On May 19, 2021, Deborah Weinswig, CEO and Founder of Coresight Research presented at the Bucharest Tech Week event, Romania’s largest networking and learning event for tech enthusiasts and thought leaders. Kicking off on May 18, 2021, more than 19,000 tech enthusiasts attended to hear from speakers spearheading the tech sector. As part of the event’s Business Summit conferences, Weinswig’s virtual presentation focused on how brands and retailers can learn from and capitalize on the tech innovations that Coresight Research has identified as drivers in China’s e-commerce market. In this report, we present insights from Weinswig’s presentation, covering China’s e-commerce market growth and Coresight Research’s 10 key e-commerce trends for 2021.

Bucharest Tech Week: In Detail

China’s E-Commerce Market Growth The total China e-commerce market has grown significantly over the past few years and is set to reach $1.7 trillion in 2021, we estimate from National Bureau of Statistics of China data. While China saw strong sales and increasing e-commerce penetration amid the coronavirus pandemic in 2020, market growth is also being driven by changes in consumer preferences and the introduction of innovative retail technologies adopted by the country’s major e-commerce players. China is ahead of the US in terms of advanced retail technologies and innovation, giving US retailers a lot to learn from China’s e-commerce market as key technology trends begin to move from east to west. Although China’s online sales have seen double-digit year-over-year growth over the past five years, growth has declined since 2017—reflecting the continued significance of physical stores in China. Weinswig discussed the online-offline retail relationship in China, referencing e-commerce giant Alibaba. Having opened its first physical grocery store (Freshippo) in China in 2015, the company leverages its physical grocery presence in customer acquisition—whereby converting brick-and-mortar grocery shippers into online shoppers reduces costs compared to acquiring new online customers through extensive marketing efforts. Below, we explore 10 key e-commerce trends in China, as identified by Coresight Research and discussed in Weinswig’s presentation. 10 Trends in China’s E-Commerce Market 1. Livestreaming Will Continue To Be an Effective Sales Channel The livestreaming market has grown significantly over the past few years. We expect livestreaming to become a valuable marketing tool for more brands following the coronavirus pandemic, helping their businesses become more agile and resilient. Coresight Research estimates that livestreaming e-commerce sales in China are set to reach approximately $300 billion in 2021 while livestreaming e-commerce sales in the US will reach approximately $11 billion this year. Going forward, we expect to see more Chinese retailers and brands hosting their livestreaming sessions, rather than working with KOLs (key opinion leaders) who use their influence to convince consumers to purchase products during a livestreaming session. With the shift to brands and retailers running their own sessions, we will see longer livestreams and hosts with more in-depth product knowledge to answer consumer questions in more detail than KOLs. Additionally, moving away from working with KOLs enables brands or retailers to save on the cost of commission paid to the KOL based on the livestream sales performance Going forward, we expect this greater flexibility to host to more frequent livestream sessions to give brands and retailers a better hand in their own product exposure. 2. Short-Video Platforms Will Capture Greater E-Commerce Market Share We believe that short video platforms such as Douyin and Kuaishou will capture a greater e-commerce market share going forward by enabling sales. Short-video platforms include user-generated content with shopping. Consumers are turning toward short video platforms for entertainment and fun, with many short-video apps recording a rising number of active users in China in 2020:

• In September 2020, thenumber of monthly active users of Douyin reached 524 million, a year-over-year increase of 8.5%.
• The number of monthly active users on Kuaishou reached 408 million in the same month, a year-over-year increase of 20.4%.

