E-COMMERCE AND ONLINE SHOPPING IN CHINA

E-COMMERCE IN CHINA

China's e-commerce market is the world's largest. China’s online retail market was valued at US$270 billion in 2013 and exceeded US$1 trillion mark in the late 2010s. According to Statista revenue in the Chinese eCommerce market are projected to reach US$1.4 trillion in 2022 and US$1.7 trillion by 2025. [Source: Statista, Los Angeles Times]

China’s e-commerce trade has grown phenomenally in recent years. In the late 2000s, China accounted for less than 1 percent of the global e-commerce market. As of 2021, it share was an astounding 52 percent, handling more transactions per year than France, Germany, Japan, the U.K. and the U.S. combined. In 2019, China accounted for 56 percent of the world’s online sales. Over 35 percent of China’s retail sales occur online, versus 11 percent in the United States. [Source: Nicolas Chu, sinorbis, April 18, 2021]

E-commerce in China grew 100 percent in 2010 to $70 billion. Led by Internet giant Taobao, a sort of Chinese answer to EBay Inc. and Amazon.com Inc., the industry was expected to grow another 60 percent to 80 percent in 2011, according to China Market Research Group. [Source: Benjamin Haas, Los Angeles Times, May 05, 2011]

In 2013, 74,100 different refrigerator magnets were sold Taobao, China’s biggest internet shopping site. They included Van Gogh paintings, SpongeBob Squarepants and imitation wood plaques thar read “Home, sweet Home.” On Alibaba which caters mainly to businesses and exporters, more than 150,000 fridge magnets are available. This is primarly a sign that shops that sell them around the globe get their products from China. [Source: Leo Lewis, The Times of London, December 2013]

Complexity of E-Commerce in in China

The E-commerce business presents huge opportunities for foreign brands but it also poses difficulties. There are thousands of e-commerce sites and new ones cropping up all the time. Owen Matthews wrote in SupChina: China’s ecommerce market is complex, massive, and highly competitive. Its companies and their business models are completely different from those in other markets, and none of the big American and European players have any real presence. COVID-19 stay-at-home orders were a huge boost for ecommerce in China as elsewhere. Although the country’s overall retail sales were down in 2020, Chinese consumers spent $20.8 trillion on retail ecommerce in 2020, an increase of 16 percent from 2019, according to Emarketer.com. [Source: Owen Matthews SupChina, August 7, 2020]

“China’s ecommerce market is made of a complex web of competitors and companions, but the sector is dominated by three companies: Alibaba, JD.com, and Pinduoduo control more than 80 percent of the market. Alibaba group owns four of the top 10 e-commerce sites-apps in China: Alibaba, Taobao, Tmall and Kaola. Amazon is present in China but its share of the total online e-commerce is minimal

The Chinese ecommerce market is like no other. This is partially due to Chinese ecommerce companies’ innovations. Popular sites like Pinduoduo utilize a C2M (consumer-to-manufacturer) model, which allows manufacturers to identify exactly what consumers want and the price they’re willing to pay for it, rather than manufacturers relying on marketing, as they do in the traditional manufacturer-to-consumer model. Many ecommerce platforms also utilize innovative tactics such as livestreaming sales — a recent trend that you can think of as a 21st-century equivalent of America’s home shopping networks — and discount shopping festivals. China’s Singles’ Day (also called Double 11), which is comparable with America’s Cyber Monday, generated $38 billion of revenue across platforms in 2019, as compared with the $16.8 billion spent on America’s Black Friday and Cyber Monday combined.

The Chinese ecommerce model may not be easy to replicate in other countries. China’s highly concentrated urban populations, low wages for delivery workers, and early mass adoption of digital payment platforms form an environment particularly well suited for online shopping. Additionally, many Chinese consumers only began having disposable income after the widespread use of the internet, and before many high-end and international brands had the chance to open retail stores in China’s second- and third-tier cities.

History of Online Shopping in China

After a slow start, online shopping began to take off in China in the early 2010s. At that time, China’s large number of Internet users, many using Taobao, and Alibaba’s Paypal-like electronic payment system, Alipay, begun using the Internet to buy everything from fake Levis to pet fish to electronic bicycles, some of which were resold to foreigners for a profit. The low cost of delivery made the system ideal for the sale and trade of all kinds of goods. [Source: The Economist, April 2010]

E-commerce accounted for only 1.9 per cent of all product sales in China in 2008, according to Taobao.com,, but was growing fast. Official government data indicated that online sales in China nearly doubled in the first nine months of 2009 to 168.9 billion yuan as consumers become more confident about Internet shopping.

