E-commerce helps Western companies gain a toehold in the huge hinterland

Although it is a relatively new kid on the block, in terms of size and spread e-commerce has no peers in China. But its real strength, as many foreign companies and brands are discovering now, is its ability to be a matchmaker in the vast and untapped Chinese domestic market.

With revenues in excess of $210 billion last year and a steadily growing customer base of more than 500 million, the e-commerce industry in China is fast catching the fancy of big names such as Louis Vuitton, Adidas AG, Samsung Group and The Walt Disney Co. Many others such as the UK-based retailer Marks & Spencer Plc and Mothercare Plc are in talks to be a part of the sunrise industry that deals with the buying and selling of products as diverse as mobiles, fresh vegetables, textiles, dresses, exotic food, machinery and personal care products.

Staff at a Taobao shop are busy packaging goods to be sent from Yiwu, Zhejiang province, to different parts of China. [LYU BIN / FOR CHINA DAILY]

"E-commerce has a key role in bolstering China's economic growth and also in increasing domestic consumption. It is a crucial tool for the government as it charts steps to rebalance the economy and ensure sustainable development," says Qi Xiaozhai, dean of the Shanghai Commercial Economic Research Center.

Pointing out the importance of the industry, analysts maintain that it is one of the few that has been recording consistently high growth rates over the past few years. The e-commerce industry has seen growth rates of more than 78 percent since 2006. Unlike the brick and mortar stores, where physical presence is the key driver, e-commerce relies more on faster, cheaper and better buying experiences and more shopping choices online.

E-commerce sales in the United States, the largest market, last year were around $225 billion, accounting for more than 5 percent of the total retail sales in that country, according to data published by the US Census Bureau. In contrast, online retail revenue in China was around $207 billion last year, representing just 6 percent of the total retail spending in the country. With the population of Internet users in China slated to grow further this year, and the fact that online shopping penetration still lags behind many developed countries, experts says they feel there are enough rich pickings for foreign companies, provided they are willing to weather the competition from domestic players.