Global intelligence company, Mintel, has revealed that “China’s online retail market has reached a critical mass”.
Business-to-consumer (B2C) online retail was tipped to reach 60%+ of total e-commerce sales generated throughout 2017. Of this B2C retail category, mobile online retail is expected to make up 80%+ of ecommerce sales.
Mintel estimated that “per capita online retail spend will rise to 45.7% of total per capita retail spend by the end of 2017; however, per capita online retail spend is predicted to hold steady between 2017 and 2019”.
In China, total B2C and consumer-to-consumer (C2C) online retail sales were predicted to climb to RMB 6.4 tn (€817.4 bn) by year-end 2017, having grown at a compound annual growth rate (CAGR) (compound annual growth rate) of 37.9% since 2012. This represents an almost fivefold growth rate in five years.
Niche versus multinational
The emergence of these smaller names heavily influences the changing face of the cosmetics world, largely as a result of the speed to market that can be achieved through an online-only presence.
“This reflects the growing diversity in the tastes and lifestyles of consumers”, which “is both a challenge and an opportunity to existing, larger brands”, Crabbe stated.
Is physical space necessary?
Continuous research must be carried out to ensure brands learn as much as possible about their consumers to keep up with “shifts in their tastes and growing diversity; otherwise, lose out to niche brands that serve these trends better”.
If the products are correct and what the consumers are specifically looking for then “scale can still be a benefit” and “bigger brands can learn from their more nimble, niche competitors and buy-up the more successful ones”.
“The future is the convergence of online and in-store. An online-only approach is a good way to start gaining wider interest, but, eventually, a physical presence is going to be necessary,” Crabbe sensed.
“However, that can be phased-in through the use of pop-up stores, in-store events and other means, rather than simply investing in the costly acquisition of physical store space,” Crabbe concluded
Online versus physical
While 57% Chinese consumers, do prefer to purchase pharmaceuticals and health care products in-store, in “all other sectors the combined total of those who shop online via a mobile device or lap/desktop is greater than the proportion who shop in-store”, Mintel pointed out.
The “immediate experience” that can only be obtained by the in-store shopping experience is a key draw for consumers. Of those asked, 62% of urban Chinese consumers say the ability to try, see, and experience products in-person before buying encourages them to shop in-store. Mintel also found that 55% say in-store shopping means they can get what they want faster.
The key drivers of the rise of online shopping can be put down to the speedy nature of online buys and the selection available. Of those asked, 65% of urban Chinese consumers say they find products cheaper online, while 63% say that online offers more choice.