E-commerce dominates retail ranking in number of brands and brand value
Sales increasingly transacted on mobile devices
Retail and e-commerce have become almost synonymous in China. In a country where mom-and-pop shops dominate, mom and pop today are buying and selling online with everyone else.
Our BrandZ™ Top 100 Most Valuable Chinese Brands research captures this change dramatically. Just four years ago, in the 2014 BrandZ™ China Top 100, only one retail brand appeared in the ranking – the bricks and mortar consumer electronics store Suning. This year, six retailers appear – predominately e-commerce brands. And Suning, which maintains a major online presence, is now part owned by China’s largest e-commerce retailer, Alibaba.
E-commerce now accounts for 94 percent of the retail category value in the BrandZ™ China Top 100. Along with Alibaba and Suning, these other retail brands appear in the 2017 BrandZÔ China Top 100: JD.com, China’s second largest e-commerce brand; Vip.com, a newcomer to the ranking; the supermarket brand Yonghui; and Suning rival Gome.
Among Chinese e-commerce users, music and travel are the most popular categories. Three-quarters of Chinese e-commerce shoppers purchase music online and two-thirds purchase travel products and services. Apparel, media services, and technology are also relatively popular online purchases.
E-commerce growth potential is still significant, as market penetration was only 46 percent in 2016, roughly comparable to Brazil and the US, according to a TNS Connected Life study of e-commerce penetration across 56 country markets. Although current online purchasing is low in hygiene products and food and drink, for example, a higher percentage of consumers say they would consider making a purchase.
The medicine category prompts the highest rejection rate for the use of e-commerce in purchasing, which is not surprising because of the safety issues. Automotive also generates a high rate of e-commerce rejection, but also illustrates potential, as China is one of the few countries where consumers purchase cars online.
E-commerce traffic increasingly happens on mobile devices. On Double Eleven Day, China’s fall shopping holiday aimed at young people, when shoppers spent a total of $17.8 billion, Alibaba’s Tmall site produced sales of $12.1 billion, 82 percent from mobile transactions, according to GroupM. The mobile proportion of Double Eleven Day online revenue more than quadrupled since 2013 when it drove just over 15 percent of online revenue.
E-commerce has grown tremendously over the past several years in China and, even more important, great potential remains. Retail brands must continue to develop their online capability and strengthen O2O (online and offline) coordination. Only the music and travel categories are saturated with e-commerce. In most categories, significant opportunity awaits brands that can combine the best online experience with rapid fulfillment.
Chinese operators are especially good at O2O execution, probably surpassing the West, in part because of their worldview. When confronted with competing channels, they are more inclined to seek holistic harmony rather than to make binary choices. Chinese operators also are fast. Categories can develop their e-commerce capability rapidly, and brand players need to be prepared to swim in a strong current. Finally, it is important not to neglect other channels, which still account for most retail business in China.
E-commerce dominates retail in number of brands…
In the 2014 BrandZ™ Top 100 Most Valuable Chinese Brands ranking only one brand appeared in the retail category – the bricks and mortar consumer electronics store Suning. This year six retailers appear, predominately e-commerce brands.
… And in the proportion of brand value…
E-commerce brands comprise 94 percent of the retail category value in the BrandZ™ Top 100 Most Valuable Chinese Brands 2017.
… but great e-commerce potential remains…
E-commerce is well developed in China, but the growth potential is significant, as market penetration was 46 percent in 2016, comparable to penetration in Brazil and the US.
… And e-commerce potential crosses many categories
Among Chinese e-commerce users, music and travel are the most popular categories. Although current online purchasing is in low for hygiene products and food and drink, a high percentage of consumers say they would consider making a purchase.
E-commerce increasingly happens on mobile devices
On Double Eleven Day, China’s shopping holiday aimed at young people, when shoppers spent a total of $17.8 billion, Alibaba’s Tmall site produced sales of $12.1 billion, 82 percent from mobile transactions.