Wednesday, November 16, 2016

CHINA E-COMMERCE KEEPS GROWING

How China’s mobile retail spending will just keep ringing up

There are over 1.3 billion mobile subscribers in China, and the country’s mobile commerce industry is expected to be worth US$1.41 trillion by 2019
PUBLISHED : Tuesday, 15 November, 2016, 3:18pm
UPDATED : Tuesday, 15 November, 2016, 10:17pm
China’s retail sector is leading the world in digitisation as its shoppers rapidly shift from bricks-and-mortar stores to online and mobile.
But some analysts suggest the surge in digital payments has also sparked growing fears over data security.
Online retail sales in the country surged 25.1 per cent in the first three quarters of the year, with total sales rising 26.1 per cent to 3.47 trillion yuan (HK$3.95 trillion) compared with the same period last year.
As China has grown into a global e-commerce centre, its online spending volume has ballooned from US$1.4 billion in 2010 to US$25.3 billion last year, according to Euromonitor International.
With the integration of smartphone usage into people’s lives, Chinese consumers are increasingly opting for online and mobile shopping options for ease and accessibility, price comparison, and affordability.
There’s a lot of different motivations driving consumers to purchase online, but in China we definitely see a much higher penetration of e-commerce and particularly using mobile
Jessie Qian, head of consumer markets, KPMG China
Around 62 per cent of Chinese people shop from their computers and phones out of convenience, with 36 per cent doing so because it is cheaper, a PricewaterhouseCoopers (PwC) survey showed.
“There’s a lot of different motivations driving consumers to purchase online, but in China we definitely see a much higher penetration of e-commerce and particularly using mobile,” Jessie Qian, head of consumer markets for KPMG China, told the Post.
With various third-party payment options available at the touch of a button, 65 per cent of Chinese people surveyed by PwC shop on their phones at least monthly, versus 28 per cent globally.
The data shows “a continuing willingness on the part of Chinese consumers to become early adopters of cutting-edge shopping habits such as mobile buying”, the PwC report said.
“Some people are no longer carrying wallets when go out,” said David Ji, head of research for greater China at Knight Frank. “It’s a way of life now.”
HKT’s Tap ‘n Go digital wallet brand. Photo: SCMP

Mobile subscribers in China exceeded 1.3 billion at the end of last year, and their purchases made up almost half of retail e-commerce sales, according to data from the Ministry of Industry and Information Technology (MIIT). By 2019, Chinese shoppers will spend US$1.41 trillion on mobile commerce, making up almost one quarter of all retail sales.
“Mobile payment is really easy for people,” Yuqing Guo, financial service consulting partner for Pricewaterhouse Coopers (PwC) in China, said to the Post.
“You don’t even have to really be at home, you can be on the subway or somewhere, and you can pay.”
The recent Singles’ Day e-commerce shopping bonanza – seen as the benchmark for Chinese retail
on par with Boxing Day and Black Friday – saw a record US$17.9 billion spent, with 82 per cent of purchases made via mobile, according to data from Alibaba, owner of South China Morning Post.
Mobile payment is really easy for people. You don’t even have to really be at home, you can be on the subway or somewhere, and you can pay
Yuqing Guo, financial service consulting partner, PwC
Last year, mobile sales during Singles’ Day represented 68.7 per cent of total purchases.
Third-party mobile payment services include the pervasive WeChat app from tech conglomerate Tencent, now with over 300 million user credit cards attached to it, and Alibaba’s equivalent, Alipay.
But the widespread adoption of e-commerce platforms have raised inevitable security concerns.
Over 60 per cent of people report being worried that hackers could access their personal information as a result of their mobile phone use, the PwC survey found.
As a result, the government has encouraged safeguards such as password verification, fingerprint identification, and retail platforms engage a range of technologies for security, including biometric technologies such as fingerprint and facial recognition.
Signage for Ant Financial Services Group's Alipay, an affiliate of Alibaba Group. Photo: Bloomberg

Third-party payment platforms also “widely employ” Near Field Communication (NFC), a communication protocol between two separate devices, as well as QR codes, or a machine-readable barcode label, the PwC report said.
But Chinese consumers are more willing to prioritise convenience over privacy, Guo said.
“People are more willing to try new things, not too worried about privacy,” she said.
Additionally, Chinese consumers work longer hours, making them more inclined to favour convenience, according to Veronica Wang, associate partner of London-based OC&C Strategy Consultants.
The average Chinese worker puts in 2,000 to 2,200 hours each year, the Wall Street Journal reported, versus the average in the UK of 1,677 hours per year.
A customer has a barcode on her Apple iPhone smartphone scanned by a cashier for payment through Alipay, at a supermarket in Hangzhou. Photo: Imaginechina
For retailers now, the path ahead is to adopt e-commerce strategies that look beyond basic shopping functions, and instead aim to provide a seamless consumer experience from making a purchase to accepting a delivery to sharing feedback online, according to Qian.
This includes sophisticated omni-channel strategies to tie together online and offline platforms, she said.
“They have to have a very holistic approach,” Wang added, pointing to different marketing approaches for e-commerce and physical stores.
While China’s retail sector as a whole has seen a slowdown in growth, with the top 50 domestic retailers seeing sales drop 1.9 per cent in the first nine months of the year, the weakness is largely in physical stores and outlets, Guo said.
But the desire to interact with physical products will never disappear, Qian said.
“The bricks-and-mortar malls will never become dinosaurs,” she said.