A survey by Nielson in 2010 found that two thirds of Chinese households with Internet connections had bought an everyday item online in the past six months. Additional research showed that nearly 10 percent of baby products were sold online. Cosmetics and tea sold well online. Among the greatest beneficiaries were Western companies. Well-known, trusted brands sold well online and Western firms marketed their goods through Chinese retailers and via their own sites. [The Economist]

A survey by Credit Suisse found that goods sold online were an average of 21 percent cheaper than goods sold at conventional stores. The low prices were attributed to competition among Chinese entrepreneurs skilled at taking advantages of pricing inefficiencies. Online traders took advantage of delivery services that delivered most anything in Beijing or Shanghai for 75 cents or less and cheap warehousing schemes that avoided the high rents and real estate prices in these cities. [The Economist, Op. Cit]

About 55 million Chinese shopped online in 2007, spending $8.25 billion, according to the China Internet Research Centre in Beijing. This is up from 43 million shoppers spending $4.3 billion in 2006. In 2010 total sales reached over $60 billion. Growth could have been higher but Chinese shoppers tended to spend little money on the Internet because of concerns about reliability, counterfeit products, payment methods and using credit cards.

Initially E-sales had a hard time taking off in the 2000s because not many Chinese had credit cards, which were essential for on-line shopping at that time. As of 2003, only 8 million of China’s 68 million Internet users had ever shopped online. Many of those who did shop online didn’t use credit cards. They used debit cards, CODs and or had money withdrawn from an account when they made a purchase. Pay systems like Alipay really helped online shopping gain traction in China.

Impact of E-Commerce on Chinese Society

Jiayang Fan wrote in The New Yorker: Capitalism, of course, has been steadily eroding that traditional sense of identity in China since the early eighties, but for a long time change did not reach the countryside, whose brutal poverty made it immune to the tide of obsessive consumerism sweeping through the cities. E-commerce, though, with its ability to penetrate deeper and faster into the hinterland, brings with it a new sense of personal identity — one less tethered to the group and, arguably, freer, but also more vulnerable to social atomization. [Source: Jiayang Fan, The New Yorker, July 23, 2018]

A generation back, when everyone in my father’s village was mired in the same kind of deprivation, the name of the village was his most significant marker of identity. But Zhang [a delivery man for the e-commerce company JD.com] told me that, in the places where he delivered, people were increasingly forming subgroups determined by their possessions. The car owners fraternized with other car owners; the computer owners with other computer o wners; and those who had little of anything were now a society unto themselves.

In the world of Chinese retail, the area where you most strongly feel the absence of older forms of identity, and the frenetic impulse to reinvent oneself, is the luxury-goods market. The Chinese are the most prolific consumers of luxury items globally, accounting for thirty-two percent of sales last year. And, because habits of consumption are less ingrained — no one’s granny shopped at Bergdorf’s — people have been notably willing to buy, say, twenty-thousand-dollar watches with a mere tap on a phone. Unsurprisingly, retailers have poured into the sector, and Jeffrey Towson, a business professor at Peking University, suggested to me that JD may be particularly well positioned for the current moment, because of its reputation for dependability and its no-fakes guarantee.

Group Buying Sites in China

Sites that operate under the group buying concept have done well. Benjamin Haas wrote in the Los Angeles Times, Such sites “generally work like this: The companies partner with local businesses to offer products and services at deep discounts, marketing the deals through emails sent to subscribers daily. Some sites require a minimum number of buyers to respond before they'll make good on the offer. Buyers typically have 24 hours to purchase the deals, which can be downloaded and printed as coupons that merchants will honor for weeks or months. [Source: Benjamin Haas, Los Angeles Times, May 5, 2011]

China's Internet users can find bargains on a wide variety of offerings including massages, hotpot dinners, Japanese condoms, doctor visits, infant formula and bridal photos. In September, 200 Mercedes-Benz Smart cars discounted by 33 percent to about $20,000 sold out in three and a half hours.

