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  • Writer's pictureGrégoire Musitelli (戈虎)

E-commerce in China: Who should you target as a Western brand?


E-COMMERCE OVERVIEW

In 2022, China’s e-commerce market reached $2.3 trillion, making it the largest in the world.

It has grown rapidly in recent years and has become a crucial part of the Chinese economy, transforming the way consumers shop. Despite economic challenges, the Chinese economy remains resilient, and consumer confidence continue to grow.


In 2020, the Chinese e-commerce market experienced a significant boost due to the COVID-19 pandemic. The pandemic accelerated the shift from brick-and-mortar stores to online shopping, leading to a surge in e-commerce sales. In 2020, online retail sales were up to 10% year on year.


The China’s e-commerce market size is expected to grow by +50% (from $1.3 trillion in 2020) to reach $2 trillion by 2025.



China’s middle class continues to grow! More and more families are joining the upper-middle-class ranks.

The middle class is characterised by an higher disposable income and greater purchasing power.

According to a report by McKinsey, China’s middle class accounted for 76% of urban households in 2022. This segment is growing and in the next three years, China is expected to add another 70 million uper-middle-class families.


This growth presents an opportunity for brands to target this demographic with high-end products and services.

They are looking for high-quality products and services that can improve their quality of life. With these developments, the Chinese market has been and continues to be an attractive destination for international brands looking to expand their sales and customer base.


HNWI IN CHINA

Despite economic challenges, the number of high-net-worth individuals (HNWI) in China continues to grow, and they are becoming increasingly important to the luxury market.

China has become the world’s largest luxury market having accounted for 35% of the global luxury spending in 2019 and is expected to surge to 49% by 2025.


They are looking for products and services that are of high quality and meet their unique tastes and preferences. Chinese consumers are nicreasingly seeking custom, personalised experiences and value-added services.


High-end brands win... Wealthier consumers have a greater preference for high-end brands, despite economic challenges. Brands that understand the needs of this demographic and offer quality, high-end products and services will have a significant advantage in the Chinese e-commerce market.


PRODUCT QUALITY IS KEY

According to McKinsey 78% of Chinese consumers consider product quality to be the most important factor when making purchasing decision.

Brands that prioritise product quality and transparency will build trust with consumers and increase brand loyalty and retention.



KEY CONSIDERATIONS FOR CHINESE CONSUMERS WHEN MAKING PURCHASE DECISIONS

Share of respondents*


Required efficiency/design : 40%

Safe/natural materials : 39%

Well-known brand : 33%

Quality is better than competitors : 30%

Reliable brand : 30%

Latest product in the market : 24%

Attractive promotions : 11%


Source : McKinsey ‘‘2022 China Consumer Survey’’

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