Forecast of 9 major trends in China's e-commerce market in 2021

Affected by the new crown epidemic in 2020, the online e-commerce industry is developing rapidly. Community group buying, the C2M trend is becoming more and more obvious, so it is expected that 2021 will be a year of innovation and expansion in China's e-commerce market. Businesses will adopt new initiatives and technologies and hope to expand their business to low-end cities. The following are forecasts of 10 major trends in China's e-commerce market in 2021.

1. Live broadcast will become an important communication medium.
2. The transition from KOL marketing to KOC marketing.
3. Short video applications will continue to integrate e-commerce.
4. As major e-commerce platforms start group-buying functions, group-buying will continue to grow.
5. Mini Programs provide a new shopping platform.
6. Express shipping will be faster.
7. China's data-based consumer-to-manufacturer (C2M) model will promote the development of e-commerce.
8. Vertical e-commerce sites will gain traction.
9. The pattern of cross-border e-commerce is changing.

Therefore: 2021 will be a year of innovation and expansion in China's e-commerce market.

• Real-time streaming and short videos provide retailers and brands with the means to interact with consumers and promote their products.
• Emerging shopping channels (including group buying and mini programs) will flourish along with the dominant e-commerce platform. Vertical e-commerce websites will achieve strong growth in 2021.
• Increasing technology adoption and data usage in the retail industry will enable the growth of the consumer-to-manufacturer (C2M) business model and faster delivery of services.
• Cross-border e-commerce will be integrated through Alibaba's acquisition of the koala platform, thereby further consolidating the company's dominant position in the online field.

01 Live broadcast will become a more important media

Real-time streaming will have a greater impact on consumers' shopping behavior in 2020, and will continue to play an increasingly important role in China's e-commerce market in 2021. This sales medium is similar to TV shopping (such as QVC), but has been upgraded in the 21st century.

The video content of the live session is broadcast in real time, and viewers can purchase goods while watching the video through an online link. Just like shopping guides on QVC, live streaming hosts sell a variety of products, from clothing and cosmetics to electronics and cars.

There are several reasons why shoppers are attracted to live broadcasts:

• Selected products: The host of the live broadcast room will carefully select products according to the fans' preferences, which not only attracts the audience, but also increases the conversion rate. Indeed, Taobao claims that it has a 65% conversion rate in the 2018 live broadcast.
• A wide range of products: through live broadcasts, various products are promoted in the beauty, fashion and grocery industries. Some hosts even sell movie tickets and hotel packages.
• Low prices: Taobao live broadcast hosts often cooperate with brands to distribute gifts or product discounts to fans. Live broadcast viewers are usually more price-sensitive.
• Lottery: Lottery is a popular way for the host to interact with the audience. For example, Li Jiaqi (known as the "King of Lipstick"), a well-known major public opinion leader (KOL) in China, usually holds competitions to win high-value electronic products such as Dyson hair dryers, iPhone11 and Xiaomi TVs to attract audience participation.
• Limited quantity and time-limited offers: Live broadcast hosts often adopt a quick sales strategy, each sale lasts only a short time, and the number of available products is limited. In addition, the host will regularly announce the inventory balance to increase the urgency of the audience to purchase.
• Overcoming the "choice paradox": If shoppers are provided with too many options, they may be confused when buying goods and therefore buy nothing. Interact with consumers during live sessions to help consumers focus on one product and make purchasing decisions easier.

Through these strategies, live broadcast hosts can attract a large number of shoppers. For example, on Double Eleven in 2019, Li Jiaqi broadcasted live broadcasts for more than six hours, attracting 36.8 million viewers.

During the 2019 Double Eleven, more than 100,000 brands used online live streaming as a sales method. In the first hour of the shopping carnival, the total merchandise sales (GMV) generated by the online live broadcast exceeded the total daily transaction volume of the online live broadcast last year. Overall, on November 11, 2019, GMV reached 20 billion yen (US$2.85 billion), accounting for approximately 7.5% of Alibaba’s total sales of 268.4 billion yen.

02 Transition from KOL marketing to KOC marketing

Key Opinion Consumers (KOC) are ordinary consumers who share their product experience through video production and post posting. This emerging trend will provide brands and retailers with a new way of communication, enabling them to adopt influential marketing methods instead of using KOLs. Due to the popularity of some Chinese social applications, including Kuaishou, Xiaohongshu and Douyin, KOC can easily share reviews of its products, thereby influencing other shoppers' purchasing decisions.

One of the reasons why KOC is becoming more and more popular is that consumers are more and more aware that KOL is a person who is sponsored by a brand to make product recommendations, so they believe that the information provided is not so credible and true. On the other hand, KOC itself is a daily consumer, they are more able to provide fair product reviews.

Part of the reason why KOC is growing in popularity is that shoppers want to seek advice from everyday consumers. For example, new parents will seek the advice of their friends and other experienced parents when choosing maternal and child products. Through the latest social applications, these shoppers can now watch videos and comments from experienced KOCs before making a purchase decision.

