China will continue to dominate the e-commerce landscape in 2021

China will continue to flex its e-commerce muscles in 2021, predicts Associate Professor Chu Junhong from the NUS Business School. Expect a strong dose of cross-border e-commerce, live-streaming e-commerce, and more eye-catching short videos that promise great returns on “retailtainment”.
This picture taken on 28 October 2020 shows a customer (right) scanning a QR payment code (centre in green) to pay at a restaurant in Beijing, China. (Nicolas Asfouri/AFP)
This picture taken on 28 October 2020 shows a customer (right) scanning a QR payment code (centre in green) to pay at a restaurant in Beijing, China. (Nicolas Asfouri/AFP)

China’s e-commerce sector is as big as the country is vast. Worth 30 trillion RMB or US$4.5 trillion, China’s online retail sector is the largest in the world. The pandemic made the pie grow even larger. During the first seven months of 2020, China's online retail sales rose by 9% from the same period in 2019 to 6.08 trillion RMB, accounting for 25% of its overall retail sales. By comparison, the world average is around 15%, and it is 14% in the US, 11% in Europe, and less than 4% in Southeast Asia. 

The market size, growth speed and business model innovation of China’s e-commerce ecosystem have been the envy of many countries. In 2021, China’s e-commerce sector will continue to impact the world. 

Shoppers will see more offerings from an e-commerce sector that is growing, albeit at a slower rate compared to previous years. Primarily, this is because the sector has been gradually reaching saturation. Already, 80% of China’s netizens, or 749 million of them, have been shopping online. 

Just in a single year, China-based sellers on Amazon.com have grown their share from 38% to 49%. This trend will continue. 

Cross-border e-commerce will continue to thrive

Some areas will see faster growth than others. One thriving area is cross-border e-commerce. With their rich experience in managing online businesses, Chinese firms have long ventured into overseas e-commerce. This is necessary due to increasing competition and saturation of the domestic market. The number of Amazon.com sellers based in China has surpassed US sellers: 49% versus 47%. Just in a single year, China-based sellers on Amazon.com have grown their share from 38% to 49%. This trend will continue. 

Workers sort packages for delivery at a warehouse of China Post Group in Hengyang, in China's Hunan province on 12 November 2020. (STR/AFP)
Workers sort packages for delivery at a warehouse of China Post Group in Hengyang, in China's Hunan province on 12 November 2020. (STR/AFP)

For Chinese sellers, Southeast Asia will be one of their top targets. With a combined population of 655 million, a young demographic, high internet penetration and growing purchase power, Southeast Asia is another bonanza for e-commerce. China’s biggest tech companies have invested heavily in regional e-commerce platforms such as Lazada, Shopee, and Tokopedia. 

On the other hand, Chinese e-commerce brands do not have a strong presence in the region. With China formally joining the Regional Comprehensive Economic Partnership (RCEP) on 15 November 2020, barriers to entry for China’s e-commerce foray into ASEAN have been greatly reduced. Due to cultural differences and diversity of the Southeast Asian region, Chinese sellers need to focus more on branding and localisation when selling to customers in Southeast Asia. One way is to put up listings on local platforms such as Shopee and Lazada. Another tactic is to focus on high-demand categories such as consumer electronics, household items, beauty and health, and fashion and accessories. 

Cross-border e-commerce has also brought foreign products to consumers in China, especially those who are affluent. The importing e-commerce sector will be further consolidated. In 2019, Alibaba acquired Kaola, China’s largest cross-border e-commerce platform and integrated it into its Tmall Global Marketplace, with a combined market share of 53%. This acquisition boosted Alibaba’s dominance in cross-border e-commerce. In 2021, we will see more imports via these platforms.

During the 2020 Singles’ Day, Cartier hosted its first live-streaming show on Taobao Live, showcasing a US$28.3 million necklace to 800,000 people.

Live-streaming e-commerce to get even hotter

Another popular trend is live-streaming e-commerce. A combination of entertainment, product demonstration and influencer advertising, live streaming has experienced exponential growth in the past four years. Data from iiMedia Research shows that the market size for live streaming went up from RMB19 billion in 2017 to RMB133 billion in 2018, RMB434 billion in 2019 and RMB961 billion in 2020. The growth in 2020 was partly due to Chinese consumers shopping on their smartphones during pandemic lockdowns. 

