China’s Consumers Now Have More Online Shopping Choices as COVID-19 Spurs Decentralization

China bounced back from the coronavirus pandemic-induced slowdown, registering a positive GDP growth of 3.2% in the second quarter. Pandaily deep dives into a set of employment and consumption statistics to explain how e-commerce penetration is accelerating.

Job Security

According to a recent UBS Evidence Lab survey, job stress peaked in late March when 70-80 million workers were either not working or had lost their jobs. This number dwindled to 15-20 million at the end of May, as 61% of the UBS survey respondents said they expected their salary to rise in the next three months. As wage-earners become more confident about their income, consumption is expected to rebound from the 9.5% slump in the first quarter, flattening out for the rest of the year before gaining 8.8% in 2021, according to the UBS report. The estimates are backed by the survey’s finding that 58% of respondents expect to spend more in the next three months, with 12% expecting to spend more than the past three months and last year.

(Source: UBS Evidence Lab)

Engaged Shoppers

The quick recovery in China’s job market brings massive opportunities for online retail platforms. In June, e-commerce sales surged by 25.2% thanks to the 6.18 shopping festival, accelerating from the year-on-year growth rates in May, April and March, according to data from China’s National Bureau of Statistics.

Consumers are also becoming more active and spending more time on e-commerce apps. Top e-commerce platforms such as Taobao, Pinduoduo and JD.com all saw a strong rebound in the number of daily active users after the relaxation of COVID-19 containment measures, according to data from QuestMobile, a mobile internet market researcher. The ratio of daily active users against monthly active users (DAUs/MAUs), a metric measuring user engagement, has also improved significantly since February.

Frequent Buyers

Compared to five months ago, all major online shopping platforms have reported increasing shopping frequencies, with Taobao/Tmall seeing the biggest jump from 84 times to 95 times per year. Pinduoduo, which bills itself as the world’s largest interactive e-commerce platform, also saw shopping frequency increase from 46 times to 51 times per year.

The stellar performance of Taobao/Tmall and Pinduoduo can be largely attributed to the wide range of products they offer. The UBS survey, which breaks down the net increase in spending by product categories, found that daily necessities, medical and healthcare products, and food and beverage contributed the most to the increase in spending, while expenditures in travel, offline entertainment, and luxury goods are expected to drop in the following year.

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The survey also showed that the level of customer loyalty to an online shopping platform is positively correlated to the length of time they have used the platform, meaning that the longer they have been users of a certain platform, the more frequently they choose to shop there. That in part explains why large, established e-commerce companies like Alibaba, Pinduoduo, and JD.com are the biggest winners in the post-lockdown online shopping industry.

More Options

Compared to a few years ago, China’s e-commerce industry has become more decentralized, with more choices for buyers. Pinduoduo, founded in 2015 and the youngest of the major e-commerce platforms, saw its June DAUs surge 83% y/y to 236 million. That compares with market leaders Taobao, whose June DAUs increased 16% y/y to 313 million, and JD.com with a 34% gain to 77 million, according to QuestMobile data.

The first-mover advantage by Taobao in live-streaming also attracts the introduction of the same feature by short-video giants Douyin and Kwai.

Sellers also have more choices. Based on its 2019 annual report, Pinduoduo has already accumulated more than 5 million active merchants. As of May, Douyin had more than 1 million e-commerce merchants. With these emerging platforms attracting more traffic, the trend of “decentralization” in the e-commerce industry looks set to continue.