In fact, KOC marketing is one of the key components of the "Perfect Diary" marketing plan, which has made it one of the top cosmetic brands in China. At the beginning of the company's establishment, the brand began to cooperate with KOC on a large scale, which made ordinary consumers feel that the brand is very popular.

03 Short video applications will continue to integrate e-commerce

Short video applications have entered the e-commerce market, and we expect this trend to continue in 2021. Short videos are usually 10-20 seconds in length and are rich in various contents. According to reports, some users spend an average of several hours a day on short video applications. With the help of artificial intelligence technology and algorithms, users are encouraged to customize personalized content according to their browsing history and preferences, which greatly increases users' support for short videos.

The short video industry is booming in China. As of 2019, the number of users in China has exceeded 820 million. According to business intelligence provider QuestMobile, this total has increased by 32% year-on-year. Among the 10 mobile Internet users in China, an average of 7.2 use short video applications such as Kuaishou and Douyin. According to QuestMobile data, since 2018, the time users spend on these platforms has increased by 8.6% year-on-year, totaling more than 22 hours per month.

In order to take advantage of these statistics and consumer behavior patterns, short video applications have taken steps to monetize their user traffic:

• In October 2019, Douyin added a new feature called "Marketing Tags", which assigns tags to content to help retailers target consumers who want to search for products.
• In November 2019, TikTok lifted the restrictions and allowed all users to sell products through the platform. Previously, the minimum requirement for users to access e-commerce functions for social applications was 3,000 followers. This move can help Douyin, which has 3.2 billion daily active users, turn into an e-commerce site based on short videos.

04 As major e-commerce platforms launch group buying functions, group buying will continue to grow

By 2021, e-commerce platforms will vigorously develop community group buying. If consumers buy in large quantities, group buying will provide products and services at greatly reduced prices. This shopping model is attractive to shoppers with limited budgets, especially in second- and third-tier cities.

• Since its establishment in 2015, Pinduoduo has experienced explosive growth. In terms of market value, Pinduoduo has now become the fifth largest Internet company after Alibaba, Tencent, Meituan and JD. As of 2020, it has surpassed Baidu. Pinduoduo’s success is largely due to its group buying model, where consumers shop with friends to ensure better deals.
• JD.com started its group-buying applet on WeChat in June 2018, and launched its group-buying app in April 2019. Suning established its own group buying application in July 2018.
• Alibaba launched its fast sales and group buying platform Juhuasuan in 2010. Alibaba's Alipay launched a feature called Pinbu in March 2018.

These users provided huge spending power during the Double Eleven shopping carnival: Juhuasuan reported that 576 products received more than 10 million orders in the first two hours; Jingdong said that 40% of its new customers came from Jingxi. Pinduoduo sold more than 1,000 cars in the first 16 minutes of November 11.

Impact on brands: The group buying model will be offered at a lower price to brands that want to expand to low-end cities in China. Consumers in these areas tend to be more price sensitive and may look for bargains. Group buying also provides retailers with a good opportunity to clear inventory.

05 Mini Program provides a new shopping platform

The applet can be run in applications such as Alipay, Meituan and WeChat. They provide brands with an additional online platform to sell their products, and users do not need to download a separate application to perform similar functions.

Brands can use small programs as a supplement to large e-commerce platforms, not as a substitute. The mini program is used as an auxiliary sales channel, which can list the goods in demand through quick promotion. Mini programs can also be used as branding tools-brands can create interactive visual programs to better attract customers and encourage them to share content with friends. The WeChat applet now supports augmented reality (AR), which superimposes virtual images onto the physical world. The first of this type is Armani's cosmetics applet, which allows users to test the appearance of different cosmetics, such as lipsticks in various shades, through the built-in camera that users use on their mobile phones.

Source: Armani's WeChat Mini Program

Mini programs provide advantages for brands that want to break into the low-end market, and shoppers may be reluctant to download new apps. Brands can combine mini programs with group buying to access WeChat users in lower-tier cities.

Impact on the brand: As the capacity of the mini program is very light, it is a good thing for the brand to invest in marketing here, customer engagement and e-commerce. WeChat, the creator of the WeChat applet, reports that as of 2019, it has 700 million users who use the WeChat applet 42.6 times a month.

06 Express delivery will be faster

We expect that by 2021, logistics providers will provide faster delivery speeds by upgrading logistics infrastructure and increasing the production capacity of bonded warehouses. In this way, more products can be delivered on the same day. Alibaba's Cainiao program aims to digitize and accelerate the entire delivery process by helping logistics companies deploy Internet of Things (IoT) solutions on a large scale. Cainiao plans to connect 100 million smart devices to its IoT technology between 2020 and 2022, including its warehouses, delivery robots and algorithm-supported management systems.

Cainiao will also establish 100,000 transfer stations through the last mile delivery service "Cainiao Post Office" to increase delivery options. Cainiao Post Office provides services such as regular delivery, smart lockers, and door-to-door pickup.

