Some Chinese companies are tapping a new growth opportunity in online shopping amid trade tensions and the coronavirus pandemic.
While e-commerce has become a part of modern life around the world through giants such as Amazon and Alibaba, online shopping remains a fraction of overall retail sales. Even in China, where delivery has become integrated into urban life, online sales of physical goods still only account for about a quarter of overall retail sales, according to official data.
“There is a trend towards more direct shipping out of China through digital cross-border shopping channels, which helps alleviate some of the downtrend in Chinese exports driven by the trade wars and increasing political tensions between China and other countries,” Suresh Dalai, senior director at consulting firm Alvarez & Marsal focusing on retail operations in Asia, said in an email.
“Evidence of this cross-border trend comes from the rise of cross-border shopping sites such as AliExpress, Alibaba.com, and Globalsources.com, and particularly in (Southeast) Asia,” he said.
In Southeast Asia alone, the internet economy for the region of 570 million people off the southeastern coast of China is expected to more than triple to $300 billion in gross merchandise value by 2025, according to an “e-Conomy SEA 2019” report from Google, Temasek and Bain.
That estimate came before the coronavirus pandemic, which has since accelerated demand for online shopping due to widespread stay-home orders.
Several Chinese start-ups are looking to take advantage of these trends.
The virus has caused orders to fluctuate more and forced the digitalization of the logistics industry in order to improve efficiency, Mingming Huang, founding partner at Future Capital Discovery Fund, said in a statement, according to a CNBC translation.
“Future Capital believes that in the future, the best logistics company will definitely be a technology company,” Huang said.