China's Rural Areas Outstrips Urban Areas for Retail Growth

Originally from: https://intrepidsourcing.com/chinas-rural-areas-outstrips-urban-areas-for-retail-growth/

China has a thriving e-commerce industry. Throughout 2015, the total amount spent by Chinese consumers over the internet was a staggering $589.61 billion, a substantial increase of 33.3% from the previous year. This e-commerce revolution has been fueled by the Chinese middle class, a demographic that is continually growing, with more Chinese citizens than ever seeing their disposable incomes rise.

However, recent news announced has started to paint a different picture. Typically, urban areas have seen a faster increase in disposable income levels for citizens. It may come as a surprise that for the second quarter of 2016, growth within rural areas increased at more enhanced rate than that of urban areas.

Data by the Ministry of Commerce shows that there was a 13.48% increase from the first quarter to the second for rural e-commerce sales. While growth in urban areas was still significant, it is estimated to be at least 4 percentage points lower than the 13.48% growth rate seen in urban China.

Overall, the split between urban and rural areas for total sales is still heavily weighted towards the more urban and populated areas. Only 14.14% of online sales within China actually come from rural areas. However, if the trend of rural areas outpacing urban areas continues, then we can expect this number to increase.

There is plenty of room for growth across the whole country when it comes to e-commerce. While 2015 saw $589.61 billion in total sales, experts predict that from as early as 2018, the total value may top $1 billion yearly. This meteoric rise is understandably directly linked with the rise in more Chinese citizens having access to the internet. However, rising incomes as well as other factors also played a part.

Rural areas were identified to have huge potential in itself. In these areas physical retail stores can be scarce, making this market extremely attractive to companies who wish to meet the needs of this market through providing e-commerce solutions. Chinese e-commerce giant Alibaba has already identified the untapped potential in this market, and has set up over 100,000 centres in this areas for rural residents to use to order from their websites. This means even those residents who do not currently have access to the internet can still access the vast range of products found on sites such as Taobao.

According to a report produced by the China Internet Network Information Centre only 28.4% of total Chinese internet users were rural residents. In numerical terms, this equates to roughly 195 million users, of a total 688 million in total at the end of 2015. With the Chinese population totaling over 1.3 billion people, if China manages to mirror the percentage of connected users in countries like the United States, they would have an audience of over 1 billion users. This underlines the growth that is still to come, as well as the sheer size of the potential market.

As the country continues to catch up with many of the other major world economies globally, both rural and urban areas will play a key part in growing the e-commerce market present in China.