The Chinese Ecommerce Boom: a decade of growth is just the beginning
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The Chinese Ecommerce Boom: a decade of growth is just the beginning

If the digital economy has exploded in any one country over and above the global average, it is China. Ten years ago, China’s ecommerce market accounted for just 1% of the world’s total. Today, it accounts for 42% of the global ecommerce market. That growth is staggering – but it may just be the beginning. Meanwhile, in the west, the numbers are dropping. Since 2005, the United States has seen its share of global ecommerce dwindle from 35% to a still-respectable 24%. One thing is clear: when it comes to ecommerce, China is already more developed than the developed world.

Chinese mobile data usage this year has already overshot 2017’s total!

graph 2908 ecommerce

How did China go from being a (very) minor player in a worldwide trend to handling more digital transactions annually than France, Germany, Japan, the United Kingdom, and the United States combined? Three factors stand out in particular: first, its sheer size (China, after all, is the most populous country in the world with 1.4 billion citizens); second, the country’s unique geographical challenges; and third, the speed with which it has embraced mobile technology.

Over the last ten years, China’s urbanization project has stormed ahead, massively swelling the country’s middle class, and bringing the trappings of what we might call “modern” life to its people. China is so vast a landmass that many of those people live hours away from cities with decent retail opportunities. Ecommerce, in this regard, is the great equalizer: no matter which tier your city is in – or, for that matter, your village – if you can get online, you can find what you need. In this way, ecommerce has provided an answer to a problem for hundreds of millions of consumers – and they’ve been keen to exploit it.

The Chinese people have also embraced new technology relatively more quickly than their international peers. Earlier this decade, mobile payments expanded dramatically in the country, accounting for 25% of mobile internet use in 2013, and 68% by 2016. By 2016, Chinese mobile users were spending $790 billion on “consumption-related” purchases. That’s 11 times as much as the United States spent on the same thing in the same year – an incredible statistic, but even more so when you consider that the U.S. still has 262 million more mobile internet users than China!

Ultimately, simple demographics are what suggest that China has much more room to grow in the digital realm. With about 731 million people online today, the country has an internet penetration rate of around 55%. North America, by contrast, has an internet penetration rate of 88%. As China continues to close the gap, global ecommerce is likely to be a winner.

Disclosure

Dominion holds a number of Chinese internet firms in its Global Trends Ecommerce Fund, as well as western companies with exposure to the Chinese market.


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The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.