Mobile e-commerce to fuel Chinese retail

Despite the slowdown in China’s GDP growth, the Alibaba Group believes the country’s consumer economy will weather the storm and grow handsomely, largely fuelled by mobile e-commerce.

According to a recent report titled The New China Playbook by he Boston Consulting Group (BCG) in association with the with AliResearch, Alibaba Group’s research arm, even if China’s GDP growth slows to 5.5 per cent, which is a full point below the 6.5 per cent government target, the country’s consumer economy will expand by more than half to $6.5 trillion in 2020 from $4.2 trillion in 2015.

According to the report, e-commerce is expected to play a major role in the development of China as a consuming nation, a transition that is being accelerated by the growth of shopping via smartphones and other mobile devices.

“One of the most revolutionary changes in the Chinese consumer economy has been the astounding growth of e-commerce,” the BCG said. In 2010, online transactions made up only 3 per cent of total private consumption in China; online channels today account for 15 per cent of the total, a share that BCG projects will rise to 24 per cent in 2020 (in contrast, online shopping currently accounts for about 7.5 per cent of private consumption in the US).

The BCG does not foresee a marked slowdown in the growth of e-commerce. Over the next five years, private online consumption is expected to surge at a compound annual growth rate of 20 per cent, compared with 6 per cent annual growth in offline retail sales. Chinese consumption will grow by more than half to $6.5 trillion over the next five years from $4.2 trillion in 2015. E-commerce on the whole will account for 42 per cent of that growth.

BCG identified three distinct “megatrends.” First, rising incomes are fueling greater spending, and in new areas not seen before. Then there’s the growing prominence of China’s “young generation.” And finally, the shift from bricks-and-mortar retail to e-commerce will continue to play an ever-bigger role in China’s economy.

Overall, an incremental $2.3 trillion in annual consumer spending that China is expected to add over the next five years is almost like adding another Japanese consumer market onto the global economy, the report said.