China’s booming e-commerce industry inspires global retail transformation

China's e-commerce industry has continued to thrive despite the impacts of the COVID-19 pandemic, with online retail sales hitting 11.76 trillion yuan (about $1.82 trillion) in 2020, up 10.9 percent year-on-year. Behind this strong growth and world-leading resilience are new business models and a consumer market fueled by advances in digital technology.

While Alibaba and JD.com have been two of the traditional e-commerce powerhouses, Pinduoduo has managed to capture a rapidly rising share of the market with its attractive features and a business model that focuses on social shopping. Short-video apps, including Douyin and Kuaishou, are also moving full steam ahead into the sector, brimming with new ideas and business practices.

Accelerated by livestreaming, the e-commerce market in China has shown a clear trend towards the integration of online and offline shopping experiences. This trend builds connections with consumers on wider and deeper levels, turns one-off sales into long-lasting relationships, and fosters organic interactions between brands and consumers.

The success story of Perfect Diary, a young Chinese makeup brand, demonstrates some of the exciting dynamics in today’s e-commerce market. Relying on WeCom, a business communications and office collaboration tool developed by Tencent, the brand has introduced the distinctive features of its cosmetic products, demonstrating their beauty effects and offering digital coupons, doing so all on one platform so as to facilitate an enjoyable shopping experience.

After clicking to follow the account, a customer will receive highly personalized advice and recommendations, garnering a greater understand about specific products through images and text, and having the chance to take advantage of great deals. Essentially, WeCom allows the brand to manage an all-inclusive suite of services that range from promoting shoppers’ interest in certain products to placing a first order along with repeated purchases thereafter.

The same truth holds for Pop Mart, a Chinese toymaker known for selling “mystery” figures in a box, a business model that does not allow buyers to see what's inside the box until they open it. Another mystery is just why the successful brand has seen such explosive growth. Perhaps such success can be attributed to the brand’s elaborate efforts to create communities on WeCom among lovers of fashion and pop culture. It has built up communities of over 100,000 users in only a short time, and has encouraged them to shop using a miniprogram, recording the excitement of opening up and unveiling a new boxed “mystery” toy, and sharing fashion news and information, which ultimately has strengthened the unrivaled connections that the brand has built with its customers.

Innovative digital tools and new service models have emerged, which have been integrated to reach consumers on a deeper level, increasing their bonds with brands, and unleashing new market potential.

Pop Mart sold more than 50 million toys in 2020 and generated 2.5 billion yuan in revenue. The figure includes 950 million yuan from online shopping, a year-on-year growth of 76.5 percent. Notably, the WeChat-based miniprogram generated 460 million yuan in revenue, more than half the total amount.

Such rapid and pioneering changes in China’s retail sector have also attracted worldwide attention and stimulated transformations in the global retail landscape. As reported in The Economist earlier this year, China, not the West, is where the future of e-commerce is being staked out. Many international industry leaders have tapped into the social e-commerce market, such as Facebook Shops and Walmart’s first pilot test of a new livestreamed shopping experience launched in the U.S. in December 2020.

Watsons has chosen WeCom to establish a close relationship with Chinese customers. Data shows over 60 percent of e-coupons distributed via the business communication platform were actually used in in-store shopping, certainly a successful practice of combining online marketing and offline spending.

Sharing his insights into the e-commerce revolution, Air Li, vice president of WeCom, said at The Economist Innovation@Work Asia event that Chinese Internet firms are masters of putting complicated systems and technology on the back end and simplifying the business process in the front end. Li said a deal can be easily made by sending a voice message, WeChat Moment feed or a webpage link.

The retail sector still faces daunting challenges, but fortunately evolution in China's digital businesses is a positive force in the global economic recovery. As sectors in the real economy integrate deeper with the online transformation, there will certainly be more digital tools and business models driving growth for China and the world.