The great mall of China - The next big thing in retail comes with Chinese characteristics

08 February 2021

In 2019 Chinese e-commerce industry was nearly twice the size of that of America, Britain, Germany, Japan, and South Korea combined. And it continues to grow at a greater pace. Some attribute the incredible growth to structural forces behind Chinese cyber-bazaar, citing higher mobile share of e-commerce in China than in the West. Others claim that it is a result of high concentration in the market, where three firms, Alibaba, JD.com, and Pinduoduo, account for over 90% of total online sales. In comparison, top three online platforms in the US, Amazon, Shopify, and eBay, account for less than half of the market.

Research suggests that Chinese e-commerce is yet to reach its limits. Pinduoduo managed to gain 14% market share in just a few years, while industry outsiders, such as ByteDance, owner of short-video platform TikTok, have heavily invested in the market. Unlike America, where retail has always been, and continues to be, reliant on bricks and mortar, China seems to be much more at ease with online shopping. In China the traditional American retail experience is replicated in digital form, where shops, food court, and entertainment neighbour within a super-app like WeChat.

The new retail architecture is built on two pillars: "social commerce" and "omnichannel". "Social commerce" relies on live-streaming, short-form video, and social-networking. The total market for live-stream commerce in 2020 was valued at $153bn. Social networks, on the other hand, enable buyers to form groups in order to bargain with merchants. More familiar to the Western audience, "omnichannel" has also soared during the pandemic. For years Chinese e-commerce giants have owned their own physical supermarket businesses, allowing them to provide customers with a convenient and reliable shopping experience. Like New Zealand, customers saw a boom in "click-and-collect" shopping, including cashier-less stores and contactless payments.

The pandemic accelerated the adoption of "social commerce" and "omnichannel" in the West, too. As most physical shops were forced to shut, businesses and social networks had to learn new tricks fast. Catering to 160m SMEs, Facebook introduced Facebook Shops to enable businesses to set up their own online store. Walmart partnered with TikTok for a shopping campaign, whereby customers could purchase clothing items worn on celebrities via the app. Yet, e-commerce in America is still far behind that of China. Concerned over privacy or simply preferring a different retail experience, American customers have yet to fully embrace online shopping. However, should the sentiments change, the US physical retail infrastructure is primed to facilitate more hybrid shopping models.

Read the article on The Economist website.

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