Becoming one of China’s fastest-growing sectors in spite of the country’s slowing economy, the Chinese e-commerce market is at an all time high, thanks to the consumers who continue to make more purchases via the Internet, making it easier for foreign brands to enter and make a deeper presence in an otherwise competitive country. Sales on B2C websites are set to more than triple to US $ 102 billion in 2013 from around US $ 31 billion in 2011, according to Beijing-based research firm Analysis International. Accounting for a full 36% of the total online sales, apparel alone is the biggest single category making China e-commerce a significant opportunity for fashion brands in the not so far future…
Young, crowded and certainly a booming market with more than half a billion internet users, many foreign fast-fashion brands have already joined the ‘e’ multibillion bandwagon, including Zara, Japan’s Uniqlo, America’s Forever 21 and Sweden’s H&M. Zara already has more than 100 brick-and-mortar locations in over 40 cities in China and now hopes to take advantage of the rising popularity of online shopping among urban white-collar shoppers and those in third- and fourth-tier cities currently without physical Zara locations.
Arguing the potential of e-selling over physical stores, a report by BCG, a research agency said, “Physical retailing is expensive, as sky-rocketing real-estate prices eat up a much larger proportion of operating costs than in more developed markets and China’s distribution structure is still inefficient, but selling directly to consumers on the internet circumvents both of the cost outlays.” Another brand that reports its maximum profits coming from the Chinese ecommerce market is Gap Inc., the American clothing retailer which now plans to triple its China store count and capitalize further on the growth of e-commerce by shipping to over 300 cities.
In fact, witnessing the largest virtual footfall, China is soon expected to also become the world’s largest luxury e-commerce market by 2015, with record investment in 2011 with brands like Burberry, Gucci and Louis Vuitton making fairly swift progress and a raft of new entrants set to join the market in 2012 such as Net-A-Porter and Neiman Marcus, as well as designers like Alexander Wang.
Leave alone luxury, mass retailers like Walmart are also projecting an explosion in online sales in China just ahead of their announcement to enter the country through e-commerce. This comes soon after retail giant Macy’s investment of US $ 15 million in VIPStore, the domestic Chinese online retailer, and is on track to launch sales also on VIPStore’s luxury site, Omei.com, in Spring 2013, delivering “original priced” goods that are timely, exclusive, and readily available.
Online sites becoming a platform of choice for their favourite foreign products, the women in China are pumping money for this rapid market growth, coming from urban white-collar workers with relatively high incomes and a high brand awareness level. Expecting special perks, deep discounts, and online exclusives, the option becomes all the more lucrative for customers as they can get their favourite Louis Vuitton, Gucci, Prada and Chanel, at a discount price of around 20% compared to brick-and-mortar stores within China.
Shoppers can also occasionally find mass-market brands, such as Coach and Calvin Klein, 50% cheaper online. But apart from the brands that already exist with a physical presence in the country, what is now serving as a real opportunity are reports of Chinese consumers also being drawn to online shopping to find brands that are yet to enter the China market, including Topshop, ASOS and Miss Selfridge.
Today, e-commerce has a critical role to play in a sensible China retail strategy, and even though there are a fleet of brands who have already ventured into the same, soon enough there will be other retailers as well, as the concept grows bigger.
