Domestic online giants to overtake MNC rivals as China’s favourite retailers

New consumer research shows that domestic online retailers are becoming as popular as multi-national brands amongst shoppers in China. eCommerce brands such as TMall (Alibaba Group) and JD.com (invested by Tencent) are now increasingly trusted businesses, offering far more than just cheap prices and convenience. At their current rate, one of them will likely take the top spot in the next two years, according to OC&C Strategy Consultants Greater China.

Although sportswear brands, Adidas and Nike, once again topped the latest rankings in Second Mover Advantage – The OC&C Retail Proposition Index China 2014 (The Index), Tmall now appears in the top three for the first time. In total, four of the top ten places are now occupied by Chinese online-only retailers – TMall, JD.com, YHD.com and Taobao. The rankings are based on the views of over 2,000 consumers across China who rated retailers against criteria including, trust, value for money and product suitability.

The growth in popularity of eCommerce retailers means that the Chinese retail landscape is starting to become more like other global markets where generalist, online-only players such as Amazon, tend to be dominant.

“As retail execution and consumer expectations increasingly mirror what we see in Western markets, it may only be a matter of time before a pure online-only player becomes the most popular retail brand in China,” said Jack Chuang, Associate Partner at OC&C Strategy Consultants Greater China. “Chinese consumers are becoming more confident and independent in their shopping habits and exercising greater choice between retail brands, particularly online.”

“This means that foreign retailers are losing their inherent advantage over their Chinese counterparts as the high-profile, trusted brands of choice with shoppers. The era of relying on their brand strength and its implied trust is coming to an end. Retailers will need to respond by tailoring their products specifically to the local target market.” he added.

The growth of eCommerce in China will continue over the next few years. The evidence from The Index highlights that the key challenge for traditional bricks and mortar retailers will be developing an attractive multi-channel offering (online as well as offline) to consumers. Some retailers in western markets are starting to fight back against the competition from online-only retailers and, in the long-term, this will likely also be a feature of the Chinese market.