Analysis

Despite trade frictions with Washington and the slowdown of China's economy, the purchasing power reflected in e-commerce shows no sign of weakening. Sales during e-commerce giant Alibaba's annual shopping festival, 'Singles' Day', last November reached more than 30.8 billion dollars in 24 hours -- up 27% year-on-year.

Changing shopping patterns

In the early years of online retailing, people mainly sought cheap goods that were hard to find in physical shops. Now, people shop online in search of lower prices for high-quality products -- and for convenience.

In order to connect to potential consumers, Alibaba and JD have now begun building infrastructure in inland regions as part of logistical networks. Alibaba's Rural Taobao has constructed over 30,000 service centres to provide e-commerce delivery to villages, and plans to expand this to 100,000 villages in the next three years (see CHINA: Rural middle class will boost consumption - March 22, 2017).

Singles' Day

Singles' Day data show sales of high-quality electronic appliances, cosmetics, and mother and baby products rising steadily, and consumption of services rising dramatically, led by healthcare and tourism.

According to data released by AliHealth, the healthcare arm of Alibaba Group, the turnover of the medical services sector jumped 3.3 times year-on-year. This includes dental care products, online booking and payment for physical examinations, and 'medical beauty products' such as high-tech electronic skincare devices.

In the first 30 minutes of Singles' Day, the turnover of Tmall's medical beauty platform exceeded the amount of last year's full day.

This trend is seen not only in the large cities and more developed regions. The growth rates of healthcare-related sales in second-tier, third-tier cities and towns below fourth-tier cities are well above the first-tier ones -- 3.6 times for second- and third tier cities and 7.2 times for towns below fourth-tier cities) respectively.

The growth rates of healthcare-related sales in second-tier and third-tier cities were 3.6 times those of first-tier cities, and that for towns below fourth-tier cities was 7.2 times as high.

This suggests that mass consumption in China is entering a new phase, with customers focusing more on health, home furnishings, travel and other areas related to better quality of life.

Big data analytics

The billions of transactions made through China's e-commerce giants Alibaba Group and JD.com generate huge datasets that provide these firms with insights into dynamic shopping trends.

By providing the data services and reviews of products, use of data analysis could help companies to better position themselves and gain competitive advantages when facing market saturation and more selective consumers.

The e-commerce companies sell datasets to the vendors using their platforms, which these businesses can use to modify their products according to consumer reviews and transaction records.

Big data analysis can enhance the efficiency of the ecosystem of the e-commerce industry from sourcing, to payment to delivery.

Algorithms can optimise pricing strategy by taking key pricing variables into account such as supply, seasonality and demand, and optimise transportation routes deliveries based on past behaviour.

Big data analysis also helps with inventory planning and maintenance. Alibaba uses predictive data ahead of the Singles' Day shopping festival to let merchants know where they should be warehousing goods the day before.

Fighting fraud

In addition, Alibaba has built a fraud risk monitoring and management system based on big data. This analyses data on users' behaviour and networks in real time to identify suspicious users and transactions.

Alibaba in 2017 announced an alliance with global brands, including Louis Vuitton and Samsung, to fight trade in counterfeit goods using big data analytics. The alliance now includes 105 brands in twelve industries.

In 2017, Alibaba's automated anti-fraud system identified and proactively removed 27 times more listings than were manually removed as a result of requests from rights holders, with 97% of all proactive removals occurring before a single sale was made.

This technology benefits all brands selling on Alibaba's platforms, not only for the alliance members.

The increasing use of big data, artificial intelligence and robotics driven by China's e-commerce companies will change China's retail industry even more in the future -- and also enhance its security.

Alibaba and JD.com have invested in big data analytics companies. More acquisitions of companies working in artificial intelligence and blockchain are likely (see CHINA: AI plan lays foundation for long-term strength - July 9, 2018).

Cross-border e-commerce

The e-commerce boom in China will also benefit foreign e-commerce businesses because there is huge demand in China for foreign products available on overseas websites.

The China's Ministry of Commerce reports that cross-border e-commerce rose 50% year-on-year in 2018 to reach 134.7 billion renminbi.

In the first China International Import Expo, held in Shanghai last November, President Xi Jinping said that China will boost its imports by, among other things, accelerating the growth of cross-border e-commerce.

Concrete policies are underway. This month, the annual quota on international cross-border e-commerce purchases for individual buyers rose from 20,000 renminbi to 26,000, and the tax-free limit on a single transaction rose 150%.

Moreover, another 63 items will be added to the list of products covered by the tariff-free scheme for e-commerce, first complied in 2016, which already includes 1,142 items including cosmetics and diapers.

Currently 13 cities are already implementing these rules and another 22, including Beijing, Nanjing and Xiamen, have been approved by the State Council in July last year.