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Consumers

Further growth in China’s e-commerce lies in omnichannel retail

Increasingly discerning Chinese consumers will demand a better shopping experience from retailers, despite a slower pace of growth for online sales

PUBLISHED : Thursday, 22 June, 2017, 10:17pm
UPDATED : Friday, 23 June, 2017, 7:49am

Seamless integration of online and offline channels holds the key for mainland China’s retailers to meet the demands of increasingly discerning consumers as e-commerce growth slows, global consultancy McKinsey & Co said on Thursday.

That integration is expected to improve consumer experience to further unlock purchasing enthusiasm from shoppers as online sales, a previous major growth engine, slip to a more modest pace of growth.

The mainland’s e-commerce gross merchandise volume growth is expected to slow to 19 per cent this year, before further dropping to 16 per cent next year, compared with the staggering 74 per cent rise in 2011, the consultancy said.

It will be more difficult and demanding for the industry to grow at a fast clip even with a larger customer base, following rapid expansion in the past several years.

The mainland’s e-commerce sector, which is the world’s largest, is equivalent to the combined size of the next six biggest markets of the United States, Britain, Japan, Germany, South Korea and France.

Online retail sales on the mainland are forecast to reach US$812 billion this year, accounting for 17 per cent of the nation’s total retail market.

McKinsey said another reason for the expected slowdown in domestic e-commerce is that the crowded mainland market is nearly reaching maturation after brands scurried to set up their business-to-consumer shops on major online platforms, such as JD.com and Alibaba Group Holding’s Tmall, from 2010 to 2015.

“Our latest research findings show that Chinese shoppers have come to expect that their offline and online shopping activities will be integrated into seamless omnichannel journeys,” said Lambert Bu, a McKinsey partner in Shanghai, quoting findings from a survey of more than 5,900 consumers on the mainland earlier this year.

“Yet the potential is not fully tapped.”

...Chinese shoppers have come to expect that their offline and online shopping activities will be integrated into seamless omnichannel journeys
Lambert Bu, McKinsey

For instance, most consumers are happy to embrace omnichannel experiences, yet few have taken advantage of options such as shopping online and collecting the items at brick-and-mortar stores.

Shoppers’ high expectations, in sharp contrast to their low adoption rates, suggested that retailers need to fix their omnichannel offerings while providing more advanced services such as in-store virtual reality experiences and online product customisation, the consultancy said.

Swift delivery is another determining factor, according to McKinsey.

There are growing signs that mainland shoppers want to buy as and when they are in the mood, such as while they are learning about a new product from a chat with a friend on the social media app WeChat.

To monetise such buying impulses, retailers must enable shoppers with the right tools to immediately act on their desires.

The McKinsey research indicated that making deliveries within one hour will not just lead to more sales, but also significantly increase consumer satisfaction.

New York-listed Alibaba owns the South China Morning Post.

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