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E-commerce Development Trends in the New Normal

Feb 05,2015

China is seeking new driving forces to boost its economic development. It was pointed out at the Central Economic Work Conference at the end of last year that the capacity of traditional industry far exceeds market demands. The industrial structure must be upgraded, and emerging industries, the service industry, and small and micro companies will play a bigger role. As the economy enters into a new normal, it is essential to grasp this new trend and make preemptive moves. Mobile e-commerce is an important part of emerging industry, and it is significant to grasp its development in the new normal stage.

In recent years, rapid popularization of mobile Internet has laid a solid foundation for the development of mobile e-commerce in China. Boasting increasing influence on social and economic life, mobile e-commerce is becoming an important driving force in China's economic development. First, China is seeing a rapid rise in mobile e-commerce business. The Statistical Report on Internet Development in China shows that China had 632 million Internet users by June 2014. Of them, 527 million accessed the Internet via their mobile phones, accounting for 83.4 percent of the total. It was the first time that mobile phones had overtaken personal computers as the most popular Internet terminals. As the number of mobile Internet users surges, the mobile phone has become a major tool for online shopping. By June 2014, 205 million Chinese users had shopped through their mobile phones, a 42 percent surge year-on-year, 4.3 times the growth rate of online shoppers as a whole and 38.9 percent of total shopping made via mobile phones. Mobile transactions account for a rapidly increasing share of online transactions.

Second, mobile e-commerce stimulates business transformation. In recent years, many of China's traditional e-commerce websites are changing into mobile ones. Both Taobao (www.taobao.com) and JD.com have launched apps and mobile web programs to constantly improve their user experience. Many small and medium-sized companies offer their own apps to effectively improve the efficiency of their marketing efforts. Mobile e-commerce is seeing a rapidly rising concentration in the market.

Third, mobile e-commerce generates a new mode of business. First, the mobile Internet can locate and integrate brick-and-mortar shops with online ones, creating a model of O2O (Online to Offline). Each brick-and-mortar shop or company can have its apps on the mobile Internet, while their offline showrooms are used for product display and experience. With the transaction made online, the physical stores will address the last mile issue for customers.

In other words, the Internet distribution channel is not separated from offline shops; instead, it seamlessly connects with the offline channel and stimulates offline sales. The O2O model is a closed loop. Online businesspeople can trace customer transactions and whether customers are satisfied and rapidly adjust their strategies accordingly. Second, supply and demand information is highly scattered and instantaneous in many areas, and mismatch of demand and supply will cause market failure. The mobile Internet will help strike deals between suppliers and consumers. Third, as mobile payment becomes popular, the mobile phone will become a smart device and replace bankcards. In fact, mobile payment platforms like WeChat payment are prompting online funds, peer-to-peer lending (P2P) and crowdfunding to become available on mobile phones.

It can be said that mobile e-commerce is more than just extending business from cabled Internet to wireless Internet; it has a richer portfolio in e-commerce application by profoundly changing the way people consume and pay, penetrating into all walks of life and promoting the upgrade of relevant industries. In fact, it has become an important way to boost domestic consumption and foster new industries.

Of course, it is not easy to develop mobile e-commerce in China. In fact, there are some problems that should be tackled as soon as possible. For example, mobile Internet connections are quite slow and expensive. The market supervisory system needs to be improved, and the ability to ensure safe mobile e-commerce needs to be enhanced. Meanwhile, new requirements have emerged as China's economy enters the new normal of slower but quality growth. It is suggested that emphasis should be laid on the following issues so as to boost the healthy development of mobile e-commerce.

First, information infrastructure construction should be strengthened. Admission into the telecom market should be made easier, and private capital should be allowed to invest in mobile networks to strengthen competition in the industry. The Broadband China strategy should be carefully studied and implemented, and efforts should be strengthened to improve Internet infrastructure building. As Internet connections get faster, Internet coverage should be expanded. Meanwhile, its use should be promoted, and its rates should be reasonably scaled down.

Second, mobile e-commerce market supervision should be enhanced. Technical and industry standards for mobile e-commerce should be drawn up and improved. The supervisory system of the mobile e-commerce market should be enhanced to ensure that pre-trade protection, in-trade monitoring, post-trade tracing and a contingency mechanism are in place. As innovation is encouraged, management should be strengthened for trader identity. Effective technical measures should be adopted to ensure that e-commerce-related service and data are safe. Law violations, including selling fake goods online, network-based fraud and personal privacy infringement, should be severely punished, and disputes over online transactions should be dealt with timely in an effort to build a credible, safe and convenient environment for online shopping via mobile phones. In addition, efforts should be made to further improve supervision over innovative financial derivatives of mobile e-commerce. Education should be offered to improve consumer awareness of financial risks and their ability in self-protection. Mobile e-commerce companies should be urged to undertake their responsibilities in information disclosure and risk warning to ensure customers are kept informed.

Third, technical innovation and pilot programs of mobile e-commerce should be promoted. Efforts should be strengthened to promote technological research and development as well as commercialization of mobile e-commerce technologies. Chinese companies should be urged to develop smart mobile phone operating systems with proprietary intellectual property rights. Third-party e-commerce companies should be encouraged to develop mobile e-commerce user terminals that will attract traditional e-commerce platforms to introduce mobile e-commerce business and increase the percentage of such trade in their total transactions. Pilot mobile e-commerce programs should be encouraged in public services and faculties, transport, logistics, tourism, agricultural production, corporate management and environment monitoring. Efforts should be made to introduce pilot programs about mobile e-commerce-related financial and technical innovation at China's e-commerce demonstration cities and to enrich the products and improve related systems, to provide strong support for the rapid and healthy development of mobile e-commerce.

The authors are Lai Youwei and Shi Guang at the Development Research Center of the State Council (DRC), and the article appeared on page 14 of Economic Daily on Jan 8, 2015.