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June 14, 2011

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China leads way in e-commerce as nation's spending power rises

CHINESE consumers are becoming increasingly sophisticated in their tastes and expect a wider range of better products, according to a report released yesterday that says local companies are leading foreign rivals in using e-commerce to expand sales.

The report by the American Chamber of Commerce in Shanghai and the consultancy Booz & Co, said China will likely become the second-largest consumer market in the world by 2015, just trailing the United States.

As their incomes grow, Chinese consumers will have enough purchasing power to buy 14 percent of the world's goods by 2015, up from 5 percent now, said the report, which surveyed 135 major consumer goods companies, 70 percent of them multinationals.

Wider access to information, travel and the Internet is raising awareness about different lifestyles and driving demand for a greater range of choices, the report said.

"As wealth continues to grow, people will begin to focus more on enjoying the fruits of their labor, increased attention to leisure activity, domestic travel, interest in arts and science and self-betterment," it said.

Such trends reflect the transformation of China into a dynamic consumer economy from a centrally planned one that several decades ago was dominated by rationing and shortages.

Investing in brand building and quality control are crucial and will pay off, Ken Newell, president of PepsiCo (China), said in a panel discussion of the report.

"Increasingly we're seeing consumers willing to pay a premium for a guarantee of quality," Newell said.

As the single-child families mandated by China's population policies mature, their shopping habits and tastes will also change, the report said.

"These changes could affect purchasing behaviors in many ways including product innovation, packaging sizes, packaging, design, access and delivery," it said.

At the same time, access to the Internet, mobile communications and gaming allows shoppers to research their choices and buy online.

"Over the next three to five years, the growth in e-commerce in China will significantly change the way in which consumers access information, interact and shop," the report said.

Almost all Chinese companies surveyed said they were already heavily using e-commerce or planned to do so soon, while multinational companies were less likely to have such plans, the report said.

Chinese companies also have less trouble hiring the staff they need than foreign companies and have strategies focused on high volumes and low prices that are more attuned to the tastes of the consumers they are targeting.

"Chinese companies are continuing to gear up to bring products into the marketplace that are not just your locally priced, "me too" products, but products that are innovative, products that are of high quality, and products that clearly are going to give multinational companies a run for their money here in the Chinese marketplace," said Joanne Bessler, a Booz & Co partner.



 

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