Mobile commerce – in short m-commerce – in China is bigger than anywhere else. A simple click on WeChat or any other platform brings shoes, food and any other product directly to your doorstep. What exactly is behind the rapid growth of m-commerce in China? I have a few clues I’d like to share.
Recently I returned to China from a trip to Europe, and I noticed something. At the airport, in the train, waiting for the taxi lines, in the streets of this great city Shanghai – everyone is busy working, entertaining themselves or buying goods on their smartphone. The Chinese urban citizens shape their lives around their smartphone, buying virtually everything they need on the web – from food to furniture and even cars.
High share of total retail spending
At approximately $630 billion of sales in 2015, China’s online retail market is the world’s largest, nearly 80 per cent bigger than the US, says McKinsey China (survey april 2016). E-commerce in China accounts for 13.5 per cent of total retail spending, a higher share than that of all developed economies except the United Kingdom.
In China, half of e-commerce spending is done through mobile devices. This isn’t too much of a surprise since China had 557 million mobile internet users in 2014 out of a grand total of 649 million web users. The rate of growth in m-commerce is immense: at the end of 2014, Alibaba reported mobile-based consumers racking up 42 per cent of total expenditures on its Taobao and Tmall marketplaces. That was up from 20 per cent just a year before!
Access via mobile
I found one more interesting statistic: an overwhelming majority of China’s internet users now regularly access the internet via mobile phones – 87.4 per cent, versus 74.6 per cent of US internet users.
Why is the mobile share of e-commerce growing so fast in China? One answer is that Chinese work long hours, often even Saturdays. The smartphone saves them a lot of time. Traveling in trains, buses and taxis, waiting in line, the time that was previously lost is now made useful again by the smartphone. Most people have very little time to go to a store after work and to buy groceries – many Chinese will go online to buy goods there, or order food to be delivered.
That brings me to one of the key factors in e- and m-commerce: low cost of delivery, due to the scale of economies, technology, and affordable salaries. Having someone bring a package from point A to B across the large city of Shanghai hardly costs more than the equivalent of one or two euros. Having something delivered by ordering via m-commerce will cost the vendor little. The same goes for offering the service of quick and easy pickup in case the product is not right, not the right size or simply not your style.
The ability to order almost anything via m-commerce, have it delivered, picked up and redelivered in the same or next day – at no/low cost! – is a very common business practice. A big advantage of brick and mortar stores is the ability to ‘try before you buy’, but ecommerce players are adapting to end that. For example, I recently ordered footwear I was not sure about, simply because they offered easy and inexpensive return policies.
Favourite mobile platform
WeChat is China’s favourite mobile platform and its rampant success is hard to explain. WeChat started as a simple messaging app like WhatsApp but has evolved into a multipurpose platform essentially combining the features of Facebook, Amazon, WhatsApp and more all in one. Furthermore, the individualized ‘store’ and content pages allow service providers to customize their offerings and communication with potential users. Advertising and selling a product is easy, as is buying. Whatever you see online, in magazines, on billboards, just scan the QR code that is often featured in the message, buy the product according to your wishes and wait for delivery!
I am still amazed by the central role that WeChat has taken in China’s society. It certainly helps that WeChat has a very convenient wallet ‘on board’. Many people pay for their daily purchases by holding their phone/WeChat wallet in front of scanners – in store, at bus and train ticket windows – anywhere!
Another part of the story is that China’s middle class is still growing. Not all of them live in big cities, many live in third-tier cities and even in rural areas. For them, taking part in the new consumption era can most easily be done online – with their new smartphone.
Earn the trust
Since you can buy everything on your phone through WeChat, TMall, Taobao and JD.com, the key word is trust. The platforms, the brands and the vendor do everything in their power to earn the trust of the m-commerce customer. Quick, easy and free return policies, good information on the site about the product, phone sales teams to answer questions: it all matters. What helps a great deal is features such as AliPay, a transaction intermediary similar to PayPal, except that it only pays the vendor after the customer confirms it is happy with the purchase. Not happy? Start a dispute with one click on a button and wait for the solution± have your product replaced by a better quality alternative or simply return it. Customer service and transparency all in one!
So in a way, with m-commerce, the customer is king. More than ever. International companies that want a piece of the ‘action’ should be very aware of the high standards that apply for e- and m-commerce. When you fail to meet these standards – in logistics, delivery, response time, sales support, service recovery, etc. – it will be hard to win back trust. Chinese buyers have become increasingly demanding.