A growing middle class, a change in buying habits and the expansive reach of the Internet will keep China’s online retail momentum strong, according to a Forrester Research Inc. report, “China Online Retail Forecast, 2014 to 2019”.
Consumers want higher-quality goods and more imported products, and they want to buy them online, contributing to Forrester’s estimate that China’s online retail sales will exceed $1 trillion by the end of 2019. Total online retail spending is expected to increase at a compound annual rate of almost 20% until 2019.
Online retail sales have surged as a percentage of total consumption, representing 9.8% of total retail sales in 2014, up from 2% in 2009, according to the report.
And mobile sales will grow faster than online sales in the next five years, according to the report released this week
Online retail sales also will increase in the country’s more rural locations as more consumers outside China’s cities get access the Internet and use their smartphones to shop.
“Residents of small towns, migrant workers in top-tier cities, and affluent consumers in smaller cities—consumers who have historically had little access to brands due to a limited number of retailers and the scarcity of goods—have growing purchasing power to put toward online shopping,” the report states.
“There is no big-name retailer that can be found in all of the country’s geographical regions and which covers large cities through to small towns. Per capita retail space is only 0.6 square meters in China—less than one-quarter of the 2.6 square meters in the U.S.,” according to the report.
E-commerce merchants also should benefit from the Chinese government’s policies that aim to improve the Internet economy. In November, China’s State Council issued a report that called for increased promotion of e-commerce and logistics.
The report notes that several major e-commerce companies in China are investing in improving delivery infrastructure. For example, Alibaba Group is leading a group of companies that is building what they call the Cainiao network, which aims within five to eight years to be able to deliver online orders in 24 hours to anywhere in China. JD.com, No. 1 in the Internet Retailer 2014 China 500, has its own logistics network and as of February 2014 had seven distribution centers and 97 warehouses in 39 cities, Forrester says It offers same-day delivery in 111 counties in China. In October it announced its first automated warehouse, in Shanghai, which can sort up to 16,000 packages per hour, the report states.