China leads the world in online shopping—by a wide margin. And the reasons that led to this retail e-commerce boom have created several important trends in China that may well show up in the near future in other advanced economies.

The e-commerce numbers are quite staggering. Chinese consumers made $1.149 trillion in online retail purchases in 2017, according to official government figures, more than twice the $455 billion purchased that year by consumers in the United States, the No. 2 online retail market in the world.

And online sales represent a larger share of consumer purchases in China than in other major economies. Of all retail purchases made in China in 2017, e-commerce represented 20% when counting both physical and digital goods, and 15% when counting only physical goods. Only the United Kingdom, with 16.4% e-commerce penetration, according to British retail trade group IMRG, is close. In the United States, online accounted for 12.9% of retail purchases, by Internet Retailer’s estimate, and that’s after taking out items hardly ever purchased online, such as gasoline and heating oil.

What’s more, online shopping is still growing rapidly in China, increasing 28% in 2017, a year when total retail sales in the country grew by 10.2%. Compare that with the 15.6% growth of retail e-commerce in the U.S. and 12.1% in the U.K.

What accounts for the success of online retailing in China? Jack Ma, who founded dominant e-commerce marketplace operator Alibaba Group Holding Ltd., has explained that the internet came along when China’s retail industry was weak. Retailing had been controlled for decades by bureaucrats in Beijing until the government made a turn to a market economy in the late 1980s, and Chinese retailers were just beginning to gain expertise in merchandising and marketing when e-commerce pioneers like Amazon.com Inc. and eBay Inc. began to show the world the potential of online sales.

Alibaba and JD.com are the biggest ecommerce retailers in China

Alibaba, founded in 1999 by English teacher Ma and a group of friends, quickly emerged as China’s leading online shopping company, a position it still holds today. Millions of small Chinese companies sell on the wide-open Taobao marketplace (anyone with a Chinese ID card can sell there), and larger companies—including many foreign brands—sell on Alibaba’s Tmall shopping portal.

Alibaba reported $768 billion in gross merchandise value of goods and services purchased on its China shopping sites in its fiscal year ended March 31, 2018. That means this one giant company accounted for about 65% of online purchases in China in 2017. Little wonder that BABA, the company’s stock ticker abbreviation for its shares traded on the New York Stock Exchange, commanded a stock market value of $400 billion early in 2019.

Alibaba’s biggest competitor is JD.com Inc., which trades on NASDAQ and had a market cap of about $32 billion in early 2019. JD.com accounts for about a sixth of China’s online retail sales.

Originally an online seller of consumer electronics, JD.com has broadened its selection and built a nationwide delivery network. Walmart Inc. owns about 12% of JD.com, and the two companies increasingly are working together to leverage JD’s online prowess to drive sales in Walmart’s more than 400 bricks-and-mortar stores in China

Eretailers move online-to-offline bring innovation with it 

Alibaba, too, has moved into physical retail, taking advantage of its large cash holdings. In 2015, it invested $4.56 billion in national consumer electronics chain Suning Commerce Co. Ltd. as part of a broad campaign it calls New Retail, a strategy of offering services that blur the lines between online and offline shopping.

Alibaba founder Jack Ma

In one example, during Alibaba’s annual Singles Day sales extravaganza in 2018, consumers could send friends and relatives digital variants of  “little red envelopes” that are traditionally exchanged as gifts around the New Year. Those digital gift cards could only be redeemed in participating physical stores.

There are many other examples of “online-to-offline” innovations in China, including Alibaba providing technology that allows small convenience stores to track purchases, see analytics of what consumers in their neighborhood buy and automatically replenish their stock—through Alibaba, of course.

China has the most advance mobile payment culture

But China’s e-commerce innovation that has attracted the most attention in more advanced economies is mobile payment, which is far larger in China than in any other major market. Consumers routinely pay with their smartphones in physical stores and restaurants, most often using Alibaba’s Alipay or WeChat Pay, a service of the ubiquitous Chinese social network WeChat that is owned by the country’s online gaming giant Tencent.

In fact, WeChat has become something of an e-commerce ecosystem in its own right. Retailers, car-hailing services, food-delivery services and even foreign luxury brands have created lightweight apps that allow a consumer to make purchases without leaving WeChat, using her mobile WeChat Pay wallet.

These services are immensely popular. Among Chinese smartphone owners, 76% have made a mobile purchase, compared with just 25% in the U.S., according to market research firm eMarketer.

The groundbreaking advances China has made in enabling consumers to shop and pay with their smartphones and in marrying online and offline retail may well point the way for the introduction of similar innovations in other countries.