China: Online Growth in “Fast-Expanding Market” Mode
China’s online market with rapid development is at the “take-off” stage, corresponding to the “Fast-Expanding Market” (FEM) model.
This is the main conclusion in the article “Fast-Expanding ‘Online’ Markets in South Korea and China: Are They Worth Pursuing?” published by Associate Professor Adrian T H Kuah and Dr. Wang Pengji, from the Australian James Cook University Singapore Campus.
The FEM is a model that has sustained annual growth rate of over 15% for straight 3 to 5 years, with investors and entrepreneurs flocking in.
In the article, the authors expected the number of online buyers in the Chinese market to grow by 19.6% per year and the online retail to reach US$ 271-B in the next five years.
Extensive application of the social media, the rapid growth of middle-class consumers, and the convenience and variety of shopping are the 3 Key reasons for the fast market expansion, they explained.
From Y’s 2000 to 2014 there was a substantive uptake of Internet usage, with ever more customers applying social media such as Wechat and Weibo and, over 80% of them, learning about products through them, they wrote.
Then there was the significant enlargement of middle-class consumers with increased demand and are motivated by good prices, they pointed out.
The online shopping meets well the convenience and variety appeal of consumers, especially those living in the Tier 3 and 4 cities where their product choice is limited in many ways, they added.
In terms of China’s e-Commerce potential effects, the authors held, the manufacturing industries face both opportunities and problems.
While more small and medium enterprises will have easier access to the consumers. Lower entry threshold will lead to tougher competitive pressure in reducing their cost, they noticed.
How to find competitive advantage becomes an important topic for the manufacturing industries, they added.
Also, the traditional retailers will face more challenges.
With more and more consumers going online, how to keep the volume of consumers and sales is key to their survival, they wrote, pointing to the fact that many have started the O2O model or offering experience, product and service.
While online market penetration in the 1st and the 2nd Tier cities is increasing, the 3rd and the 4th Tier cities and rural areas will be the focus target for expansion, as huge potentials are tapped by the development of infrastructures and logistics.
Expanding internationally also is a direction of China’s online market development.
On the one hand, consumers decide to buy overseas via “Hai Tao” and other ways focusing on safety and quality, on the other hand, the e-Commerce platforms work to expand growth overseas.
For instance, the giant Alibaba (NYSE:ABAB) invested US$1-B in the Lazada platform, materially aiming to expand in the Southeast Asian and even global markets as they see them.
About Authors of article “Fast-Expanding ‘Online’ Markets in South Korea and China: Are They Worth Pursuing?”:
Assoc. Professor Adrian T H Kuah read his PhD at the University of Manchester. He has been a faculty at Manchester, Bradford, Nottingham and Huddersfield universities in the UK, and was a guest professor at Fudan University and Harvard University.
Dr Wang Pengji is senior lecturer also at James Cook University, Singapore Campus. She obtained her PhD from the National University of Singapore.
By Tian Shaohui
Paul Ebeling, Editor