, China’s consumers spend
almost 30 minutes a day on Alibaba’s
Taobao, the country’s leading e-com-
merce marketplace, nearly three times
longer than an American consumer
typically spends on Amazon. And
they’re very brand conscious, if not
particularly brand loyal. For instance,
the typical Chinese teenager can recall
20 cosmetics brands while the average
US teen can identify just 14. China’s
young people are also the most “spend
friendly” in the world: 42% feel the
need to buy more things, compared
with 36% in both the UK and the US.
constant innovation. Established
players and upstarts alike continually
create new oferings and service models
to stay one step ahead of the competi-
tion. In highly competitive categories
such as cosmetics, dairy, and confection-
ery, market leadership constantly
changes as new entrants jockey for
attention. Online merchants in China are
not afraid to test new products, fail, and
try again, rather than adhering to a rigid
schedule of product launches. They’ve
become increasingly sophisticated in
their use of multimedia and multiple
channels to reach and engage consum-
ers. What’s more, they’re at the forefront
of using data, analytics, and consumer
insights to better understand the
customer—and are moving toward true
consumer-driven product development.
shopping fun
—
and buying easy
.
In
China, news sites, games, videos, and
e-commerce are all interconnected in
the major online hubs, with click-to-buy
product placements and quick links to
payment options. (See Exhibit 3.) Unlike
online shoppers in other countries,
Chinese consumers rarely visit company
or brand websites. Instead, they discov-
er what they want to buy through
online marketplaces such as Taobao,
entertainment apps like iQiyi, and
WeChat, China’s most popular social
media platform. Taobao and WeChat,
two of the top fve apps in China, have
evolved into all-in-one super apps.
Taobao, which began as solely an
e-commerce site, now ofers social and
The Boston Consulting GroupAlibaba 4
entertainment features. WeChat, which
started as a social platform, now allows
users to buy and sell products. These
super apps also provide a wide variety
of online and ofine services. Users can
send money to people, order food, call a
taxi, set up a doctor’s appointment, pay
bills, and get movie tickets. In the US
and UK, consumers would need a
diferent app for each of these activities.
A Tale of Two Giants: Alibaba
and amazon
Another way to better understand the dif-
ferences between East and West is to ex-
amine the key players in each market:
Alibaba and Amazon. On the surface, they
seem very much alike. Both offer online
marketplaces, each holds a leading market
share, and each is continually expanding
into new ventures. Although both compa-
nies are enormously successful, their busi-
ness models are quite different.
Amazon is the quintessential online retail-
er, carrying its own inventory and focusing
almost exclusively on the consumer. Most
shoppers come to Amazon looking for a
specific item. The site’s virtually unlimited
selection, excellent search engine, low pric-
es, userreviews, product recommendations,
easy payment, rapid delivery, and first-rate
service have built a base of very loyal cus-
tomers. Over the years, Amazon has ex-
panded into many different lines of busi-
ness and services, such as Kindle e-books
ande-readers, video streaming, original TV
shows and movies, and food delivery.
By contrast, Alibaba doesn’t carry invento-
ry or buy and sell merchandise. The com-
pany operates like a virtual mall, providing
wholesalers and retailers with platforms
that connect buyers and sellers. In this
e-marketplace model, brands “own” their
relationship with customers and create on-
line experiences appropriate to their indi-
vidual brands. Alibaba offers tools and ser-
vices to help brands and small businesses
navigate the world of e-commerce and con-
nect directly with consumers through
games, news, video, live-streamed talk
shows, celebrity events, and online commu-
nities. Consumers go to these sites to be en-
tertained and to explore new trends—as
DIGITAL COMMERCEPAYMENTSSOCIAL MEDIAVIDEO STREAMINGSEARCH
TaobaoChina’s biggest mobile
commerce platform, with integrated entertainment
and social features
TmallChina’s largest third-party
platform for brands and retailers
~75%–80% share
AlipayChina’s largest online
third-party payment system, with more than 450 million
active users, compared with about 12 million for
Apple Pay
~50% share
JDA direct sales e-commerce
platform, JD manages such functions as merchandising
and pricing (similar to Amazon)
~10%–15% share
Suning, Vipshop, Gome
~5%–10% share
WeChat PayPayments integrated into
popular messaging app
~20% share
Baidu WalletPayments system from
largest search engine
~5% share
QQPopular messaging app
with a greater focus onintegrated games/blogging
(similar to WhatsApp)
~550 million monthly users
Sina WeiboChina’s biggest social
media platform(Twitter-like microblogs)
~400 million monthly users
BaiduChina’s biggest search
engine (similar to Google)
~75% share
iQiyi, PPSChina’s leading video
platforms
~20% share
Youku, Tudou
~20% share
Tencent Video
~15% share
ShenmaMobile search engine
~5% share
SogouSearch engine
~5% shareLeTV, Sohu, Bilibili
~25% share
AlibabaBaiduTencentServices independent of Alibaba, Baidu, and Tencent
China UMS, 99bill,ChinaPnR
~25% share
WeChatMessaging app with
integrated shoppingfeatures (a much-
expanded WhatsApp)
~800 million monthly users
Source: BCG analysis.
Note: Other social media and search sites were omitted because of their relatively small market share.
Exhibit 3 | China’s Digital Ecosystem Is Highly Integrated
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