Zhao Yajie is one of the millions of Chinese consumers who have bought into the trend. She obsessively scours group buying websites for the latest deals, focusing on neighborhood restaurants and Japanese lingerie. When she finds a particularly good bargain, she emails it around or sends it to people over QQ, China's most popular instant messaging service. "And sometimes my friends send me deals too," said the 28-year-old investment manager. "Recently, a friend bought me a coupon to a lobster restaurant."

Zhao even sends deals to her boss. In a country where haggling for almost everything is the norm, this isn't considered unprofessional or embarrassing. "If you take away the technology behind group buying, this isn't new," said Kevin Lee, chief operating officer of China Youthology, a research and consulting firm that focuses on Chinese youth trends. "The motivation has always been there, trying to get the best deal, talking down the price, using coupons."

In December, 2010 the Ministry of Commerce singled out the industry for being too chaotic and in need of tighter regulation. Recently, for example, a daily deals website based in Zhejiang province in eastern China allegedly defrauded more than 500 people by offering deeply discounted movie tickets that a local theater never agreed to honor, according to a report in the Qianjiang Evening News.

See Pinduoduo Below

China’s Top Online Shopping Sites

1) Taobao.com received 341.57 million monthly visits as of 2021. It is an overseas cross-border e-commerce platform for Chinese people, covering consumers in more than 200 countries and regions. It and its counterpart Tmall (See Below) dominates online retail business to consumer (B2C market) with a market share of nearly 65 percent and well over 700 million active users. Taobao’s core sites are in mainland China, Hong Kong, Macau, Taiwan, Singapore, Malaysia, Australia, and Canada. [Sources: Minz Buii, Ecomeye, August 2, 2021]

2) JD.com, also known as Jingdong, JD.com. See Below

3) Pinduoduo See Below

4) Tmall.com received 130.3 million monthly visits as of 2021. It is a mega-comprehensive shopping platform, with more than 100,000 brand merchants. A large number of domestic and foreign products are introduced every day. Tmall offers tens of millions of authentic brand-name products, in all categories.

5) Xiaohongshu (“Little Red Book”) See Below

6) VIP.com, formerly known as Vipshop, and also known as Wei Pin Hua) is one of China’s leading online discount retailers, offering products from over 1000 brands in categories like fashion, home and beauty at heavily reduced prices for a limited time. Its focuses primarily on premium and popular brands, quality products and good customer service. Known for offering great deals on luxury and high-end labels, VIP.com attributes its success to concentrating on women, who make up over 80 percent of its consumer base. VIP.com sells over 20,000 brands and has offices in New York City and Los Angeles. In 2018, it hosted a Chinese fashion showcase as part of London Fashion Week.

7) Suning is one of the largest non-government retailers in China, As of 2021 it ran four top online shopping sites with its market share of seven percent, and received 13.6 million monthly visits. The company’s growth has not been strong in recent years as other players have elbowed into it space. Suning is known mainly as a regular retailer. It has more than 1600 physical outlets and is limited in terms of range of products, mostly electronic appliances. Founded in 1990, Suning.com began as a brick-and-mortar home appliance store. In 2011, it selling its products online. By some measures it is China’s fourth-largest ecommerce retailer. Suning’s third-biggest shareholder is Alibaba’s Taobao, which owns a 19.99 percent stake in the company. In 2019, Suning acquired an 80 percent stake in the Chinese operations of French supermarket chain Carrefour.

Smzdm.com received 44.62 million monthly visits as of 2021. It is a consumer portal website that provided information on purchasing high-quality products at a discount and steers users to places the can purchase these items. Products include home appliances, home life, fashion sports, travel, cars and credit cards.

Kaola was originally launched as a gateway for Australian products into China. As of 2021 it was China’s largest “cross-border e-commerce” (CBEC) platform, with over a quarter of the CBEC market. Bought by Alibaba in 2019, Kaolo was an independent platform in 2021 but there was talk of integrated it into Tmall Global. As of 2021, it offered 8,000 brands from 80 countries. In reliability surveys, Kaolo ranks high along with Amazon.com and Xiaohongshu.

