Growth in online shopping on mainland has reached its peak, report claims

PUBLISHED : Saturday, 18 April, 2009, 12:00am
UPDATED : Saturday, 18 April, 2009, 12:00am

The explosive growth of internet shopping on the mainland has reached its peak and will drop rapidly in the coming years, according to an industry report.

It said that while online shopping transactions on the mainland grew more than 110 per cent in 2007 and nearly 130 per cent last year, it would drop to about 80 per cent this year and less than 40 per cent by 2012.

Jerry Young - business director of Market Avenue, an international consulting company that specialises in mainland market analysis - said the conclusion was based on comprehensive data and a rigorous econometric model.

'No market can sustain such growth rates for long,' he said. 'The mainland online shopping sector has reached the peak in its puberty. It will continue to expand with impressive speed, but nothing as close to the explosive growth that we have seen in the last couple of years.'

Mr Young said the financial crisis would play an important role in the growth slowdown. The consumer base of nearly 80 million names would also weigh against any further three-digit percentage expansion.

'The number of potential customers, or internet users, will increase, but only at a much more moderate manner, limiting the annual growth rate of online shopping,' Mr Young said. 'But it may be good news to both customers and suppliers, as the slowdown also means a more mature market.'

The report estimated that by 2012 the total market volume would reach 791 billion yuan (HK$897 billion), more than six times the present level. But even during this period, mainland expansion would still be one of the fastest in the world.

But some analysts thought the report's estimate was too conservative.

Ruan Jingwen, senior vice-president of the iResearch Consulting Group, said the company was also doing similar research and early results suggested the growth rate of internet shopping would continue to double for the next few years.

'Thanks to the global economic recession, more people are buying things online than ever,' he said.

'Why do consumers choose internet shopping? An important reason is that it is cheaper than traditional retailing, and the products that people receive on delivery are exactly the same as those on display in large shopping malls.

'Commodities that are most frequently bought online, such as books, portable electronics and garments, are affordable to most people, regardless of the economic conditions. Therefore, while the global financial crisis has already dealt a severe blow to many other industries, online shopping will still have a more than 100 per cent annual growth rate on the mainland.'

Mr Ruan said that in recent years the government had made a concerted effort to regulate the market.

'There will be fewer counterfeit products and more online shops will win business on the strength of their good credit and reputation,' he said.

'Some companies used to be reluctant or even hostile to the online shopping mode. They were afraid that dealing directly with customers would be troublesome and reduce profits. But now an increasing number of them have changed their minds and begun to participate. In some cities, even newspapers are converting their delivery networks to deliver online shoppers' purchases.'