China'S "Online Shopping Craze" Continues To Heat Up

The Chinese are crazy about it.

According to data from Analysys, an Internet research firm, the number of online retail sales in China will double this year from 253 billion yuan to 500 billion yuan (75 billion US dollars) in 2009.

In less than 6 months earlier this year,

But that is less than half the global average.

Plus, in the third quarter of this year, retail sales accounted for only 3.7% of the total retail sales of consumer goods in China.

Accordingly, analysts believe that China's online shopping market contains great potential.

In a recent report, McKinsey said, "about 2/3 of Chinese Internet users are less than three years old, and half of them are less than two years old.

Past experience tells us that the growth of Internet users to online shopping consumers takes about three years.

Assuming that this conversion rate is maintained, tens of millions of Chinese online shopping consumers will soon be born.

Retailers and consumer goods companies undoubtedly believe this.

Fashion brand Armani (Armani) opened an e-commerce website in China two weeks ago, and apparel retailer Gap's online store opened in China last month.

Dangdang, the largest book sales website in China, listed on the New York Stock Exchange on Tuesday, raising $272 million, which is nearly 1/4 more than target financing.

Following the pace of diversification in Amason (Amazon) and expanding sales from specialised books to selling various kinds of commodities, Dangdang's revenue in the first 9 months of this year has increased by 56%.

WAL-MART (Walmart), the world's largest retailer, is planning to open a Chinese e-commerce website next year for its Sam 's Club (Sam).

Uniqlo, a Japanese clothing retailer, opened an online store in China last year. Adidas, sporting goods company (Adidas), opened an online store on Taobao, the largest e-commerce platform in China this summer.

"Just 9 months ago, because of the trouble that Google (Google) had encountered in China, many foreign companies felt that it was too difficult to enter the Chinese Internet market," said Geoff Jeff, vice president of CDNetworks, a virtual hosting company for e-commerce websites.

But now, "people think the market is too big to ignore," he said.

Since October, 30% of the new customers of the company are going to enter Chinese enterprises.

China's domestic enterprises are also pouring into the e-commerce market.

The first online store of Geely, the Chinese auto maker, opened in Taobao this week. Consumers can pay the deposit here and then go to the showroom to confirm the purchase.

New e-commerce websites have sprung up like mushrooms.

"Our industry is rapidly emerging all kinds of new professional websites," said Zhuang Chenchao, President of Qunar, one of the longest and largest tourism websites in China.

Taobao's Taobao mall, which runs B2C business, expects that the volume of pactions completed on this mall will increase by 3 times this year than in 2009.

However, rapid growth also brings challenges.

So far, China's online retail market has been dominated by C2C trading mode: Taobao occupies an absolute leading position in this field.

"B2C accounted for only 8.5% of the total retail sales last year," said Su Huiyan, an analyst at iResearch, Beijing.

"But the proportion will rise sharply in the next 5 years."

This means that Taobao may face tough problems.

Although Taobao is also a leader in the B2C market, its market share (33%) is only half that of the overall e-commerce market.

Fang Yingzhi, an analyst at China e-Business Research Center, said earlier this year that Japanese Internet retailer Le Tian (Rakuten) and China's major network search engine Baidu (Baidu) opened an online business city, which could pose a major challenge to Taobao.

The demand for consumers is also getting higher and higher, which has prompted Taobao to make many changes.

Taobao mall has launched an independent domain name to create a more high-end shopping environment; Taobao's parent company is investing heavily in improving the logistics network to overcome bottlenecks in distribution.

"We started from C2C. People used to be attracted by low prices, varied products and shopping convenience," said Zhang Yong, chief financial officer of Taobao.

"Nowadays, the quality of products and services has become more important."