Mark Tanner says China's mature ecommerce sector is still a key option for foreign brands selling into less-familiar markets

By Mark Tanner*

12 months ago, many signals pointed to Chinese consumers binkying into the Year of the Rabbit. With trillions of extra dollars saved up and the lockdowns behind them, the unmistakable force of the Chinese consumer collective was to show the world that they were back. Whilst things started to reignite earlier in the year, it’s fair to say that much of those trillions saved remains in bank accounts and spending has been more subdued than many were expecting once China opened up.

Stagnant property prices have contributed to Chinese consumers being less confident than in the past. More than one in five youth were jobless when Beijing stopped publishing rates in August and almost three million more people are blacklisted for missing payments on mortgages and business loans than in early 2020.

There’s no disputing that youth unemployment, black listings and more frugal spending symbolises that many Chinese consumers are finding it tough right now, like many of their peers around the world. But these numbers can distract us from the bigger picture of how China is tracking overall and that there continues to be opportunities abound like no other market. As Bain senior partner Bruno Lannes noted this year, “the next China is … still China.”  

The IMF expects that China will contribute to over a third of global growth this year – more than the rest of Asia combined, and more than the world outside of Asia. China’s top leaders have pledged a stronger focus on growth next year, and GDP is expected to expand around 5% again in 2024. Whilst 5% may not quite be the 7.8% that many were gushing about a decade ago, China’s economy is now twice the size, so in dollar terms, GDP growth is a third higher now.

The continued ascent of China’s GDP is also mirrored in its retail spending. McKinsey forecasts that China’s retail market will expand an additional ¥10 trillion ($1.4 trillion) over the next five years – the single-largest growth market globally. That incremental spending is equal to the combined retail sales of India, Indonesia, and South Korea today.

Let’s compare the size of China’s retail opportunity versus India for some perspective. China’s vastly larger market shouldn’t just be measured by the dollar value – China retail spending was almost seven times larger than India last year – but also the accessibility to the market. As many foreign brands have discovered selling into less-familiar markets, ecommerce provides a more direct platform to reach consumers than navigating the complex and fragmented brick & mortar market. As an indication of the maturity of ecommerce in China, over 120 billion parcels have been delivered this year. In India, it was 88.8 million parcels over the same period.  

Selling into China isn’t easy by any measure, but done through a well-executed, smart strategy, supporting appropriate products and services, few markets come close. And that’s unlikely to change in the medium term at least. China still shows significant potential for growth, for example China's per capita consumption of liquid milk is about one-third the global average.

*Mark Tanner is the CEO of China Skinny, a marketing consultancy in Shanghai. This article was first published here, and is re-posted with permission.