Tata Group

Smaller Chinese cities lead way in shift to online shopping

Lack of choice in local malls is cited as a factor for spurring trade on retailer Taobao

PUBLISHED : Wednesday, 31 July, 2013, 12:00am
UPDATED : Wednesday, 31 July, 2013, 10:51am

Who are the most generous online spenders on the mainland? Surprisingly, it is not the cashed-up citizens of Beijing or Shanghai, but those who live in small cities and towns.

A study by the mainland's largest online retailer said shoppers from third- and fourth-tier cities spent an average of 5,628 yuan (HK$7,060) per person on the site last year, beating the 4,700 yuan splashed out by those in higher-tier cities.

It said about 30 million people from more than 2,000 county-level cities outlaid a total of 179 billion yuan on Taobao, up 87 per year on the year before.

Jeff Walters, a consumption researcher and partner of global consultancy BCG, said one reason was that more middle-class families were being created in lower-tier cities than top-tier ones and their purchasing power was growing fast.

"In addition, people in lower-tier cities have even more reasons to shop online than those in top-tier cities as many of them cannot find the brands they are looking for in their own cities," he said.

This was also reflected in Taobao's study. It showed people in smaller cities tended to pay more than those in large cities to buy big fashion and cosmetics brands such as Nike, Uniqlo and Clinique.

It said, for example, buyers in small cities last year spent an average of 765 yuan on Estee Lauder's products on Tmall, the business-to-consumer platform of Taobao, while their peers in big cities spent only 652 yuan on the brand.

"Online spending in lower-tier cities will continue to grow fast," Walters said. "Now many people in these places are still in their first or second year of buying online. As they get more comfortable with online shopping, they may purchase more big-item products from the internet."

According to the study, people from Yiwu city in Zhejiang - known as the mainland's small-commodities trade centre - contributed the most to the shopping site with total spending of 3.44 billion yuan.

The most enthusiastic individual Taobao customers are from Qingliu county in Fujian. Purchases from the county reached the equivalent of 20,000 yuan for every shopper - a high proportion of people's incomes in the county, Taobao said.

Walters expects an impact on traditional shopping centres as consumers increasingly look to online retailers for some of their day-to-day purchases.

"Apparently, consumers have got used to purchasing some of these types of goods online before looking for them in physical stores. This would have a significant impact on shopping centres," he said.