One of JD.com's logistics centers, in Zhengzhou, Henan province. The e-commerce company has set up an overseas purchasing arm, JD Worldwide, to buy products it identifies as being in high demand among Chinese customers. These are then warehoused in China to be quickly shipped to buyers.(Provided to China Daily)
The slowdown of physical retail and the high expectation for growth have led Chinese CEOs to look for new growth avenues - and e-commerce is seen as one of the last few levers for growth. The mass of online shoppers - a majority of them born in the 1980s and '90s and increasingly rich - is the driving force. Their rising purchasing power has also drawn more consumer brands online.
In addition, a few consumer brands growing out of Taobao's ecosystem have grown so fast that by now a few of them are starting to look at being listed on the Growth Enterprise Board and getting attention from market leaders across sectors ranging from apparel to food.
Our clients come to us seeking answers about the future trends of Chinese e-commerce. We would like to propose an outlook for three years.
First, we believe mobile technology will become more important to e-commerce than today. The rise of mobile and commerce will further connect what consumers buy digitally and what consumers experience in stores - integration of online and offline experiences.
Second, we believe the structure of Chinese e-commerce will largely remain the same - platforms like Tmall and JD will continue to be dominant in absolute value while new formats for e-tailers will gain importance to serve the rising differentiated needs of lifestyle and community. After the first wave of e-commerce growth via platforms like Tmall, we believe consumer brands will revisit their e-commerce business model and the multi-channel approach in China. Brands will start to shift from traffic-focused growth to loyalty-based growth because online traffic will be more expensive. We believe brands that know how to curate consumer interest and offer the most competitive products and services either online or offline or a combination of both will win ultimately.
Last but not least, with the enrichment of data from e-commerce, digital marketing and other digital platforms, the re-imagination of data analytics and applications will become the new force for competitive advantage and success.
We also foresee that companies will have to re-engineer how they operate to fit into e-commerce. Increasingly, the role of e-commerce is shifting from a sales channel to a new market segment. We have started to see an accelerated pace in innovation in consumer brands' e-commerce approach - from creating the digital community to driving traffic to analytics-based communication and customization.
The writer Adam Xu is partner of PwC's Strategy.
