There is no doubt that
e-commerce
represents one of the key strategies to expand or to accelerate the sales in China. Small, medium-sized and big enterprises can trade their products and services efficiently through this mean, and it is not surprising e-commerce is expected to grow rapidly in China. Indeed, a report by Forrester Research Inc. (
www.forrester.com
) predicts that e-commerce in China will grow 20% annually through 2016. It must be stressed that China is the Asia’s top market for electronic retail, and e-commerce sales are set to grow 20,41% annually to reach $356 billion in 2016, and it is expected to generate $169 this year in China.
Let’s take the example of Tmall for example the retail arm of Alibaba. It is predicted that Tmall will Overtake Amazon by 2015 to become the largest Internet retailer in the World
(http://blog.euromonitor.com/2012/11/prediction-tmall-will-overtake-amazon-by-2015-to-become-the-largest-internet-retailer-in-the world.html
).
Having overtaken eBay to become the
world’s second largest internet retailer
, Tmall appears to be on an unstoppable trajectory to the top. The most astonishing fact? It is has managed to achieve all this growth from one single market: China. Amazon and eBay, on the other hand, have built up their businesses predominantly in the US and have managed to push their brands globally through localized sites. With the Chinese market still booming and the possibility of Alibaba taking Tmall to international markets, things look good for China’s leading internet retailer – so good, in fact, that if Tmall maintains its current market share in China (and Amazon maintains its current market share globally), the prospect of a new leader in the Internet retailing channel is not only realistic but highly likely by 2015.
World: A Look at the Top Three Internet Retailers by Sales, 2010-2017
Source: Euromonitor International
Tmall breaks the world record for single day sales
In what is perhaps a sign of things to come, Tmall broke all single day sales records on 11 November 2012, when it processed a staggering US$2.1 billion in a single day. This record was previously held by
Amazon in the US
on “Cyber Monday” in 2011. In a highly anticipated event, over 10 million consumers visited Tmall in the first minute of the sale, with a total of 213 million users logging in during the day. Despite China having lower penetration rates, smartphones played a vital role in boosting traffic and sales to the site, with 39% of sales being placed over Tmall’s mobile interface. Going forward, it is highly likely that mobile sites and apps will feature at the centre of Tmall’s strategy, in addition to single day sales.
With Tmall now responsible for half of internet retailing value in China, and the Chinese market forecast to grow rapidly in the near future, Alibaba which owns Tmall is expected to become global one day not to far away. Having said that, expanding abroad does offer some advantages. Growing its business outside of China helps mitigate the risk of being too reliant on a single market. China also only represents 12% of
global internet retail sales
, and with Tmall making most of its money as a platform provider, it will be interested in large developed markets such as the US (34%), Japan (10%) and the UK (9%).
However it remains to be seen how these platforms and their retailer arms can develop abroad properly. In fact not only the legal framework governing e-commerce abroad (outside China) could be challenging for these giants, but also the transition from being a domestic successful model to a profitable global retail platform is not foregone, because of the peculiarities of foreign markets. Tmall had a significant advantage in the Chinese market due to the user base from its Taobao C2C platform and Alipay merchant transaction system. Abroad these advantages may disaper due to the presence of other local competitors.
Cristiano Rizzi