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E-commerce emerges in smaller cities

By Ding Yining | April 18, 2016, Monday | Online Edition

China's e-commerce activities in lower tier cities are showing greater growth potentials than that in the first and second tier cities, and new service areas are showing strong growth opportunities, a latest study shows.

Expenditure from third and fourth tier cities account for 50.1 percent of the national e-commerce gross merchandise volume, against that of 49.9 percent contributed by consumers in first and second tier cities, according to the McKinsey iConsumer China 2016 report.

But the penetration rate of online shopping among web users among third and fourth tier cities is 62 percent, lagging behind that of 89 percent among the online population in first and second tier cities, according to McKinsey's online survey covering 3,120 domestic web users in January 2016.

"E-commerce growth in China is shifting to new areas and companies must keep pace with changes to uncover the opportunities and move quickly to take advantage," said Kevin Wang, Partner and head of McKinsey Digital in China.

Online to offline (O2O) services are also gaining momentum, with nearly 80 percent of respondents having used travel O2O services, and ride hailing services also attracted 31 percent online consumers.

Simply by enhancing the user penetration in first and second tier cities would no longer guarantee business growth, and online retailers should focus on offering more personalized options for these shoppers to drive further growths, the study shows.

A total of 31 percent of respondents said they have purchased through social media platform, doubling the proportion a year ago, as social media channels emerged as an efficient transaction platform.

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