The coronavirus pandemic has changed practically every aspect of modern life across the globe, but perhaps one of the most compelling shifts has been that of global consumer behavior. The shelter-in-place guidelines and lockdowns put in effect in practically every country gave way to the meteoric rise of e-commerce, and even as the world returns to some sense of normalcy the wheels had already been set in motion.
China is currently the world’s largest e-commerce market, today accounting for over half of all e-commerce globally. Online retail sales of consumer goods made up a quarter (24.5 percent) of all retail sales by the end of 2021, and the market is showing no signs of slowing down with sales revenue for e-commerce in the country expected to grow from an already massive $2.1 trillion in 2021 to $3 trillion in just three short years.
Within China itself, the largest retailer by revenue is the ecommerce website JD.com, which currently has over 570 million active users. Globally it is the third largest internet company in the world after Amazon and Alphabet, seeing a revenue of $149.3 billion in 2021. The company is known in particular for having built the largest e-commerce logistics infrastructure in China, an extensive network of over 1,300 warehouses that has the ability to guarantee order fulfillment in 24 hours for 90 percent of its retail orders.
In recent years, the company has made moves to expand its international scope to match its global business recognition. It is listed on the NASDAQ in the United States, and has been the first Chinese internet company to be placed on the Fortune Global 500, ranked number 59 in 2021. The Chinese consumer holds strong buying power and there is a growing demand within the market for global products, and in January of this year it was announced that JD.com had formed a strategic partnership with the United States-based ecommerce platform provider Shopify.
The collaboration has allowed independent brands utilizing Shopify’s platform to have an accelerated pathway to selling in the biggest retail market in the world, leveraging its recently created cargo flights between China in the United States and US warehouses, in addition to the logistical infrastructure available once the goods have arrived in China.
In a guide for global brands produced by JD.com in collaboration with Shopify, the company identified the rapidly shifting consumer behaviors that are some of the main drivers for the growth of China’s e-commerce market. Citing China’s National Bureau of Statistics, it pointed out that the country’s internet penetration as of February 2022 had reached 73 percent, with over one billion people in the country now online. This is certainly an impressive feat considering the country’s rural population of 37.5 percent. China has worked in recent years to revitalize rural areas, building out internet infrastructure that has resulted in a growth in internet penetration of 17.8 percent over the course of three years.
The effects of the pandemic on people in China certainly cannot be ignored either, pushing many people online for the first time to shop for items such as groceries and other necessities. In particular, elderly consumers have seen significant growth and according to JD.com’s data are China’s fastest-growing segment of online shoppers since early 2020 when the pandemic first began. Known as China’s “silver economy,” the category has grown by over 50 percent since 2018, as found by iiMedia Research Group. This isn’t even to mention the swiftly growing buying power of Generation Z, whose global sensibilities have given them a taste for imported products.
China’s love of e-commerce has also given rise to numerous selling opportunities in the form of “shopping festivals,” which in 2019 resulted in online sales of $1.5 trillion. The biggest ones include JD.com’s anniversary celebration 618 each June and Singles Day or Double 11 in November, but there are many more that occur throughout the year, providing opportunities for discounts, experiential shopping, and new product launches amongst other things. During the 618 event in 2021, JD.com alone reported a total transaction volume of over $51.9 billion.
Travel restrictions have also played a role in online demand for cross-border products, as the pandemic prevented people from going abroad to buy luxury products amongst other categories. In 2020, consumer goods imports to China reached $237.32 billion. JD Worldwide, JD.com’s platform for imported products, has developed similarly since its establishment, seeing sales growth of over 120 percent this year when compared with 2021 on the first day of its 618 Grand Promotion. The platform has been consistently adding new brands to its offerings, which today includes over 10 million SKUs in total.
Chinese consumers often have the impression of being able to receive higher-quality items from international sellers, and the growth of the cross-border import sector is a strong indication of their pursuit of quality. According to data from JD.com, cosmetics and skincare, baby and maternal, and healthcare products are the top three categories by both sales and order volume on JD Worldwide, accounting for nearly two-thirds of its sales overall. It is this trend in particular that makes JD.com the ideal partner for Shopify. From its humble beginnings as a small booth in an outdoor electronics mall founded by Liu Qiangdong, quality and trustworthiness have been core tenets for the company. In a time in which trust between the consumer and seller was considerably eroded, Liu guaranteed quality and authenticity and was able to build his business to the behemoth it is today on those tenets.
Indeed, in a survey conducted by the consulting firm iResearch in 2020 JD.com was rated as China’s most trustworthy e-commerce brand. This is no doubt greatly in-part due to its in-house logistical network, another strategy of Liu’s in order to have full control over a product’s journey from purchase to doorstep and guarantee quality service. This system has been essential to JD.com’s growth, today reaching 93 percent of the counties and 84 percent of the townships in China. Recent international efforts have included opening automated warehouses in the United States, United Kingdom, Australia and the Netherlands and launching cargo flights from China to Thailand, the United States and United Kingdom.
It is thanks to this strong foundation that JD.com stands poised to further facilitate cross-border sales with the Shopify partnership. The consumer market in China is heating up, and demand for international products has never been higher in the country with the largest e-commerce market in the world. COVID-19 introduced numerous challenges across practically every industry, but it has also served to accelerate trends that were already in motion such as the move to online shopping. By collaborating with Shopify, JD.com has entered business with the United States in a new way, taking a typically lengthy and difficult cross-border process and simplifying it for sellers large and small.
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