Chinese e-commerce adapts to new consumption trends

BEIJING - As Chinese consumers become increasingly affluent and sophisticated, the country's e-commerce companies are catering to new consumption patterns to grab a larger market share.

Yanxuan, an e-commerce site under Chinese internet company NetEase, offered a special deal for the June 18 shopping festival: customers can enjoy 20 percent off for the first three items they buy, but no discount will be given for any extra purchase. They want to concentrate on the quality of purchases not just the volume.

Just like its name, meaning "strict selection," Yanxuan is trying to make its way through a crowded e-commerce market with quality control and calls for a simpler lifestyle.

NetEase is not alone in adapting to changes in consumer demand.

According to a report jointly released by e-commerce giant JD.com and data analytic firm Analysys, Chinese consumers are becoming more and more rational in their online shopping behavior and tend to focus more on the shopping experience rather than just low prices.

Companies acted fast on the change. MIJIA, an online e-commerce site launched by leading smartphone maker Xiaomi, offers selected products, especially smart devices and home appliances, to meet the demand of consumers craving high quality goods.

Alibaba's Tmall changed its slogan from "It's enough to shop on Tmall" to "Go on Tmall for an ideal life" this year, reflecting a shift toward quality products.

"E-commerce companies in China are gradually moving up the supply chain, producing high-quality products themselves. That will be an important trend for online retail in the future," Analysys said in another research report.

In addition to quality upgrades, e-commerce giants in China are also looking at physical retail stores, trying to integrate online and offline customer experiences, using big data.

China's online shopping is seeing robust growth, with total online retail sales hitting 2.47 trillion yuan in the first five months of 2017, up 32.5 percent year on year.

However, physical goods sold online accounted for only 13.2 percent of total retail sales in the same period, according to the National Bureau of Statistics.

That leaves Alibaba and other e-commerce companies a lucrative offline market that's relatively untapped. In a speech last year, Alibaba founder Jack Ma raised the concept of "New Retail," which aims to eliminate the distinction between online and offline commerce via streamlined services from shopping to payment and delivery.

Since then, Alibaba has made dozens of ventures in offline retail, including its share-swap deal with Suning Commerce Group and a deal to merge with brick-and-mortar retail chain Intime.

In May, Alibaba bought an 18 percent of stake in Lianhua Supermarket, becoming the second largest shareholder of the supermarket chain, which operates more than 3,600 affiliated stores throughout 19 provincial-level regions in China.

The investment in physical stores allows e-commerce companies to better integrate data collected offline to create more sophisticated customer profiles, offering customized shopping experiences, according to analysts.

For example, Hema Xiansheng, a fresh food chain invested by Alibaba, only accepts online payment at its physical stores. With a mature logistics system, the company allows customers to order online and delivers fresh food within 30 minutes ordering.

"New retail, in its essence, is a strategy that adapts to the change in customer demand," said Hou Yi, founder of Hema Xiansheng.

"Online retail is playing a dominant role in reshaping the retail industry," the Analysys report said. "We expect to see more cases of strategic cooperation between online retailers and physical stores."