Yihaodian is China’s largest online food shopping site. You can find most products available at major Chinese supermarkets, even fresh produce, as well as healthcare products and appliances. Yihaodian’s clientele tends to be affluent. Imported products such as wine attract many customers. Yihaodian was bought by Walmart in 2015. A year later it was sold to JD.com.

Yangkeduo.com received 11.7 million monthly visits as of 2021. The company owns a popular group of shopping mall in China. [Source: Minz Buii, Ecomeye, August 2, 2021]

Amazon.cn received 11 million monthly visits as of 2021.

Alibaba

Alibaba.com is China’s largest e-commerce company, business-to-business site, Internet retailer and online auctioneer. A private company Alibaba is based in Hangzhou, two hours south of Shanghai, it was founded in 1999 by it owner Jack Ma.

As of 2020 the Alibaba Group was the world’s the biggest ecommerce retailer and Jack Ma was one of the world’s richest people. At that time Alibaba controlled over 50 percent of China’s ecommerce market and the Alibaba Group owned multiple ecommerce sites.

Owen Matthews of SupChina wrote: A key element of Alibaba’s dominance of the Chinese internet sector was its 2004 launch of Alipay. Initially a PayPal clone, the service has grown into one of China’s two major mobile payment systems. [Source: Owen Matthews SupChina, August 7, 2020]

JD.com

JD.com, also known as Jingdong, is the No. 2 e-commerce company in China. It has a relatively large chunk of the online shopping sector, pie, with a market share of around 26 percent and around 420 million active users. It had about 17 percent of the market in 2019 and boasts a huge range of categories, such as fashion, electronics and health and has boasts its own delivery network covering 99 percent of China’s population, meaning even customers in rural areas can enjoy fast and seamless delivery. [Source: Nicolas Chu, sinorbis, April 18, 2021]

According to sinorbis: JD.com sells products from a huge range of categories, such as fashion, electronics and health, but it is also steadily gunning for a bigger piece of the market-share pie, branching into categories with little or no coverage by the other big e-commerce players in areas including travel, fresh produce and industry. JD.com also boasts its own delivery network covering 99 percent of China’s population, meaning even customers in rural areas can enjoy fast and seamless delivery – an important consideration for brands that have rural consumers amongst their key demographics. Similar to Amazon, third-party vendors can utilise JD.com’s logistics network for order fulfilment, giving it a further edge over its competitors.

And JD.com shows no signs of slowing down. It is also working on cutting-edge technologies, such as AI, robotics and drones, in order to further improve the customer experience, which promises to make it more competitive in the months and years to come. Similar to WeChat, it has begun offering mini-programs that act as an app within the app, meaning businesses can offer specific features highlighting their brand and that speak to their consumers.

Owen Matthews wrote in SupChina: JD.com leads China’s ecommerce push toward automated and drone deliveries. In 2019, it began construction on a drone airport and unveiled its first autonomous truck. In February 2020, JD.com made its first delivery with an autonomous robot vehicle in Wuhan, delivering medical supplies to a local hospital while eliminating human-to-human contact.

JD.com operates primarily as an Amazon-like direct seller, but also runs a marketplace. Multiple international giants, including Tencent, Google, and Walmart, have invested in JD.com to help it compete with Alibaba. However, Tencent’s recent moves indicate its strategic partnership with JD.com may soon turn into a rivalry. In early 2020, Tencent reduced its stake in JD.com from 20 percent to 17.1 percent. In April, Tencent launched a WeChat mini store, rivaling the JD.com mini store it has displayed in the WeChat app since 2017. Tencent has also increased its investments in MissFresh, an online grocery start-up that competes with JD.com and Walmart’s joint venture, JD Daojia. [Source: Owen Matthews SupChina, August 7, 2020]

Jiayang Fan wrote in The New Yorker in 2018: “JD.com, is the third-largest tech company in the world in terms of revenue, behind only Amazon and Google’s parent company, Alphabet, Inc. In the Western press, JD is often referred to as the Chinese Amazon, but unlike Amazon, which has all but saturated the American e-commerce market and therefore has to expand by moving into new sectors, such as entertainment, JD still has ample room to extend its customer base. Although China has the most Internet users of any country and the largest e-commerce market in the world — more than twice the size of America’s — there are still hundreds of millions of Chinese whose lives have yet to migrate online. Analysts predict that China’s online retail market will double in size in the next two years, and that the growth will come disproportionately from third- and fourth-tier cities and from the country’s vast rural hinterland. At a time when the Chinese government has instituted monumental infrastructure programs to develop these regions, companies like JD are providing a market-driven counterpart, which is likely to do for China what the Sears, Roebuck catalogue did for America in the early twentieth century. [Source: Jiayang Fan, The New Yorker, July 23, 2018]

