Investors and entrepreneurs still see opportunity in China’s fast-growing e-commerce industry.
Of the 2,053 internet companies that opened their doors in China in 2016, 13% of them focused on online sales, including to consumers and businesses, according to a report from IT Orange, a Chinese market research firm that tracks Chinese startups. That put e-commerce just behind enterprise internet services, which includes cloud computing and business intelligence, according to IT Orange. E-commerce also has attracted the second-most startups over the past five years, IT Orange says.
IT Orange says investors and entrepreneurs are optimistic about e-commerce because of the growing demand among Chinese consumers for high-quality goods. Among the hot areas of investment are online grocery, logistics services, and sales of handicrafts, drones and products for charity. Innovative business models include selling customized products, social media shopping and online barter.
About 20% of e-commerce startups raised money successfully in their first year of operation in 2016, and investment institutions continue to invest heavily in fast-growing online commerce companies, according to IT Orange.
One of the largest funding rounds for an e-commerce startup was the $110 million raised in July 2016 by Shanghai Xunmeng Technology Co. Ltd, only 10 months after the fledgling company had launched its online shopping app Pinduoduo.
The app gives a social media slant to group buying. Users of Pinduoduo must purchase products as a group in order to get the discount price. And consumers who invite their family members and friends to shop via Chinese mobile-based social network WeChat receive cash incentives.
Thanks to its competitive prices and shopper posts on social media, Pinduoduo quickly attracted more than 100 million users and its monthly sales reached 2.5 billion yuan ($362 million) in 2016, the company says.
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