It's a bit of an understatement to say online shopping is popular and flourishing in China. The growth of China's e-commerce sales has outpaced that of the U.S.—growing at a rate of 52% year-over-year in 2014 versus 17% for the U.S. And online shopping's share of total retail sales of consumer goods is higher in China (10.6%) than in the U.S. (8%).
In urban areas, mobile has helped fuel e-commerce growth. In 2015, 71% of urban online shopper used mobile phones to shop online, up from 51% in 2014. With more options for consumers thanks to new technology, both browsing and purchasing with e-tailers are on the rise. And shoppers all over China are joining this trend. In fact, among rural netizen, online shopper penetration grew 41% from 2013 to 2014 (more than growth in cities, which was 16%). However, the growth in digital shopping has reduced in-store shopping. In-store hypermarket shopper penetration fell 11% year-over-year, emphasizing the importance for all retailers to enter the online space.
With rapid growth increasing the competitors in this space, however, how can retailers win?
With retailers of all sizes and nationalities looking to tap into this large and eager consumer base, understanding what's driving these shoppers is essential for success. While China's shoppers have been quick to join the e-commerce trend thanks to frequent promotions and low prices, they're no longer just looking for the lowest price. China's online shoppers are growing more mature or "rational," and rational shoppers make up almost 40% of urban online shoppers. These more mature consumers see the e-tail space as a place to find quality with the reasonable prices and better shopping experience they want.
The increase in rational shoppers and more mid- to high-income online shoppers have driven an overseas online purchasing craze in China. In 2014, 32% of respondents to a shopper survey said they've already purchased overseas goods online. And the percentage of online overseas purchases has doubled in the past year. Many rational shoppers have turned to overseas outlets, like Amazon, or overseas online shopping agents, to procure genuine and original foreign brands. These shoppers are searching for quality and are willing to pay a premium for assurances of product quality.
It's not just product quality that's important, however. Today's online shoppers have come to expect more from online, and platform, packaging and shipping, among others, can all affect the quality of consumers' experience. As a result, attention to the importance of logistics is crucial to winning and keeping shoppers. More systematic assessments of the shopping experience, real and fair feedback to help shoppers make purchasing decisions and stricter assessment criteria for the products and courier agency are all areas where e-tailers can improve quality and brand equity.
But the opportunity to provide quality shopping isn't just for overseas retailers. "Local giants" have been gaining ground within the markets, and shoppers are paying more attention to these e-tailers’ quality and, in turn, brand equity. In the past year, local online platforms with high quality and better shopping experience—such as Tmall and JD.com—have seen their brand equity go up, while ones with lower quality or inauthentic goods have seen brand equity decline.
With the rise of local competition, however, the classification of e-tailers is becoming increasingly diversified. Integrated and single-category e-commerce platforms, as well as O2O (online to offline) e-tailers, all serve different consumer needs. But the wider choice of e-tailers has also left shoppers with too many choices and makes online product browsing and searching less convenient than before.
An organized online story is essential to stand out with shoppers in this crowded space. Information overload on such diversified platforms leaves shoppers looking for precise and useful messages. In the short term, retailers can offer and organize product portfolios based on shopping missions or consumption occasions—such as stock up shopping versus impulse buying—to help consumers parse through the many options available in today's online marketplace. In the long run, however, big data will help retailers identify the most useful information for individual shopper and highlight most relevant products to them with precision marketing.
Consumers are increasingly using social media recommendations to go to shopping sites. This year, 23% of online shoppers are entering online shopping sites through links shared by friends, up from 12% in 2014. And this is part of a larger global trend with consumers placing higher value on suggestions from social platforms. In 2015, 26% of respondents to our global survey on new products cite social media postings as a top source of new product awareness, up 11% from 15% in 2012. As a result, social media can be an efficient way for manufacturers and retailers to reach shoppers.
And social media can be even more valuable when combined with mobile. Mobile makes it convenient to reach shoppers and for them to shop by creating a link between customers' locations and payments. For example, a smart lifestyle centered around mobile access can identify stores near a customer's mobile, send them coupons and push notifications and even allow them to pay via mobile phone. Mobile shopping also brings more innovative shopping occasions. Product-oriented apps can use mobile app location services to push product info, sales, coupon, etc., while social-oriented apps use circles to help retailers reach the right consumers.
To win in today’s e-commerce, e-tailers and brands should focus on providing quality product and improving shopping experience to meet consumer needs. Wisely organizing products through better engagement with consumer shopping and consumption needs can also help reach consumers. With all the momentums built up, innovative mobile shopping technology can further unlock online shopping's potential.
These insights were first shared at Nielsen's Consumer 360 in Shanghai on Sept. 8, 2015.