Liu Qiangdong, JD.com Founder

Jiayang Fan wrote in The New Yorker: “ JD’s founder and A.D.O., Liu Qiangdong, has his office on the eighteenth floor of the JD headquarters in a business park in the southern suburbs of Beijing, In contrast with the postmodern riot elsewhere, everything in his suite is blindingly white, the walls bare except for a single gargantuan calligraphy painting that spells out the saying “Tranquillity yields transcendence.” [Source: Jiayang Fan, The New Yorker, July 23, 2018]

Liu was born in 1973. He has “a round, fleshy face and a practiced, confident demeanor befitting the eighteenth-richest man in China. (The current estimate of his wealth hovers just below ten billion dollars.) His fame has grown in step with his wealth; on subways and sidewalks, he gazes out from posters with energizing patriotic slogans. Recently, China’s social-media scene has been rife with speculation about Liu’s increasingly toned and trim physique, and whether it was an attempt to keep up with his wife, Zhang Zetian, who is twenty years his junior. (An Internet celebrity, Zhang is universally known as Milk Tea Sister, for the photograph of her posing with a bubble tea that launched her stardom.) The couple have a daughter, and Zhang, who is the country’s youngest female billionaire, tirelessly promotes a portfolio of luxury brands carried by JD. Fashion is among the company’s fastest-growing areas, and when Liu extended his hand I glimpsed a watch by Audemars Piguet, which recently partnered with JD to launch its first online boutique.

In interviews, Liu is eager to emphasize the humbleness of his origins. Born near Suqian, a fourth-tier city in Jiangsu Province, he grew up in a village not much more developed than those where Xia makes his deliveries. His parents worked as merchants, plying their trade up and down the Yangtze River, selling coal to the south and produce to the north. Because they were away on business much of the time, Liu was often in the care of his maternal grandmother — “the epitome of a rural village woman, ” he said. He likes to tell the story of leaving his home town for Beijing, after his stellar performance on a national exam earned him a place at the prestigious Renmin University. His family did not have enough money for his trip to the capital, so the rest of the village chipped in, and those who didn’t have cash donated eggs to sustain him on the long train ride. During his first week in the capital, Liu recalls, he ate only eggs.

Liu started his first business — a restaurant — while still in college, with his wages from a part-time job. It went bankrupt within eight months. When he tells the story, it comes out as a parable about the need for integrity: dishonest employees sneaked money from the till and inflated their expense claims with faked receipts. His second business was the foundation of all his success: in 1998, he opened a stall, Jingdong Century Trading, at a Beijing consumer-electronics market. Liu stresses that he took a different tack from that of his competitors, whose solution to the problem of how to turn a profit while competing on price was usually to sell substandard goods. He made it an article of faith that no product would ever be counterfeit and no price tag would ever be negotiable — a novel concept in China, where haggling is the norm.

The business prospered, swelling in five years to a chain of electronics stores across Beijing, and it earned him his first million. But the emergence of JD as an online brand was a fluke. In 2003, the SARS pandemic struck, and Beijingers hunkered down in their homes. Liu had to temporarily close his stores, and, casting around for a way to continue selling, he began to offer his products on online bulletin boards. In a marketplace where everyone was a fraud until proven otherwise, the anonymity of the Internet only magnified the sense of suspicion, and no one responded to Liu’s posts. But then an old customer, whom Liu had never met, posted on a board, vouching for the authenticity of the goods, and orders began to come in. Within a couple of years, the online sales had reached a level that enabled him to close all his brick-and-mortar stores. In Liu’s telling, JD’s birth is bound up with a lesson about the importance of trust in business.

