(Updates comment from Alibaba in the 5th paragraph.)
Right now, China’s e-commerce industry looks like a bazaar where shoppers roam around for independent sellers who have the items they’re looking for. However, trends in the nation’s online buying habits show that the Chinese are moving away from small merchants and gravitating toward their own sorts of superstores such as 360buy Jingdong Mall.
The shift signals that the market is maturing, and it threatens to shake up the industry led by Alibaba Group Holding, China’s biggest e-commerce company. According to a report by Multimedia Research Group that was commissioned by Bloomberg, Chinese consumers made an estimated 35 percent of their online purchases at retailers last year. That’s up from 24 percent in 2011 and 14 percent in 2010, the report said.
As the chart shows, businesses are expected to continue to capture more market share this year and account for the majority of e-commerce transactions by the end of 2014. This type of e-commerce, dominant in mature Internet markets, “is the future of China’s online shopping,” Julia Zhu, an analyst at MRG, wrote in her report. “Chinese consumers shop online for a better price and accessibility to more products,” both of which are better served by big retailers than individuals.
Seemingly, that would be bad news for Alibaba, which owns the dominant consumer-to-consumer retail site Taobao Marketplace. 360buy, which describes itself as an “online shopping mall,” had been attracting millions of shoppers with perks such as free shipping and quality assurance.
John Spelich, a spokesman for Alibaba, said the company had foreseen this shift and has taken steps to address it, including spinning out its own superstore called Taobao Mall in 2011. Alibaba’s two largest e-commerce sites have collectively accumulated more than 1 trillion yuan ($161 billion) in sales, and Tmall continues to experience triple-digit growth, Spelich said.
Since launching Tmall in 2008, Alibaba has capitalized on the growing preference for an all-in-one shopping experience. Tmall is now the leader in that market, according to research firm Analysys International. Within the next decade, Alibaba plans to set up a logistics network that can support 10 trillion yuan ($1.6 trillion) in transactions, the China Daily newspaper reported last week.
In preparation for a brave new world of e-commerce in China, Alibaba has been arranging for several drastic changes to its business just in the past few weeks. The company said on Jan. 10 that it will divide itself into 25 units from seven in an effort to become more flexible. Then Jack Ma said he will step down as chief executive officer in May. Ma said last June the company could sell shares in an IPO within five years.
As the massive Chinese Internet market continues to evolve rapidly, all eyes are on Alibaba to see whether it can stay ahead of the trends without Ma, its billionaire founder, at the helm.