E-commerce / Social Shopping

At a basic level, e-commerce is about bringing the traditional brick and mortar store online. E-commerce encompasses all business activities carried out online. Every time you buy or sell something online, it counts as e-commerce. Buying skins in the Metaverse or buying an antivirus programme would also count as e-commerce, and especially during COVID-19, a lot of business that used to take place physically has moved online. The most well-known example in the US would be Amazon, but multiple other platforms exist globally. In China , Alibaba, Tmall and Pinduoduo are but a few of the major players and in some areas these companies are even bigger than their Western counterparts. For instance, Alibaba's gross merchandise value is almost double the size of Amazon's.

The value of global retail e-commerce sales has risen from US$ 1.34 trillion in 2014 to more than US$ 4.88 trillion in 2021 and is expected to total US$ 5.5 trillion in 2022.^[1] In China alone, more than 83 billion packages were sent in 2020, a 20-fold increase over a 10-year period. The market is only expected to grow further, and new ways of doing e-commerce pops up at a fast pace. While the shift towards e-commerce has been accelerated by COVID-19, the trend has been moving in this direction for a long time. Where people used to go to the nearest mall, they now pick up their phone and browse through online catalogues and websites to find the products they need.

E-commerce represents a completely new way of doing business, using innovative ways of engaging the customer, and China leads the way. Everything from gamification to social commerce, O2O to online shopping festivals, and group buys to chatbots are well integrated in China, and the consumers are a key part of this journey. This opens new doors for businesses in terms of having an ongoing engagement with the customers, while data can be collected and used to analyse patterns and trends to optimize sales.

A vast logistics ecosystem supports China’s e-commerce market, where especially Alibaba and JD.com have created innovative ways to develop highly efficient systems and networks that can deal with the tremendous amounts of delivery orders they receive every day. For example, Alibaba’s global parcel tracking platform, Cainiao, has built a system that can process up to 30 million items per day. This is important as Chinese consumers order anything online, from clothing and electronics to cleaning and bike-renting. But China’s e-commerce boom has also had a number of spillover effects to other industries. Especially the delivery industry has seen a massive increase along with e-commerce, and new technologies are emerging to support the growing need for package delivery. This includes high-tech products such as drones for drone deliveries and the need for more self-driving cars, but also the need for optimization of supply chain systems and upgrading of infrastructure, smart cities and integrated IoT.

There is no doubt that China is leading the e-commerce race – this goes for both scale, scope and innovative business models. Many of the trends we see in China, have already made it to Europe, and there is a strong potential for drawing inspiration from the tendencies we see there. However, there is still a high potential for reaching a much bigger market in China. Internet penetration in China is growing, and in 2022 there is still more than 400 million people that do not have access to internet and thus e-commerce. The penetration rate is growing rapidly, which mean more opportunities and customers for the companies that are able to win this market.

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Policy – 4

From a policy perspective, there is a number of lower level government laws on how to implement e-commerce and regulation is quite strong in the field. China has an e-commerce law, which defines what e-commerce is and how it is regulated. The Chinese government formulates plans every five years (five-year-plans) to promote the development of e-commerce. Regional governments are also participating in planning and adjusting the e-commerce policy framework to fit with local conditions.

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Corporate – 4

E-commerce is already an integrated part of nearly all of the big technology companies in China in industries such as retail and wholesale, online marketing, finance, manufacturing, and digital advertising. A few examples of companies include: Meituan, a company that develops and operates a retail and online group buying services platform but also the preferred platform for take-away; Xiaohongshu, a social e-commerce platform similar to Instagram, used to share product reviews and shopping experiences; Pinduoduo, an e-commerce platform which allows users to participate in group buying deals mostly through Tencent’s Wechat and mainly targeting cities in the countryside.

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Academia – 3

There is a growing interest in public-private partnerships and in working with the triple-helix model among the companies. Some of China’s top universities offer degrees in e-commerce and many of the graduates go into the industry, but well-established collaborations between universities and companies such as seen in other areas are still not widespread (e.g. engineering in Zhongguancun, Beijing).

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Entrepreneurship – 5

The start-up scene within e-commerce is moving at a high pace. Ten years ago, the biggest e-commerce companies in China today, such as Meituan, Pinduoduo and Xiaohongshu, had just been founded. Now they are among the biggest players in the industry. The start-ups tend to use data in combination with strong So-Me (Weibo, Tiktok, Wechat) marketing and mobile e-commerce to reinvent supply chains and innovate business models.

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Investment – 3

E-commerce has largely been supported by the rapid growth of mobile telephony and increased financing over the last decade. Venture capital investment in Chinese startups reached US$ 131 billion in 2021, about 50 % higher than the level of startup funding in 2020.^[2] Here, especially the venture capital arms of the larger e-commerce companies (Alibaba, Tencent, Baidu) is investing heavily in the e-commerce sector, both domestically and internationally.

Please reach out to shainn@um.dk for any inquiries. We offer our services to corporates, SMEs and academic partners looking to dive further into the area of e-commerce and social shopping.