This photo taken early on 23 October 2020 shows an influencer attending a livestreaming event at a studio in Shanghai to offer products on an Aliexpress channel in Spain. (Hector Retamal/AFP)
This photo taken early on 23 October 2020 shows influencer Silvia Rivera attending a live streaming event at a studio in Shanghai to offer products on an Aliexpress channel in Spain. (Hector Retamal/AFP)

Even big brands have jumped on the live streaming bandwagon. During the 2020 Singles’ Day, Cartier hosted its first live-streaming show on Taobao Live, showcasing a US$28.3 million necklace to 800,000 people. According to Alibaba, 400 company executives and 300 celebrities held livestreams during the 2020’s Singles Day. The sales will likely double in 2021. Some even predict that, in the future, all retail companies may have to do live streaming to attract customers. 

Why do consumers like to make purchases via live streaming? Deep discounts, instant product information, expert-like advice, and trust in the influencers are the major drivers. Compared with conventional marketing tactics, live streaming has its unique appeal. Hosts often claim to have the lowest prices across all channels so as to attract price-conscious buyers. Not only that, they carefully select products to cater to their fans and often use lucky draws to get viewers engaged and employ a flash-sale strategy such as limited-quantity and limited-time offers. 

Live-streaming hosts sell an increasingly wide range of products, from apparel, fashion, cosmetics, jewellery to electronics, cars, vacation packages, etc. Some hosts are able to draw huge numbers (often up to millions) of shoppers and achieve high conversion rates. According to a survey by AlixPartners, two-thirds of Chinese consumers said they have purchased products via live streaming in the past 12 months. We expect to see more sales via live streaming in 2021.

E-commerce is moving towards more entertaining platforms where the lines between content and commerce are disappearing: influencers create content to engage their followers and sell to them at the same time.

Short videos will inundate your screens

If you like watching short videos, you are not alone. Short videos will be the next to take the centre stage of e-commerce. “The next Amazon competitor is going to look like a social or video app, not a shopping app,” said Connie Chan, general partner of a leading venture capital firm, Andreessen Horowitz. E-commerce is moving towards more entertaining platforms where the lines between content and commerce are disappearing: influencers create content to engage their followers and sell to them at the same time. The integration of entertainment with commerce has been described as “social commerce” or “retailtainment”. Some even say that the letter “e” in “e-commerce” now stands for “entertainment”.

Short videos are rich in content, entertaining in nature, and more persuasive in selling. Short videos are providing a modern means for retailers and brands to interact with consumers and promote their products.

The logo of Bytedance, the China-based company which owns the short video app TikTok, or Douyin, is seen at its office in Beijing, China, 7 July 2020. (Thomas Suen/File Photo/Reuters)
The logo of Bytedance, the China-based company which owns the short video app TikTok, or Douyin, is seen at its office in Beijing, China, 7 July 2020. (Thomas Suen/File Photo/Reuters)

The short video industry is thriving in China: It had 888 million users as of June 2020 and increased by 68 million in one year, according to the China Internet Network Information Centre under the Chinese government. Short-video apps such as TikTok, Kwai, Bilibili, Pear, Xigua, and Huoshan all have tens of millions of active daily users. These platforms also deploy big data and artificial intelligence to encourage users to spend more time on their platforms, such as dishing out personalised video recommendations to them. 

With these platforms becoming increasingly popular among users, especially the young, short-video platforms started to incorporate e-commerce into videos and monetize content. For instance, in October 2019, TikTok added a new e-commerce feature called Marketing Label, which assigns a label to content in order to help retailers target consumers who want to search for products. In November 2019, TikTok extended its restrictions to allow all users to sell products through the platform. This move will help to transform TikTok into a video-based e-commerce site.

Selling via short videos will be a trend that marketers need to take note of. 

In 2021, we will see more regulation of e-commerce giants in China.

Increasing regulations on e-commerce

As many e-commerce companies grew, with some even coming close to having a monopoly, promoting fair competition and protection of consumer rights and data privacy became a key item on the Chinese government’s agenda. This trend will continue. In 2021, we will see more regulation of e-commerce giants in China. This may not be bad news. Instead, it may help create a more healthy e-commerce environment for both firms and consumers.

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