China retail growth leapfrogs US

Dive Brief:

E-commerce and a surge in its middle class are pushing China retail sales growth this year to outpace the U.S. for the first time. Retail sales in China are poised to grow 7.5% to $5.64 trillion, well above the 3.3% rise in the U.S. to $5.53 trillion, according to a study from digital commerce research firm eMarketer.
E-commerce sales in China alone — 35.3% of all retail sales there, which is the largest percentage in the world — are set to grow more than 30% this year to reach nearly $2 trillion. E-commerce in the U.S. (which China overtook six years ago in 2013) will account for just 10.9% of domestic retail sales.
In fact, China will grab 55.8% of all online retail sales in the world this year, and by 2022 that could exceed 63%, eMarketer predicts. If patterns hold, the U.S. share of global e-commerce by then will drop to 15%, according to the report.

Dive Insight:

While both the American and Chinese economies are showing signs of slowing in early 2019, China's government is taking decisive steps to prop theirs up, while the U.S. government is introducing uncertainties such as a trade war and an ongoing government shutdown. It also helps that China's middle class is on the rise, while in the U.S. middle-income earners have increasingly struggled for years.

All told, eMarketer finds that China's retail sales growth overtaking the U.S. this year initiates a pattern that will hold through 2022. "In recent years, consumers in China have experienced rising incomes, catapulting millions into the new middle class," Monica Peart, eMarketer senior forecasting director, said in a statement. "The result has been marked rise in purchasing power and average spending per person."

The dominance of e-commerce in China — and more specifically of marketplaces run by Alibaba, JD.com and others there — has helped fuel sales growth. That could be especially advantageous in light of the model's growing importance worldwide, although that shift is also bringing with it complex challenges — including fulfillment logistics, pricing transparency and other issues — disruptive to brands and retailers embarking on cross-border sales through the likes of Alibaba and Amazon, according to a report from the Global E-commerce Leaders Forum emailed to Retail Dive.

In addition to more brands turning to marketplaces for sales as described by GELF, there's opportunity for "rapid growth" through expansion into rural areas in China, according to a report from Fung Intelligence emailed to Retail Dive. Even in a country like China where e-commerce is already fairly mature, the coming years promise more disruption as technology continues to advance, and as the expectations of millennials and Gen Z take over, according to that report.

"Global economic uncertainties will continue to exert downward pressure on the Chinese economy and affect consumer sentiment," said Teresa Lam, vice president of Fung Business Intelligence (and report co-author), in a statement. "We expect to see a profound transformation in the commercial sector to accommodate the new competitive environment. Meanwhile, new consumer behaviors and technological advances will continue to disrupt the retail landscape."