The growing popularity of short-video apps in China, particularly among young consumers, makes them an appealing platform for brands to grab viewers’ attention and create a marketing buzz. Weinswig explained that by expanding further into e-commerce, including building exclusive partnerships with manufacturers, short-video platforms will increasingly be able to offer brands and retailers the ability to convert traffic to sales. 3. Mini Programs Will Supplement Shopping Platforms for Brands Mini programs such as WeChat and Baidu will continue to be an important channel for brands to interact with customers. Compared to other standalone apps, mini programs are less expensive, and they come packed with various social media features. Many brands have launched a mini program on WeChat as an easy way to sell products at virtually no cost. According to the company, the GMV (gross merchandise value) of physical goods sold on WeChat mini programs from January to August 2020 increased by 115% year over year. The fastest growing merchants included those selling daily necessities and luxury retailers, shopping malls and department stores. Additionally, Weinswig explained that mini program platforms allow customers to share their opinions and recommendations about brands and stores they visited on WeChat, providing new ways of discovering new brands and stores. 4. Smart Manufacturing and Consumer-To-Manufacturer (C2M) Will Drive E-Commerce Forward Smart manufacturing and the C2M model, also referred to as “on demand” manufacturing in the US, is a data-based approach to retail. Under this model, brands leverage data provided by e-commerce platforms to respond effectively to consumer demand, and better understand their customers—meaning that product creation timelines are shortened and spending on market research can be reduced. We expect to see the C2M model accelerate in popularity as manufacturers recognize the importance of being consumer-centric to meet changing demand post pandemic. The C2M market will reach ¥1.4 trillion ($214 billion) in 2022 in China, representing a CAGR of 191% between 2018 and 2022, according to research firm Vzkoo (an estimate made after the coronavirus outbreak). Weinswig referenced Chinese manufacturer Otis, as the company worked with Alibaba in 2020 to better understand consumer demand based on its product sales on Alibaba’s e-commerce platforms. As a result, the company shifted its product inventory toward an area with increased demand, resulting in Otis reporting outsized sales. In addition, the C2M model allows retailers to reduce unsold inventory and minimize supply chain risks. C2M sets the stage for retail innovation through its data-driven understanding of what consumers want. Weinswig referred to factories jumping on the “on demand” bandwagon in the West, indicating that the trend is already growing outside of China. 5. Luxury E-Commerce Market Will Continue To Grow Coresight Research expects to see greater demand for luxury products in China, which is driven, in part, by ongoing expansion into online channels, Weinswig stated. China’s luxury e-commerce market is set to grow from ¥93 billion ($14 billion) in 2020 to ¥147 billion ($22 billion) in 2025, representing a CAGR of 9.6%, (an estimate made prior to the Covid-19 outbreak), according to McKinsey. Weinswig discussed what European luxury brands can learn from their counterparts in China and how they pivoted amid the pandemic. For instance, many brands owned by LVMH Moët Hennessy Louis Vuitton (LVMH), shifted physical customer experiences to virtual chat functions hosted by sales associates to engage and support customers shopping for products virtually. Moreover, amid depressed rates of international travel in 2020, e-commerce channels allowed luxury brands to sell to shoppers in Chain. International brands can capitalize on the shift from overseas to domestic luxury spending in China by establishing or boosting their online presence in the country, for instance by launching a flagship store on Alibaba’s Tmall Global or JD.com 6. E-Commerce Platforms Will Use Shopping Festivals To Excite Shoppers With a focus on creating excitement and engaging shoppers, shopping festivals play a significant role in driving e-commerce in China. Alibaba can be credited with the launch of the shopping festival trend around 10 years ago in China, with its annual Singles’ Day festival, termed the 11.11 Global Shopping Festival by the company. Many e-commerce companies have built on the success of these festivals: Kuaishou held its first 616 Shopping Festival from June 6 to 18, 2020, and Douyin has launched its Chongfen festival from October 25 to November 11. Moreover, Weinswig discussed the launch of Coresight Research’s 10.10 shopping festival during the pandemic in 2020. Featuring around 100 brands, the shopping festival received massive support from the retail industry as well as the media­­—it ending up extending from a one-day to a four-day event, running from October 9 to 12, 2020. As well as bringing fun and excitement to retail amid a period of disruption, the event focused on charitable giveback to the 12 charity partners that participated in the event. The role of shopping events has become increasingly significant in the current retail environment, as brands and retailers are looking to clear inventory and make up for losses caused by the pandemic. We expect to see online shopping festivals adopt an omnichannel approach by expanding promotions to brick-and-mortar stores. 7. Community Group Buying Will Gain Traction We believe that community group buying is a key e-commerce driver in China, and is only set to become more prevalent. The model centers around bulk buying and delivery, whereby consumers living in close proximity can group together to access discounts on joint purchases. A community group-buying platform works as an intermediary, approaching suppliers to list their products. As the model enables shoppers to avoid visiting brick-and-mortar stores for essential grocery purchases—thereby reducing their social contact—community group buying expanded rapidly amid the Covid-19 pandemic. To highlight growth expectations, Weinswig stated Coresight Research estimates that China’s community group-buying market will reach ¥87 billion ($13.4 billion) in 2021, representing a CAGR of 117% since 2018.

