Chinese Government encourages e-commerce to boost domestic consumption

In a move to increase domestic consumption and services, the Chinese government recently outlined plans to make online sales account for at least 10.0% of sales nationwide. According to Hangzhou-based China e-Business Research Center, online retail transactions accounted for 6.8% of all retail sales in China for the first half of 2013. By the end of this year, it is expected online retail’s share will increase to 7.0% of total retail sales.

China’s economy has largely been export-driven but as the growth for exports wane and some manufacturing shifts to other locations, China has turned its attention to the Chinese consumer to energize its economy.

e-commerce has been viewed as a means to reach consumers faster and in a more efficient way versus traditional brick and mortar retail. As such, China’s Ministry of Commerce announced plans to provide policy and financial support for businesses conducting e-commerce cross-border as well as encourage domestic e-commerce retailers to establish overseas subsidiaries and improve offshore warehousing and customer service.  The Ministry will also provide incentives to small and mid-sized businesses to establish online operations.

While Chinese e-commerce companies such as Alibaba and JD expand their logistics network across China, Suning Commerce Group Co Ltd, is expanding its cross-border functionality and in fact has established its first R&D centre in Silicon Valley, California. According to the company, the goal of these R&D centres is to achieve its long-term vision for retail which includes:

  • Implement the large-scale standardisation of key retail processes including    logistics, information and cash flow.

  • Eliminate the imbalance of information between the consumer and retailer.

  • Satisfy the needs of the world’s global shoppers via an integrated all-inclusive shopping experience that offers the convenience of online and offline.

  • Offer better capital solutions for upstream suppliers and better consumer finance experience for clients by employing an online, terminal-to-terminal financial industrial chain for suppliers and consumers.

China’s e-commerce providers’ strategies are becoming more sophisticated. This sophistication includes expanding payment capabilities, linking to suppliers and creating an omnichannel approach by technologically joining physical stores to online retail websites. e-commerce providers are also investing in data analytics and are eyeing overseas expansion for additional growth opportunities. All of this will not only benefit consumers but logistics providers as well.

In particular, international express providers DHL, FedEx and UPS should see benefits from this cross-border initiative due to their already established global networks.