As Seen In…World Economic Forum.
China’s digital market is a story of scale, innovation and raw energy. It’s a story of an internet super-giant.
But it’s also a story of two halves: 50% of the 1.35 billion population benefit from e-commerce, social media and messaging, while the rest have yet to go online.
In developed markets across Europe and the US, internet take-up has already reached 90%. By this metric, China has plenty of growth ahead, offering a huge opportunity for those that produce devices, infrastructure, services and applications.
Although the country is divided between online and offline consumers, digital literacy is high. China already has more consumers connected to the internet than any other market.
Mobile phone adoption rates have reached one device per person. The majority of devices are based on Google’s Android operating system and manufactured by local companies. Demand for handsets will continue to grow as consumers switch to smartphones or connect to the mobile internet for the first time.
Xiaomi is a good example of a company benefiting from this opportunity. It is less than five years old and yet is already China’s top smartphone maker, ranking third in the world. with 60 million handsets sold last year.
Internet adoption spurred by public policy
China has some distinct policy characteristics that are driving internet adoption and online behavior.
The country’s one-child policy, implemented in the 1980s as a means of curbing population growth, has spawned a generation without siblings. Studies show that this group want to connect with peers to make friends and discuss the high expectations of their fathers, mothers and grandparents – and they are doing so online.
Meanwhile, access to certain websites has been restricted by the government in China since 1997, which inevitably drives usage of native platforms.
Chinese social media leads Western markets
Wēixìn, known as WeChat outside China and owned by media and internet holding company Tencent, is leading the market thanks to its integration of micro-payments and messaging. This app now supports the fifth largest online community in the world after Facebook, YouTube, QQ and WhatsApp.
It’s also the fastest growing. WeChat is three-years old and has an estimated 600 million active users. That number is up 40% in the 12 months to 2014.
The service is like Instagram and Whatsapp. Messages, images and short videos are shared in a timeline with friends. But it’s also much more.
Consumers can use the platform to play games, book cabs, buy tickets, shop and send money to friends in their network. Its integration of banking, e-commerce and social media is several years ahead of the services we enjoy in the West.
But Wēixìn isn’t so much a retail channel as a payment platform. It has two retail partners: JD.com; one of the largest e-commerce platforms by volume in China, and MeiLiShuo, the largest online marketplace offering the newest in fast fashion and beauty for young women.
Wēixìn may be the largest social network but it isn’t alone. Tencent also owns QQ, the largest network by user numbers in China. Like Gmail, or Hotmail before it in Europe and the US, it’s the ubiquitous consumer email account.
Weibo is another social network in China. It’s a mix of Facebook and Twitter with more than 157 million monthly active users. It is more open than Wēixìn, enabling two-way conversation but it is fast being overtaken by the newer entrant.
Finally there’s LinkedIn and Renren. LinkedIn is a new entrant to the market and working hard to integrate with local culture. Renren is mainly used by students for connecting on the newest events and happenings in and around universities.
Digital opportunities beyond borders
The majority of the remaining 50% of China’s 1.35 billion population will seek to get online in the next five to 10 years (click to tweet). This will fuel even greater demand for devices and the growth of services such as Wēixìn and other e-commerce sites such as Alibaba and JD.com.
You don’t need to look too far into the future to see a new wave of disruption heading towards us and every major global marketplace. In fact, it may already be here – the world’s largest media and e-commerce platforms are being built in China.
Just as the business rules are being rewritten and the competitive landscape reshaped, so too must we rewrite the rules for international e-commerce. The question shouldn’t be how can we deal with disruption, but how can we nurture it?
I’d urge you to look beyond the recent market turmoil in China and see the longer term potential of a digitally powered Chinese super-giant.
The Annual Meeting of the New Champions 2015 is taking place in Dalian, China, from 9-11 September.
