This year, China will take a step in its digital transformation that once may have seemed almost unthinkable. We forecast that 52.1% of the country’s retail sales will come from ecommerce in 2021, up from 44.8% a year prior. That means that for the first time anywhere, a majority of retail sales for an entire country will transact online.
To put this further into perspective, China’s ecommerce success is unmatched worldwide. The country with the next-highest rate of ecommerce as a share of total retail sales is South Korea, which we project will transact 28.9% of its sales online this year. In the US, that figure will be just 15.0%, and the average among Western European countries will be 12.8%.
China has long led the world in aggregate ecommerce sales figures and ecommerce’s share of total retail. However, as recently as 2018, that share was only 29.2%, which is relatively close to what ecommerce’s share will be in South Korea and the UK this year.
Yet, China seemingly reached a behavioral tipping point over the past few years, wherein ecommerce enthusiasm accelerated rather than leveled off. While the pandemic did not create this trend, it certainly buttressed it, and China’s most recent ecommerce boom did not decelerate even after the country got a handle on the virus and the economy fully reopened. Last year, brick-and-mortar sales declined by 18.6% in China, and we project brick-and-mortar sales will decline by another 9.8% this year. By comparison, ecommerce grew by 27.5% in 2020 and will grow by another 21.0% in 2021.
Given how the pandemic boosted ecommerce engagement in much of the rest of the world last year, it is not inconceivable that other countries could soon find themselves making transformational leaps akin to China’s. Ecommerce adoption has a momentum of its own, regardless of public health concerns, and there may be an as-yet-undetermined tipping point beyond which ecommerce’s share of sales suddenly and inexorably spirals upward.
That said, China’s ecommerce success also derives from many idiosyncratic factors, and it’s possible that no other region will emulate the country’s ecommerce transformation—or at least not to such an extreme degree.
Ten years ago, ecommerce’s share of total retail in the US and China were nearly identical (4.9% and 5.0%, respectively). China’s share shot up soon after that for a range of reasons, some of which will be familiar to outside observers, and some of which might be surprising. The foundations of China’s ecommerce story can be traced to handful of storylines from the 2000s and early 2010s:
Not all of these factors are still in play. Labor costs in China have skyrocketed, and most buyers and sellers can no longer arrange for consumer products to be delivered within hours for just a few cents. Similarly, the in-person shopping experience has improved dramatically, thanks perhaps to competition from ecommerce. However, both of these elements played a key role in the consumer’s initial embrace of ecommerce. In the early years, it was often cheaper, easier, and more pleasant to use ecommerce than it was to go to the store. That was not the case in the US.
Thanks to this early enthusiasm—and, of course, thanks to its enormous population—China today is far out in front of the world in terms of overall ecommerce sales. Despite the US remaining just ahead of China in overall retail sales ($5.506 trillion versus $5.130 trillion in 2020), China will outpace the US by nearly $2 trillion in ecommerce this year.
China’s culture of mcommerce is still very relevant today as well (83.1% of ecommerce in China will be mcommerce this year, according to our figures). Thanks to the early availability of affordable smartphones and their rapid proliferation, online retailers in China have had to be mobile-centric since day one. This in turn has driven greater mcommerce innovation, which itself has proven key to unlocking ever-greater consumer spending.
As China’s ecommerce figures continue to surge, the still-expanding base of smartphone users is enabling China’s new success stories.
If the aforementioned set of historical factors drove China to the global lead for ecommerce sales and ecommerce’s share of total retail, a new set of factors can be credited for the recent boom that pushed ecommerce over the 50% share threshold. The story now centers on China’s phenoms of the 2020s:
Going forward, we anticipate more of the same from China. In 2022, we project that ecommerce will grow by 11.0%, and that its share of total retail will reach 55.6%. Ecommerce sales will breach the $3 trillion threshold (we forecast $3.085 trillion for next year). Only two things will prevent nearly endless standout ecommerce expansion: China’s overall retail sales growth is expected to be far more constrained in the coming years than it has been over the past decade, as China’s economic engine is not what it once was. What’s more, several hundred million people in China are not yet online at all, and thus growth from these consumers will have to wait until a little later down the line.
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