China offers great opportunities for e-retailers that know their way around
March 10, 2015 06:00 AM
Online sales in China are booming, and the largest retailers and brands—both foreign and Chinese—are growing their online sales even faster than the market as a whole, according to the newly published Internet Retailer 2015 China 500.
China’s e-retail market grew more than three times faster in 2014 than that of the United States or Europe. Online shoppers spent $449.12 billion on retail sites last year, an increase of 49.7% from 2013, according to China’s National Bureau of Statistics. In contrast, the e-retail market in the United States only grew 15.4% to about $305 billion in 2014, while European e-commerce grew 15% to $316.90 billion.
Fueling that rapid growth are the rising incomes of China’s middle class, which has grown rapidly over the past three decades of steady economic growth. China’s gross domestic product grew 7.4% last year, the highest growth among major economies, and personal incomes grew 8% in 2014, according to the National Bureau of Statistics.
Those shoppers are spending a growing portion of money with the retailers and brands listed in the China 500, which ranks companies by their web sales in China. The 500 largest e-commerce players in China increased their sales 59.1% last year, well above the market growth.
Several large Chinese e-retailers, such as JD.com Inc., No.1 in the China 500, and Vipshop Holdings Ltd., No. 4, more than doubled their online sales last year. Many of these merchants are investing heavily in mobile shopping technology, logistics and connecting their websites and physical stores.
International brands also are getting in on the action, and the China 500 ranks 90 of them, including consumer brands Kohler and Procter & Gamble.
Among those growing rapidly in China in 2014 was U.S.-based apparel retailer Gap Inc., No. 207 in the Internet Retailer China 500. Traffic to Gap.cn increased more than 154% in 2014 and sales grew 131% from 2013, according to the Internet Retailer China 500.
Gap says China is its second most important market after the United States, and the company has grown quickly in China digitally and physically, pursuing an aggressive e-commerce strategy while opening more than 100 stores in just five years.
Gap manages its Chinese offline stores itself but outsources its e-commerce operation to a Chinese company, Shanghai Yi Shang Network Information Co. Shanghai Yi Shang manages Gap’s own e-commerce site, Gap.cn, and the retailer’s stores on such popular Chinese web marketplaces as Tmall.com and JD.com.
What’s the next step for Gap in China? The company is introducing more new brands and deploying technology to tie together its online and offline stores. For example, Gap is testing “virtual wall” technology that allows consumers to order products from online inventory while they are shopping in bricks-and-mortar stores in China.
“We continue to be excited by the response of Chinese customers,” says Jeff Kirwan, president of Gap Global. “Both Gap and Old Navy have been warmly embraced, giving us confidence to continue our expansion. We want to lead the way in bringing omnichannel to life in China.”
Although Gap didn’t break out its sales by country, Kirwan, who was president of Gap China at the time, said in an investor meeting in 2014 that Gap’s total sales have reached $300 million in China in 2013 and that the retailer aims for them to hit $1 billion in 2016.
Like Gap, other U.S. retailers are growing rapidly in China. The five fast-growing U.S.-based retailers in the 2015 China 500 grew online sales in China last year by an average of 98% over the prior year.
The data from the Internet Retailer 2015 China 500 is available by subscribing at Top500Guide.com. The China 500 database is an interactive resource that provides 154 financial and operating metrics for each of the 500 retailers profiled. That includes, for each retailer:
- 2014 and 2013 web sales
- monthly web traffic
- conversion rates
- average ticket
- social network affiliations
- payments and performance statistics
In addition, the data lists 841 key executives of China 500 companies.
To order the all-new 2015 China 500 in the online database format, please click here.