The business-to-consumer (B2C) e-commerce segment will outgrow the consumer-to-consumer (C2C) market in China’s online retail market in one to two years, according to an analyst from UBS.
“B2C is the area where everyone seeks growth. The opportunity of B2C is that many offline brands or retailers in China do not have online strategy. The B2C platforms strive to help these companies open [online] shops,” said Erica Poon Werkun, head of Asian Consumer and Internet Research at UBS.
“In one to two years, more than half of the market may be from B2C, as many products on C2C platforms like Taobao tend to be lower-priced while B2C are selling bigger brands with higher average selling price,” she said.
E-commerce giant Alibaba already saw this shift in trend several years ago, which prompted the group to put in a lot of efforts to promoting the B2C-reliant T-mall, Werkun noted.
While B2C will grow faster than C2C, demand for products on C2C will sustain as more and more rural consumers are turning into low-income class population in cities amid China’s urbanization drive, she said.
At present, the B2C market accounts for “40-something” percent of the e-commerce sector in terms of the gross merchandize value, which takes into account revenue received from sales of products and the fees charged on companies that sell their goods on an online platform.
The comparative figure for C2C is said be around 50 percent.
In other comments, Werkun noted that the B2C market is also getting a push as concerns are growing about the counterfeit goods being sold on C2C platforms.
Taobao accounts for 95 percent of the C2C market in online retail in China. In January, the State Administration for Industry and Commerce criticized the e-commerce platform after concluding that about 62.75 percent of goods sold on the platform were fake.
Taobao had rejected the claim, saying that the sampling size taken by the watchdog during the inspection was too small to reflect the reality.
The e-commerce market in China is expected to double in size by 2017, posting 22 percent annual growth versus a global average of 17 percent.
The fall in the price of handsets and growing data usage has boosted smartphone penetration and acted as a catalyst for structural growth of online retail business, said Amy Lo, head of UBS Hong Kong and the Greater China chief of UBS Wealth Management.
E-commerce presents a cost-effective opportunity to reach a wider market and offer more products that are not restricted by store size, thus reducing the rental expenses pressure. All the advantages come at the expense of traditional retail markets, Lo said.
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