---

Figure 1. Community Group Buying via WeChat in China: The Consumer Journey [caption id="attachment_128255" align="aligncenter" width="725"] Source: Coresight Research[/caption]   Many Internet giants launched a community group-buying platform to gain market share in 2020. For instance:

• Didi Chuxing, China’s largest ride-hailing platform, launched its community-group buying platform Chengxin Youxuan in June 2020.
• Pinduoduo launched its community group-buying service, Duo Maicai, in August 2020.

Weinswig established a positive stance on community group buying, stating that she sees value in the improved sustainability of the model compared to traditional individual grocery shopping, which requires multiple delivery trips. This combination of an effective distribution channel with the influencing power of a community leader, and its popularity in lower-tier markets in China, will continue to drive the community group-buying model.

• Read Coresight Research’s Think Tank on community group buying.

8. Innovative Technology Will Improve the E-Commerce Experience  The movement toward new advanced technologies will continue to drive e-commerce by supporting a frictionless shopping experience. Weinswig discussed an example of technology-enhanced retail experiences from a previous Singles’ Day shopping festival: Terry Lundgren, CEO of Macy’s at the time conducted a livestream session with VR (virtual reality)-enabled purchasing. The VR headset technology enabled shoppers to make purchases just by blinking. Weinswig described the innovation as creating one of most impactful shopping experiences she has ever witnessed. Over the past few years, e-commerce platforms have adopted innovative technologies to enhance the consumer shopping experience. Brands and retailers can use VR and augmented reality tools to add a new dimension to online shopping. Moreover, we see  artificial intelligence (AI) hosts and the use of AI-enabled chatbots as a way to reduce operational costs in client experience services. 9. E-Commerce Companies Will Invest in Logistics To Own Last-Mile Delivery E-commerce companies are investing in logistics or acquiring third-party logistics firms to own last-mile delivery, instead of contracting it out to traditional shipping carriers. E-commerce companies have accelerated acquisitions of or investments in retail logistics, enabling more efficient delivery services in China. For example, Alibaba invested ¥1 billion ($146.0 million) in logistics firm YTO Express in 2020. Moreover, Weinswig discussed plans among China’s retail giants to launch proprietary delivery stations. Using the logistics network offered by Chinese e-commerce platforms, brands can also expand sales to consumers in remote areas. For instance, Alibaba’s logistics arm Cainiao announced in June 2020 that it will launch 30,000 new Cainiao Post stations in neighborhood compounds across 100 Chinese cities in the future. Brands and retailers will increasingly adopt autonomous delivery technologies to improve efficiency and reduce costs in the long term. These autonomous delivery robots, which have largely been pioneered by JD.com and Xingdong on college campuses, have now grown to be much more robust in terms safe product delivery.. 10. New Retail Will Prevail in Online and Offline Integration Coresight Research expects brands and retailers in China to adopt new retail strategies to achieve greater offline and online integration in 2021. New Retail is not omnichannel or multi-channel, but it is the seamless frictionless integration that prevails today. Indicating strong opportunity in New Retail, Alibaba reported that its New Retail sales revenue (comprising fresh food chain Freshippo and department store chain Intime) increased by 115% year over year in fiscal 2021. Recent notable major examples of New Retail developments in China include the following:

• Suning.com established a New Retail unit, Yunwangwandian, in November 2020, aiming to provide its physical stores with a digital upgrade—including stores that will be able to use big data to plan inventory. The company also wants to attract merchants to join the initiative, to enhance and extend its supply chain system.
• On November 13, 2020, Skechers announced its cooperation with Alibaba Cloud. Alibaba Cloud will help the footwear retailer integrate sales and warehousing data from online and offline channels, and intelligently allocate goods to keep inventory in a dynamic balance.

Weinswig stated that the focus on online-offline retail integration in China will become increasingly commonplace in China going forward.