China is one of the fastest-growing economies in the world, and consequently, its vast population has a higher percentage of disposable income to spend than ever before. The Chinese penchant for luxury items, and particularly western brands, is making it an attractive pool of income-rich consumers. How can UK eCommerce merchants successfully tap into this market?
The growth in Chinese spending power over the past 15 years is nothing short of phenomenal. The population of China has always been vast, now standing at 1.35 billion in 2012, but never before has its spending power aligned with its density. The nation's growing middle class is one of the catalysts behind such power.
According to MasterCard research, there were 35 million middle class Chinese households in 2006, a figure expected to rise to 100 million by 2016. Additionally, the number of dollar millionaires in domestic China is rising sharply to 960,000, up almost 10% year-on-year.
As the population of more affluent Chinese has increased, so has their desire to travel globally. According to the United Nations' World Tourist Organisation in 2001, approximately 12 million Chinese travelled abroad. 10 years on, this figure has increased to 57 million. China UnionPay, China's most-used bank and card payment scheme, estimates that this trend will rise by 20% year-on-year.
When it comes to destinations, Europe and the US are favourite. The UK retail market has already begun to tap into this source of unparalleled spending: Selfridges and Harrods have employed Mandarin-speaking sales assistants to welcome Chinese shoppers, and in Selfridges, Streamline terminals now accept China UnionPay cards.
As the exposure to western goods rises, this presents an opportunity for UK eCommerce merchants selling to the Chinese. There's certainly a market for it.
A study by CNNIC (China Internet Network Information Center) in January 2012 found that, at the end of 2011, China had 194 million online shoppers, representing more than a third of all internet users in the country. China's relationship with eCommerce is also fascinating. A study by PricewaterhouseCoopers in September 2011 found that 86% of online buyers in China considered themselves experts at eCommerce, compared to 70% in the UK.
Adding to this, WorldPay's 2012 Global Online Shopper Report found that online shoppers in China spend as much as 48% of their annual disposable income on goods online. Despite the global recession, eCommerce spend grew by 58% in China over the last year. There is also a higher percentage of 'heavy shoppers' in China - those who spend almost a third of their income online (48%).
Key to making eCommerce a viable shopping option for Chinese consumers is mastering the cultural preferences for payment types. China UnionPay is undoubtedly the market leader when it comes to cards, with the number of cardholders expected to outstrip Visa and Mastercard in a years' time.
Conversely, the Chinese are also heavy users of eWallets, 41% of e-shoppers in China choose Alipay as their preferred way to pay for purchases online, with credit cards the second choice (16%). With a healthy appetite for goods from other countries, retailers just need to accommodate Chinese shoppers to take advantage of the opportunity. Merchants who can offer locally recognised card schemes and payments types will have a much greater chance of encouraging online spend.
WorldPay's Global Online Shopper report also shows there is a substantial opportunity for mobile commerce in China. While UK e-shoppers are still only starting to embrace using their mobile devices to shop online (14%), the appetite for mobile shopping in China is already quite substantial, particularly among 'heavy spenders' - those who spend 30% or more of their disposable income online. Smartphone ownership in China is soaring (75%), with shopping on these devices a highly popular pursuit (46%), and owners averaging 5.7 shopping apps on their devices. Mobile technology has a clear role to play in China's eCommerce boom, and the revenue opportunity exists for merchants that invest here.
However, appealing to the Chinese market isn't only about offering the must-have payment methods. Although an impressive 44% of Chinese online shoppers are willing to shop on overseas websites, they do have concerns, primarily around the potential risk of fraud (54%), currency exchange fluctuations (52%) and language issues (50%). If merchants can address these concerns - for example, by making their fraud prevention policy clear, presenting prices in local currency, or offering a Chinese-language website - then the opportunity could be very lucrative.