China’s retail sales rose 9.5 percent in February from the year before, making it one of the few sectors that maintain nearly double-digit growth rate.
Online shopping has reported more than 30 percent growth, indicating that it continues to expand at the expense of brick and mortar rivals.
There are a number of reasons the trend will persist.
At present, China has about 400 million online shoppers. It’s quite reasonable for the figure to double in the next five years as the millennials are starting to play a significant role in China’s overall consumption.
Retailing of more products, especially those that are highly standardized, will migrate to the internet. Also, improved transport and logistics infrastructure has enabled those who live in lower-tier cities or remote regions to access online shopping.
Meanwhile, companies are also devoting more resources to target online shoppers.
The outlook for e-commerce platforms are even rosier, largely because as more companies want to sell online, they have to spend more to secure a higher ranking or better spots on the shopping sites amid tons of competing offers. Otherwise, their products will be drowned in a sea of options.
For a good online shopping firm, achieving a 30 percent growth rate is still very much possible. It is entirely reasonable for them to trade at over 20 times price-earnings ratio.
This article appeared in the Hong Kong Economic Journal on Mar. 22
Translation by Julie Zhu
[Chinese version 中文版]
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