LEAPS AND BOUNDS
Digital commerce and new retail point to the future of consumption in China
IThe author is vice president of China/
Asia Pacific strategy and global digital practices at consulting firm Tompkins International n 2014, I wrote a book titled China’s Super Consumers: What 1 Billion Customers Want and How to Sell It to Them. The book explained and examined the development of China’s consumer and retail evolution, from the beginning of the reform and opening-up era to the early days of the e-commerce explosion.
Some of the facts and statistics highlighted in the book left casual observers of China, it’s economy and its development into the second largest economy in the world in disbelief including: nearly 700 million consumers with significant disposable income; 1 billion smart devices in use; social media apps with 1 billion users; the second largest luxury goods market in the world; a digital first/mobile first consumer society; and near universal adoption of digital payments, just to name a few.
In summary, the book told the tale of how the evolution and growth of Chinese consumption and retail changed the way Chinese citizens shopped, lived, developed new identities and related to the outside world. It also told the stories of the entrepreneurs, retailers and brands that were transforming the Chinese economy through consumption and services.
This development happened in several stages. and retailers.
Domestic retailers emerged and the first wave of foreign brands and retailers entered China primarily in the form of foreign luxury brands. This stage started with roughly 15 million consumers and ended with 30 million consumers with significant disposable income. eration of China’s super consumers.
But how did e-commerce become digital commerce and new retail?
At first, it wasn’t necessarily what China had or what other countries did that led to the fastest adoption rates of e-commerce, digital payments and social media apps (as operating systems for life). It was what China didn’t have that became an enabler and an advantage.
China had no modern retail legacy infrastructure to overcome. Even as China’s retail and consumer economy started to develop and then boom in the late 1990s and early 2000s, modern retail infrastructure development was not keeping pace. Yes, malls and department stores were built at a rapid pace, and this helped, but the store-marketing-supply chain structures of fully developed retail markets were not yet in place. The arrival of e-commerce filled the gaps quickly. Most new consumers were “born” into e-commerce.
There was no legacy of communications systems to overcome in China. The vast majority of Chinese citizens did not own landlines, personal computers or primitive mobile devices in the 1990s and 2000s. When affordable, highly functional smartphones came on the market, China embarked on the fastest adoption of a new technology in human history. In less than 10 years, there were more than 1 billion smartphones in use. These smartphones were the perfect compliment to and enabler of e-commerce.
China had no traditional banking, finance and payment systems to overcome. During the early and middle development stages of retail and consumption in the country and until the introduction of digital escrow accounts to complete consumer-to-consumer e-commerce transactions in the mid-2000s, almost all retail was conducted on a cash-and-carry basis. Credit cards, checking accounts and debit cards were not a big part of people’s everyday lives. The introduction of easy-to-use, ubiquitous and eventually, QR code-based payment systems voided the need for credit cards, checkbooks and debit accounts.