The COVID-19 pandemic has boosted China’s online retail sales in 2020, as its share of total retail sales of consumer goods continues to rise and the gap between online and offline retail growth widens, global credit rating agency Fitch Ratings said on Monday.
China’s online retail sales reached over 8 trillion yuan ($1.2 trillion) in the first three quarters, up 9.7 percent year-on-year, according to the latest data from the Ministry of Commerce.
In the first 10 months of the year, online retail accounted for 27 percent of total retail sales of consumer goods, compared with 21 percent in 2018 and 23 percent in 2019.
Fitch said the sales ratio of online retail to total retail in China is higher than for most developed nations. The agency believes there is still ample room for the online retail market to grow in the future, given the rising online shopping penetration rates and robust urbanization rate. The nation’s urbanization rate is likely to reach around 85 percent by 2050, from 61 percent in 2019.
To seize the opportunities brought by the trend, many Chinese merchants have shifted sales online amid the pandemic, and some new retail business models have thrived after digitizing their retail value chains, expediting online and offline integration.
Despite the growth of new players such as livestreaming e-commerce, which combines entertainment with consumption, e-commerce giants including Alibaba, JD and Pinduoduo still accounted for 95 percent market share by transaction value in the first half of 2020, said Fitch.
Another giant Tencent has been competing with Alibaba through the companies it has invested in such as Meituan.
On Monday, China’s antitrust watchdog slapped fines and announced probes into deals involving the two giants. Alibaba and Tencent-backed China Literature and Shenzhen Hive Box Technology, were each fined 500,000 yuan by the State Administration for Market Regulation for not reporting past deals properly for anti-trust reviews.
Karl Shen, associate director in the China Research Initiative team at Fitch Ratings, said it signals the central government's attitude to increase scrutiny of monopolistic practices.
“We believe this attitude will last for many years to come. Anti-monopoly rules will promote a healthier business environment and benefit both merchants and consumers in the long run. But it will also lead to more intensive competition, driving e-commerce giants to cut prices and offer more subsidies,” said Shen.
Shen said he expects to see more capital raising activities by major players in the future, adding that the threshold for entry into the sector will be raised and new players will need fresh and extraordinary business models.
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