JD.com Business

Jiayang Fan wrote in The New Yorker: ““Chinese people don’t easily believe the good will of strangers, ” Liu told me. “Why do you think Chinese fight tooth and nail to get on the bus and subway?” He shook his head and laughed. “It doesn’t matter that it’s less efficient or unnecessary. It’s a complete reflex for them, because it’s what they’ve been taught since they were young.” [Source: Jiayang Fan, The New Yorker, July 23, 2018]

Though the origin story might strike some as self-serving, Liu’s diagnosis of “a fundamental lack of trust in Chinese society” does relate to qualities that make JD distinctive. Rather than competing on price, in a marketplace steeped in counterfeit goods and shoddy service, JD has focussed on developing a reputation for dependability. It maintains a much publicized “no-fakes” guarantee, and works hard, if not quite infallibly, to keep its site free of them. “One transaction can’t earn trust, ” Liu told me. “But over time people come to rely on you.”

Establishing this reputation has required JD to adopt a strategy radically different from that of its greatest rival, Alibaba, which is essentially the eBay of China — a platform connecting customers to a vast network of third-party sellers. Although there are an increasing number of third-party sellers on JD’s site, the core of its business, like Amazon’s, involves managing the entire supply chain. It buys from manufacturers, stocks inventory in warehouses, and invests billions of dollars in development, including a kind of in-house FedEx, called JD Logistics. There are now nearly eighty-five thousand delivery personnel like Xia, and several thousand depots, from large hubs to tiny outlets like the one in Xinhuang. “The couriers are the faces of JD, ” Liu said. “They come to your home. You have to trust them.” The success of this network, combined with the notorious unreliability of the Chinese postal service, means that JD Logistics is now itself a product — a service that other e-commerce players pay to use.

Viewed in a certain light, JD can be seen as a privately financed national infrastructure project. “JD has brought the entire nation closer together and made it more close-knit, ” Liu told me proudly. Although the company’s infrastructure investments make plenty of business sense — its stock, which is traded on the Nasdaq exchange, reached an all-time high at the start of this year — it is not incidental that the vision underlying them is completely in harmony with that of the government. In recent years, China has built roads and high-speed rail links to bind the country’s least accessible regions more closely to the big cities that are the engine of its economic growth. And the tech sector has emerged as a centerpiece of the country’s global ambitions.

Pinduoduo

Pinduoduo is China’s second largest online retailer. It has been China’s fastest growing e-commerce site in recent years. Founded in Shanghai in 2015, it held a 13 percent share of China’s e-commerce trade in 2021 and at that time was the fastest-growing app in China’s history/ According to Sinorbis: Unlike major competitors such as Tmall and JD.com, which focus on premium products, Pinduoduo is targeted at bargain hunters looking for a great deal. What makes Pinduoduo unique is that it is primarily focussed on social e-commerce. The interactive “group buy” or “team purchase” model allows users to invite friends to join a shopping team. This social nature of the platform encourages product virality – the more people buy a product, the more it is discounted, and the higher the product is ranked, further driving sales. Total revenues were US$9.1 billion in 2020, an increase of 97 percent from 2019. The increase was primarily due to an increase in revenues from online marketing services and contribution from merchandise sales.

Owen Matthews wrote in SupChina: Fueled by its popular group-buying business model, Pinduoduo has skyrocketed since its 2015 launch to become China’s fastest-growing ecommerce company, with 7.3 percent market share in 2020. In June 2020, Caixin News reported that the five-year-old retailer replaced JD.com for the number two spot in market share domination. Under the group-buying business model, customers are invited to form groups with others who want to buy the same product. This can lead to discounts as steep as 90 percent if a large enough quantity of the product is purchased. Pinduoduo also touts its consumer-to-manufacturer (C2M) model mentioned above. [Source: Owen Matthews SupChina, August 7, 2020]

Pinduoduo is also China’s largest online seller of agricultural products. It launched AI-driven Duoduo Farm in April 2019 to help farmers in impoverished counties in China sell online and improve their productivity. In January 2020, Pinduoduo launched Duoduo Livestream, which allows salespeople to promote their products on the Pinduoduo app through live video.

The company responded to the COVID-19 outbreak by combining these two services as part of its Help the Farmers campaign. Pinduoduo collects information about surplus agricultural produce and connects farmers with consumers by livestreaming the perishable stock. From February 10 to March 18, the service helped 180,000 farmers sell 120,000 metric tons of agricultural produce.

