Online consumer spending on physical goods in China slowest since 2015 amid maturing market and pandemic slowdown

Growth in online sales of physical goods is now on par with total retail sales growth at about 12 per cent, as e-commerce continues to decelerate

Total online sales of goods and services topped US$2 trillion last year, as consumer spending recovered from a pandemic-induced slowdown

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Shelves of inventory inside a Cainiao warehouse, the logistics subsidiary of Alibaba Group Holding, ahead of the company’s annual Singles’ Day shopping festival in Wuxi, Jiangsu province, on November 9, 2020. Photo: Bloomberg

Published: 6:00pm, 18 Jan 2022Updated: 6:20pm, 18 Jan 2022

Growth of online Chinese consumer spending on physical goods, the bulk of e-commerce spending, was the slowest in 2021 since the data started being recorded in 2015, according to the latest government data.

Online spending on physical goods including food, clothing and cosmetics grew just 12 per cent year on year in 2021, according to the data released on Monday by the National Bureau of Statistics.

The slowdown in online consumer spending casts a shadow over business prospects in the world’s second largest economy. After a rough 2021, partly the result of a government crackdown on Big Tech, e-commerce players such as JD.com, Pinduoduo, Meituan and Alibaba Group Holding, the owner of the South China Morning Post have been searching for new growth. The trend could also bode ill for the burgeoning live-streaming e-commerce market, in which TikTok owner ByteDance and Kuaishou Technology are significant players.

Growth in China’s maturing e-commerce market is now on par with the rest of the retail market, which grew 12.5 per cent for the year. Online sales made up 24.5 per cent of total sales for physical goods last year, a slight drop from the 24.9 per cent in 2020.

Sales of physical goods online have tripled since 2015, but growth has seen a steady decline since that year, when such revenue saw a 31.6 per cent jump over 2014.

Sales of all goods and services online grew 14.1 per cent last year to 13.09 trillion yuan (US$2 trillion), according to the statistics agency. It was an improvement over the 10.9 per cent the year before, when lower consumer spending took a toll even as many activities moved online amid the Covid-19 pandemic. Growth remained slower than in 2019, when online sales grew 16.5 per cent.

Barclays economists led by Jian Chang wrote in a research note that China’s consumer spending is expected to remain weak in 2022, in part because of China’s zero-tolerance approach to containing Covid-19, including the most recent Omicron variant.