China on track to compete with US in global e-commerce market

Source:Global Times Published: 2020/1/2 22:53:40

Tmall's black cat mascot poses besides a Maserati SUV Levante 350HP at Alibaba Group Holding's headquarters in Hangzhou, capital of East China's Zhejiang Province. Maserati was showing off the car to promote the opening of its flagship store on Tmall, Alibaba's online shopping site. The first 100 vehicles put up for sale on the store sold out in 18 seconds. Photo: CFP

Though American consumers made a record amount of online purchases during this holiday season, US e-commerce retailers continue to operate under great pressure. As online goods are almost three times more likely to be returned than those purchased in stores, US shoppers are forecast to return roughly $100 billion worth of unwanted goods bought over the holiday, the Financial Times reported.

The record scale of returns will undoubtedly eat into the potential profit margins of US e-commerce retailers, margins which have already been reduced due to China-US trade war tariffs.

By comparison, e-commerce retailers in China have been far more successful. In 2018, their gross merchandise value (GMV) amounted to 6.9 trillion yuan ($990 billion), nearly doubling the US' $517 billion. China remains the world's largest e-commerce market, accounting for 54.7 percent of the global total.

The US was the first country to see the emergence of e-commerce retailers, with Amazon having been founded in 1995. But why was the US overtaken by China, a latecomer, in 2013?

One explanation may be China's manufacturing boom, which has seen residents' incomes rise and product prices fall sharply, leading to increasing consumer demand. Another factor that differentiates the Chinese and US markets is the cost of delivery, which is much lower in China than in the US. The US delivery market is dominated by three giants - USPS, UPS, and FedEx - and less competition has made it easier for delivery companies to increase their prices every year. In China, however, competition is fierce among various courier companies fighting to seize more of the market share through extremely slim profit margins.

Last but not least, with the rapid development of China's telecommunications sector, China has already entered the era of mobile e-commerce. As of June 2019, the country had a total of 847 million mobile internet users, according to a report issued by the China Internet Network Information Center. Most of these users are able to use their mobile phones to shop online thanks to the widespread coverage of 4G base stations across the country. And now, with the launch of commercial 5G usage, it is believed that the e-commerce market will see further growth. 

Of course, it should be acknowledged that although Chinese and US e-commerce retailers have unique competitive advantages in their own countries, the US is still ahead of China when it comes to global e-commerce market competition. But Chinese e-commerce retailers have become strong competitors to their US peers, particularly in certain critical regions such as Asia.

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