E-commerce behind new wave of consumption in China

BEIJING - When Jia Hailan wants to buy something, she reaches for her phone almost as much as she opens her wallet.

The Beijing twentysomething buys food and clothing for her cat via her mobile phone and orders lunches through apps that track nearby eateries with delivery services. She hails taxis through cab-hailing apps when she goes out, and much of her home possessions were purchased online, including an electronic scale she uses to track her weight every morning.

Young Chinese born in the 1990s are a generation of online consumers, and older generations are catching on as well. By late 2014, the country had 360 million online shoppers, accounting for almost a quarter of the nation's population.

In the first five months of 2015, online retail sales value in China grew 40 percent year on year, four times the growth for general retail sales value for consumer goods during the same period.

The trend is expected to continue as the number of Chinese Internet users grows. The country's online population reached 649 million by the end of 2014, with some 557 million accessing the Internet via mobile phones.

"The Internet has brought three irreversible changes to China's social consumption: online shopping is reaching everyone after becoming popular with young people, desktop shopping is being rapidly overtaken by mobile-based shopping, and buying based on what other people are buying has given way to personalized consumption," said Shang Yan, online marketing director of womai.com, an online food retailer.

"These changes are certain to deeply transform Chinese people's consumption style," Shang said.

The online shopping boom is helping lift consumption's role in the Chinese economy, which once relied too heavily on exports and investment.

The National Bureau of Statistics said consumption contributed 51.2 percent to China's economic growth last year, beating contributions by exports and investment, which cooled due to uneven global demand and a downturn in the domestic property market.

A McKinsey report from 2013 said China's online consumption has not simply replaced consumption that would have taken place offline. For each dollar of online consumption, around 40 cents were from incremental -- or new -- consumption, it said.

The report predicted that by 2020, China's "e-tailing" market could generate up to $650 billion in sales, equal to the 2013 e-commerce sales value of the United States, Japan, the UK, Germany and France combined.

Experts said the Internet is making consumption easier due to free flow of information between sellers and buyers. "It is just open information on the Internet that is making new consumption possible," said Zhang Jindong, founder of top Chinese retailer Suning, a leader in home appliances.

Brick-and-mortar stores are also feeling pressure to adopt new business models to retain customers.

Shenzhen-headquartered Rainbow, a department store chain with 58 flagship stores across the country, has rolled out its own online sales service and promoted discounts and new product information through instant messaging service WeChat.

"By analyzing customers' online shopping data, we will be able to refine and deliver our product promotions directly to users' phones," said Tan Xiaohua, deputy general manager of Rainbow's e-commerce department.

In addition to boosting consumption, the government is exploring other ways the Internet can bolster the economy and employment.

It unveiled an "Internet Plus" action plan on July 4 to integrate the Internet with sectors such as modern manufacturing, agriculture, energy, finance, public services, logistics, traffic and e-commerce.