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Published
Feb 18, 2021
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China is first country where e-tail outstrips physical retail

Published
Feb 18, 2021

China is to become the first country in the world to see e-commerce sales outstripping sales through physical shops with a new prediction saying e-tail should account for 52.1% of all retail sales (by value) this year.


Photo: athree23/Pixabay



eMarketer analysed quantitative and qualitative data from research firms, government agencies, media firms and public companies to reach that conclusion. It also interviewed top executives at publishers, ad buyers and agencies.

Its prediction would see Chinese online sales accelerating sharply from 44.8% of the total in 2020.

But reaching that 50%+ milestone is way out of the reach of every other country at present with second-placed South Korea set to reach only 28.9% this year and 31.6% next. The UK is in third place and its e-tail will make up 28.3% of the total this year and 28.5% in 2022.

The rest of the top 10 is made up of countries where online sales are or will be between 10% and 20% of the total this year and next. They include (in descending order) Denmark, Norway, the US, Finland, Sweden, France and Spain. 

Despite the US staying just ahead of China in overall retail sales ($5.506 trillion for 2021 vs $5.130 trillion in 2020), China will outpace the US by nearly $2 trillion in e-commerce this year.

KEY DRIVERS

So what’s driving the e-tail boom in China? After all, it’s a country that has been able to reopen its physical retail earlier than many other countries due to its success in containing the pandemic. That means e-tail might not have been expected to pick up pace so much.

eMarketer said there are several factors behind the boom. One is social commerce. It estimates that this grew by 44.1% in China last year and will grow by another 35.5% this year, reaching $363.26 billion. By comparison, social commerce in the US will be just $36.09 billion this year.

WeChat’s Mini Programs have become “ubiquitous” as Tencent’s super app has been in China for nearly a decade. But it was “only recently that its interface began to skilfully facilitate third-party e-commerce,” eMarketer said. “Mini Programs allow businesses to better leverage WeChat’s user base and have proven to be extremely popular among both merchants and consumers”.

Pinduoduo (PDD) has also made an impact as the “groundbreaking group-buying-meets-social-networking phenomenon has shot up from a 0.5% market share in 2016 to a projected 13.2% of China’s e-commerce market this year”. PDD “unlocked China’s rural e-commerce participation more effectively than any other platform,” we’re told.

Live-streaming has also had a big impact, especially combined with social media activity in video-centric platforms like Douyin being key here. 

And of course, we can’t ignore the coronavirus, Although China suppressed the threat far more quickly than any other country (and its economy has been operating almost normally for close to three consecutive quarters) consumer behaviour has still been affected.

And it looks like there won’t be much of a slowdown ahead. eMarketer is forecasting 11% e-commerce sales growth next year and said the $3 trillion threshold for e-commerce sales should be breached during 2022.

PHYSCAL STORES

So what might this all mean for physical retail in the country? Well perhaps it might not be as painful as it will in some markets given how much less developed retail remains in large parts of the country. 

eMarketer hasn’t said as much, but the biggest problems are possibly more likely to be seen in Europe and North America than China as their e-commerce markets grow steadily.

The UK has seen physical retail devastation in the past year with popular chains disappearing from the high street, retail jobs wiped out and a huge number of retail vacancies causing pain for the property sector.

This is something UK retailers might have been expecting, but not so quickly. Change that could have taken a decade or so happened in just a matter of months because of the pandemic. It’s likely that other European markets and the US could see a similar physical stores decline, but spread over a long period.

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