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Global Tax Insights

China – The Epicenter of E-Commerce

October 25, 2016

Despite China’s slowing growth and uneasy transition to a service-driven economy, the country’s immense e-commerce industry is stronger than ever.

The e-commerce industry in China is showing vast potential for continued growth. In 2015, online retails sales topped $622 billion, a 33% increase from the year before. By 2020, it is forecasted to overtake the U.S., UK, France and Japan combined – with an estimated 750 million online shoppers. Mobile technologies will play an important role in growth, in addition to cross-border e-commerce.

Main Industry Players

The e-commerce industry in China is dominated by three large players:

Tmall: Tmall is an online mall selling general merchandise owned by the Alibaba Group, controlling 57.7% of the market. With an estimated number of 407 million users, it is a suitably large international brand with demonstrated potential to achieve a large volume of sales and high revenue.

JD: JD is a hypermarket that focuses on selling home appliances and consumer electronics, generally favoring 3C product brands. JD controls 25.1% of the market with 132 million users.

Yihaodian: Owned by Walmart Inc., Yihaodian is the third biggest online mall in China with a market occupancy of 1.5% and 100 million users. Yihaodian focuses on the sale of food and beverages.

Chinese consumers often shop online as a means to ensure the authenticity of the products they buy, and are increasingly willing to pay a premium to invest in trustworthy foreign brands. There is huge potential for U.S investors to penetrate the market as foreign brands increasingly throw their hat into the ring.

Stay tuned for more on the state of China’s economy and tips for Doing Business in China. Contact a member of our Global Tax Services Practice for more information.

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