Ten China Commercial Highlights 2016 series:

“Internet Plus” initiative drives e-commerce expansion; mobile commerce and rural

e-commerce high on the agenda

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Fung Business Intel l igence Centre

“Internet Plus” initiative drives e-commerce expansion; mobile commerce and rural e-commerce high on the agenda

91.2 billion yuan, an increase of 60% yoy. Mobile shopping

also reached a record high, with 95 million people

purchasing items on mobile phones. Total mobile GMV

accounted for 68.7% of the total, reaching 62.0 billion

yuan.

The mobile revolution in China provides huge opportunities

for Internet players as well as mobile app developers.

Many traditional retailers are now deploying various O2O

strategies to provide a better shopping experience for

customers. One recent O2O trend is the application of

mobile shopping apps in brick-and-mortar stores. One

example is the “Miaojie” app created by Alibaba in May

2015. Equipped with location-based beacon technology,

the app allows retail operators to deliver location-specific

information, such as current deals and coupons and other

personalised services. The app also supports in-store

mobile payments. Another case is the “Feifan” app

developed jointly by Wanda Group, Baidu and Tencent in

July 2015. Customers can use the “Feifan” app at selected

Wanda shopping malls and department stores. The app

integrates data on merchants and consumers, allowing

retailers to analyse the information and carry out

personalised target marketing campaigns.

Rural e-commerce takes the lead As China’s urban e-commerce market nears saturation

after years of explosive growth, the rural e-commerce

market is becoming the new growth engine for online

sales. In June 2015, the number of Internet users in rural

areas rose to 186 million, accounting for 27.9% of the total

Internet population. The number of online shoppers in rural

areas reached 77.14 million, a 40.6% yoy increase against

the 16.9% yoy growth in urban areas, according to the

China Internet Network Information Center. Thanks to the

rise of affordable smartphones, mobile penetration in rural

areas has been increasing rapidly. Within the rural online

population, 81.9% are able to access the Internet via

mobile devices, reflecting high growth potential for

m-commerce development. Indeed, the government is

optimistic about such digital developments in rural areas.

In November 2015, the General Office of the State Council

released its Opinions on Promoting Rural E-commerce.

The State Council estimates that the transaction value of

China’s e-commerce sector continues to attract the

world’s attention with its explosive growth and

transformative effect on the commercial

landscape. China has the world’s largest number of

Internet users and online shoppers, contributing

significantly to the phenomenal growth of the sector. As of

June 2015, China had 668 million Internet users, and 56%

of the Internet population shopped online. E-commerce is

now a major driver of growth in the “new normal” economy,

since many traditional industries have now embraced this

digital channel.

The announcement of the “Internet Plus” strategy by

Premier Li Keqiang in his March 2015 Government Work

Report further supports the growth of the sector. Our

experts expect the online sector will grow even faster in

2016, further driving the growth of e-commerce. They

identify two major forces that will shape the e-commerce

landscape in the coming year.

The continuing mobile revolution Chinese online shoppers are increasingly using mobile

devices to make purchases. The increasing penetration of

smartphones and growing prevalence of mobile payments

have made mobile shopping particularly popular. Data

from iResearch showed that the transaction value of the

online retail market amounted to 872.5 billion yuan in

2Q15, up 39.6% year-on-year (yoy) and accounting for

12.3% of the country’s total retail sales. Within the online

sector, the transaction value via mobile devices reached

443.5 billion yuan, up 133.5% yoy, growing at a rate faster

than the overall online retail market. According to the

National Bureau of Statistics, mobile commerce

(m-commerce) has been gaining market share at the

expense of PC-based transactions. In 2Q15, purchases on

mobile devices exceeded those generated on PCs for the

first time, accounting for 50.8% of online sales. Bain &

Company predicts that the share of m-commerce in online

retail transaction value will increase from 55% in 2015 to

70% in 2020.

Singles’ Day sales figures in 2015 also showed the growing

trend towards m-commerce. Alibaba’s total gross

merchandise value (GMV) on Singles’ Day amounted to

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Ten Highl ights of China’s Commercial Sector 2016

there is also an intention to establish new rural business models, nurture and develop rural e-commerce entities and develop a modern distribution and service network for rural products and services.

Realising the ample growth potential of the rural

e-commerce market, a number of leading retailers and

e-commerce players are adopting “going rural” strategies.

For instance, Suning Commerce Group has signed various

strategic partnerships with local governments to introduce

rural e-commerce initiatives. The company plans to open

1,500 service centres and 12,000 franchise depots in

lower-tier cities by the end of 2015, and employ 30,000

staff in the villages. On 25 September, 2015, Suning and

the State Council Leading Group Office of Poverty

Alleviation and Development signed a strategic

cooperation agreement to step up its poverty relief drive in

rural e-commerce. Leading e-commercial players such as

Alibaba and JD.com have also made substantial

investments in rural areas to expand their e-commerce

distribution networks.

The mobile revolution in China provides huge opportunities for Internet players as well as mobile app developers. Many traditional retailers are now deploying various O2O strategies to provide a better shopping experience for customers.

What the experts sayOur experts believe that the “Internet Plus” initiative will continue to drive e-commerce development and domestic

consumption in the coming year.

Recent measures have already contributed to this trend. In 2014 the government introduced a number of policies to place

greater emphasis on e-commerce when facilitating the upgrade and transformation of traditional retailers; in May and

September respectively these included the Opinions on Intensively Developing the E-commerce and Accelerating the

Cultivation of New Economic Power promulgated by the State Council and the Opinions on Promoting Online-Offline

Interaction to Expedite the Innovation Development, Transformation and Upgrade of Commercial Circulation announced by

the General Office of the State Council. They show the extent to which the government supports the development of

e-commerce. More such measures are expected in 2016.

While it is important for enterprises to implement their digital strategies, they must also strengthen their core competencies. At

the same time, enterprises need to leverage big data analytic tools to provide targeted products and services that consumers

wish to purchase. This is especially important in today’s consumer-centric environment.

rural e-commerce will hit 460 billion yuan in 2016,

narrowing the gap with urban e-commerce.

In its support for rural e-commerce development, the

government introduced a number of policies to boost the

growth of the market in 2015. They included the following

measures:

• In October 2015, an executive meeting of the State Council presided over by Premier Li Keqiang decided to earmark 140 billion yuan to upgrade the rural telecom infrastructure, and improve e-commerce in less-developed rural areas. Broadband coverage is expected to cover 98% of China’s villages by 2020.

• In September 2015, the Ministry of Agriculture, the National Development Reform Commission and the Ministry of Commerce (MOFCOM) announced an action plan to speed up e-commerce development for the farming and agriculture sector, and to establish sound e-commerce infrastructure and policies in rural areas.

• In August 2015, the MOFCOM and another 18 departments released the Circular on Promoting Rural E-commerce Development. The Circular aims to speed up rural infrastructure construction, improve government policies and deepen rural distribution system reform;

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Fung Business Intelligence Centre, Member of the Fung Group

Authors

Teresa Lam and Lucia Leung (Asia Distribution and Retail, Fung Business Intelligence Centre)

Contributors

Christy Li and Tracy Chan (Asia Distribution and Retail, Fung Business Intelligence Centre)

Administrator

Yu Di (Secretariat of the Expert Committee of the China General Chamber of Commerce)

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