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The growing power of Chinese Ecommerce

China's Ecommerce

Research house Forrester recently revealed that the Chinese ecommerce market is expected to be worth $1.8 trillion by 2022 – more than double that of the US market and more than ten times that of the Japanese market.

The country has a huge population and is known as a hotbed of digital innovation, but it still has massive room for growth in online shopping, with only 38% of its citizens currently spending digitally.

The market is expected to capitalise on some of this untapped potential, with Forrester anticipating a compound annual growth rate (CAGR) of 8.5% through to 2022.

A large portion of Chinese ecommerce happens on mobile devices, with 76% of purchases being made this way. And mobile payment is strong too, with “80% of metro Chinese shoppers using Alipay and 66% using Tencent’s WeChat Pay to pay for a product or service in the last three months”, The Drum writes.

One of the two dominating companies in the Chinese ecommerce market, Alibaba, is probably the best known Chinese tech firm in the west. The market there is unusual, with quite significant levels of state intervention leading to a selection of very large companies. They also tend to explore international business less than large western corporations.

But Alibaba, among a few others like Tencent and Didi, has escaped western obscurity in recent years, becoming recognisable to casual observers, in large part due to its efforts to expand abroad.

The company is going through an interesting phase at the moment. Its long-serving and charismatic chairman, Jack Ma, is stepping down, to be replaced by chief executive Daniel Zhang.

Ma’s departure doesn’t seem to have done a huge amount of damage to the company – though he has steered it to a huge level of success, it was not an acrimonious split, and Ma has not left for a competitor. Instead, he wants to go back into education.

At the same time, the company has entered into a deal with the Moscow sovereign wealth fund and an oligarch who owns mail.ru and the country’s second largest phone operator, Megafon.

The Russian Direct Investment Fund and investor Alisher Usmanov will take minority stakes in AliExpress Russia, which will sell Chinese-made products. The deal, the Financial Times writes, is the “first major joint venture between Russian and Chinese companies.”

The FT also writes that the move is a deliberate aim to target and disrupt Amazon’s dominance. Much like China, Russia has dominant social media and telecoms organisations, allowing companies that have an ‘in’ with them to quickly establish themselves.

As mail.ru chief executive Boris Dobrodeev told journalists, “Russia has never had a major local ecommerce player. We’ll be the number one player from day one after the deal closes.”

The Chinese approach

Both Russia and China have approaches to the digital economy and internet regulation that is, to many, somewhat questionable. Russian interference in elections is widely discussed and often makes the front pages, while news broke recently that a rival politician to Vladimir Putin had adverts taken down by Google in accordance with local advertising laws.

But we know that China’s economy is extremely strong and in a position to challenge the dominance of the US on many fronts, with ecommerce being just one of those. And pursuing strategic partnerships, such as this with Russia, is arguably just a legitimate business tactic.

What it tells us is that Chinese ecommerce and its digital economy more generally, is here to stay, and the money and power may start shifting away from Silicon Valley and London, and towards Beijing.

A changing market

For those working in the industry, that may mean that a new world order may be on its way; Amazon may start to lose its grip, or new companies with new ways of doing things might enter the market.

The Forrester report, for instance, found that three-quarters of Chinese digital purchasers were classed as “demanding, advanced, and innovation-hungry digital shoppers” compared to only a quarter in the US.

If Chinese ecommerce companies are used to catering to these kinds of customers, they may well bring with them a change in the way that ecommerce is done in the west, and the demands that are placed on the people behind those platforms.

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