By adopting 5G technology, logistics providers will be able to provide more efficient and faster delivery. JD Logistics opened the first 5G-powered smart logistics park in Beijing in 2019, and uses the latest generation of connectivity to monitor the location and route of forklifts in real time, and provide abnormal warnings.

Impact on the brand: New technologies will promote further acceleration of deliveries in China. Brands and retailers can use tools such as smart routing, which use machine learning algorithms to optimize delivery routes, thereby increasing delivery efficiency.

07 China's data-based consumer-to-manufacturer (C2M) model will promote the development of e-commerce.

China's consumer-to-manufacturer (C2M) model will become a new driving force for the development of e-commerce, helping companies to better meet consumer needs and achieve sales growth.

In the C2M model, the factory becomes consumer-centric. Retailers and manufacturers collect data from customers and use big data to create customer profiles, analyze consumption characteristics and plan production. This helps manufacturers predict product demand and reduce inventory and supply chain risks, which also benefits brands and retailers.

During the Singles Day Shopping Festival in 2019, Tmall users snapped up 170 million C2M products. A company reported that sales of electric toothbrushes reached 25,000 on November 11. Roman uses Tmall's consumer insights to influence the design of toothbrushes, such as the size of the toothbrush head and the color of the toothbrush.

The C2M model is also consistent with the growth of China's demand for personalized products. China is dominated by consumers after the 1980s (people born in 1980-1989) and consumers in the 1990s (people born in 1990-1999). The C2M model will allow manufacturers and retailers to produce products according to the needs of consumers.

Brand influence: According to data from Chinese research firm iResearch, China's C2M market reached 17.5 billion yen ($2.5 billion) in 2018 and is expected to reach 42 billion yen ($6 billion) by 2022, a compound annual growth rate The rate is 24.4%. According to Statista estimates, this is equivalent to 0.4% of China's total e-commerce sales in 2018 and 0.6% of China's total e-commerce sales in 2022. Brands can use the C2M model to better meet consumer needs and improve the efficiency of the entire supply chain.

08 Vertical e-commerce sites will gain appeal

The vertical market is an e-commerce platform on which goods and services are sold to specific customer groups, who can connect with each other through online communities. We expect such sites to flourish in 2021. Websites and apps such as Babytree (focusing on maternal and child products) and Gegejia (a global food importer for the female market) are examples of successful vertical markets.

• Vertical platforms naturally bundle like-minded consumers together and form a strong social community around specific industries or products. For example, for the parent and baby market Babytree, users on the platform share parenting tips and advice on baby products.
• Vertical platforms provide better content that can help users make purchasing decisions. According to a survey conducted by McKinsey in 2019, two-thirds of consumers in China use the information they collect from vertical websites to influence their purchasing decisions.

Impact on the brand: As consumers’ understanding of their purchasing choices becomes more and more complex, we hope that vertical e-commerce sites can attract people’s attention and not only provide product knowledge, but also provide interactive opportunities for like-minded customers. community. Brands can work with these platforms to effectively position their products to the appropriate consumer base.

09 The landscape of cross-border e-commerce is changing

We expect that the pattern of cross-border e-commerce will be consolidated in 2020. Alibaba acquired Koala, China's largest cross-border e-commerce platform at the time, in September 2019 and integrated it into Tmall. Then, Alibaba will account for more than 50% of China’s cross-border e-commerce market: According to research firm iMedia Research, NetEase Koala accounted for 27.7% of the market share in the first half of 2019, while Alibaba’s Tmall global market Occupies a 25.1% share.

This acquisition will increase Alibaba's opportunities to reach Chinese shoppers who need to buy goods across borders. This will also help the company diversify its business model on Tmall, which mainly involves inviting foreign brands to open online stores on its website-koalas usually buy a variety of goods directly from foreign merchants and then resell them to Chinese consumers. CEO Daniel Zhang said that Alibaba's acquisition of Koala will further enhance the company's import services and experience for Chinese consumers through the synergy of Alibaba's entire ecosystem.

10 Summary of e-commerce market trends in 2021

Real-time streaming will play a more important role in e-commerce in 2021, because it enables brands and retailers to promote products to consumers in real time and provides consumers with the advantage of time-limited discounts.

The pattern of e-commerce will become more diversified. Short video platforms and small programs will continue to carry out live broadcasts to provide retailers with technologies such as AR to further interact with potential customers. E-commerce companies will continue to invest to expand their product range, such as Alibaba's acquisition of Koala, a Chinese cross-border e-commerce platform, and using technology to provide consumers with a more seamless shopping experience (for example, using 5G connections to simplify the delivery process).

Relationship-based marketing methods will proliferate in 2021: vertical markets provide opportunities for participation in the shopping community. Group buying will provide products at a relatively low cost, thus becoming an effective way for retailers to attract consumers from second-tier cities in China.