Online Sales in China exceeded USD 366B in 2016, almost comparable to e-commerce sales in the United States (360B in 2016). Note that online retail is “only” about 8.5% of the overall retail market in the United States.
According to Fortune Magazine, Amazon was 34% of the US e-commerce market. However, China is an entirely different story.
Amazon barely makes an appearance among the big e-commerce contenders. Taobao – an e-Bay like electronic market place owned by Alibaba commands a lion’s share of the China e-commerce market.
Perhaps, even more, impressive is the scale of vertical integration of mobile payment systems with their corresponding e-commerce websites. For instance, the largest third-party payment system, Alipay, the mobile payment arm of Alibaba, has 520M users. To “bring home” the comparison, that user number is equivalent to “2.5 times as many users as PayPal and more than 11 times as many as Apple Pay” according to The Economist. Even the runner-up firm WeChat (owned by Tencent) has an estimated 400M users, dwarfing US payment systems.
The electronic payment system is the moat that protects the incumbents in e-commerce markets in China. (I am temporarily ignoring the contentious arguments about regulatory Hamiltonian protectionisms, etc).
The structural advantage in the payment space emerged because the mobile e-commerce in the United States is several years behind the mobile e-commerce in China (or India and Asia in general). Mobile e-commerce is only about 34% of total e-commerce in the US, whereas more than 53% of Alibaba’s gross merchandise sales in e-commerce were through mobile devices (from South China Morning Post). In fact, eMarketer estimates that 64% of China’s e-commerce happens through mobile devices.
On another note, I tend to believe that Tencent (which owns WeChat) and Alibaba will the first global brands to emerging from China. Yes, the order in which I wrote is not entirely random. More on that later.