Xiao Hong Shu (Little Red Book)

Xiaohongshu (“Little Red Book”) is China’s fifth largest online retailer. It is a fashion-centered app that combines social media with ecommerce. It began as a platform for users to share their experiences with make-up and skincare, and over time expanded into areas such as sport, travel and food. As of 2021 it boasted nearly 300 million active users and had a 6 percent share of the e-commerce market. It pushes luxury-brands and is very popular among young women. Like Instagram, it is also a form of social e-commerce. Users scroll through images. When they see something they like they click the image which sends them to an e-commerce shop.

According to SupChina, “Influencers film their own reviews of high-end and luxury international products, write fashion blogs, and post other lifestyle content. Users can purchase reviewed products straight from the posts about them. The app claims its name has no connection to the famous book of Chairman Mao quotations. Xiaohongshu fosters a sense of community amongst its base of fashion-loving young women, who trust its content over the often bot-filled reviews on other ecommerce platforms. About 75 percent of its 300 million registered users live in first- and second-tier cities. Xiaohongshu was founded in 2013 as an app to help travelers plan their overseas shopping list and is backed by both Alibaba and Tencent.

Tony DeGennaro wrote in Dragon Social: Xiao Hong Shu has many features commonly seen on social media networks. Users can post reviews, join in on discussions, and post their own content. Content on the platform tends to focus on product photos and shopping experiences, including shopping tips, deals, and experiences from their trips abroad. Xiao Hong Shu was built to be a platform primarily focused on User Generated Content, where users could share reviews and their experiences to help others with their purchasing decisions. [Source: Tony DeGennaro, Dragon Social, 2020]

In June 2019, Xiaohongshu had 250 Million average monthly active users and 29,000 brands registered on the platform. Eighty-five percent of the users were female. Users can browse through lists of the most popular brands for a category, and through products on brands’ exclusive pages. They can share also share pictures of products that they have purchased, on a board that bears a strong resemblance to Pinterest, where other users can like and comments.

Aside from its social aspects, Xiao Hong Shu is an advanced e-commerce platform. The home page features items that have received the most shares. This allows users to dictate which items are featured on the home page and to direct trends. Influencers (KOLs) on this platform can directly influence sales through the content that they generate, making this a very attractive platform for foreign luxury brands, with most of the larger ones already taking advantage of this advertising method.

Xiao hong Shu had a very rough 2019. After seeing massive growth in its user base and transactions conducted on the platform, the company ran into trouble with authorities for hosting fake and misleading content. This led to a massive purge of fake users and influencers using fake users to boost their metrics. The platform was forced to implement a rigrous process for influencers who must now register to conduct commercial activity on the platform.

Dangdang

Dangdang has been called China’s answer to Amazon. It received 5 million monthly visits as of 2021. As is true with its U.S. counterpart, it began as a book retailer before branching into many other categories, such as beauty and personal care; home and lifestyle; baby, children and maternity; and electronics. Even with this diversification Dangdang remains the largest book retailer in China and is heavily associated with books. According to Dangdang’s cofounder Penny Yu Yu, “Dangdang caters to medium- to high-end customers with higher-than-average education level and larger wallet size and they tend to live in top 20 cities.”

Dangdang.com is China biggest online bookseller. It was founded by a husband and wife team, Peggy Yu and Li Guoqing, two Chinese who survived the Cultural Revolution and met while studying in New York. All employees are required to read “E-Commerce Empire: The Legend of Amazon”. Dangdang.com began to generate profits in the late 2000s. The company initially got around the credit card problem by using 30 bicycle courier companies to deliver the books and collect payments, which were then wired to Dangdang. In August 2004, Amazon bought China’s then largest Internet bookseller Joyo.com for $75 million.

In 2015, Dangdang.com announced plans to open 1,000 physical bookstores around China. According to Chengdu Commercial Daily, Zhang Wei, the assistant president of Dangdang, said, "The offline bookstore we are opening is not the traditional bookstore anymore, but a cultural complex instead. It will come in the forms of mall, supermarket-style bookstore, county-level bookstore and others. Online and offline sales will be fused together." “Dangdang also plans to stimulate its online book sales in this way. It is said that its founder Li Guoqing was negotiating with many offline chain bookstores on the price issue and had promised a protective margin. [Source: China Daily (November 26, 2015]

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

Last updated May 2022