This year will be remembered as a major jumping off point for tech-driven consumption in China. The blending of consumer-driven lifestyles and technology is now fully realized and has transformed how Chinese technology companies, foreign tech companies, brands, retailers and investors must approach the spending power of 1.4 billion consumers.
Chinese consumers spent $3.7 trillion in 2015, more than $4 trillion in 2016 and spending on consumer goods from January to November 2016 is up 10.4% year-over-year. But there is much more to come: consumer spending is expected to rise by 5.2% per year for the next decade. A report from the The Economist elaborates:
By 2020, the number of households earning above $24,000 per year is expected to double to 100m, making up 30% of all urban households, consumption is rising at 14% a year among under-35s and even if economic growth falls to only 5.5% per year (well below official claims of nearly 7% a year now), China’s consumer economy will expand over the next five years by some $2.3 trillion. Despite the deficiencies in economic forecasts, that incremental gain would be bigger than the entire consumer economy in Britain or Germany today.
A big part of this growth is technology-enabled consumption. The following are some of the biggest stories from 2016 that will almost certainly lay the foundation for bigger changes and continued consumer spending growth in 2017.
Alibaba broke virtually every e-commerce record during the 24 hours of the 11-11 Global Shopping Festival this year with $17.8 billion in sales, 120,000 orders processed per second on Alicloud, and more than 360 million parcels shipped. It is the most important shopping day in the world.
What to watch in 2017: 27% percent of sales were made by foreign brands and retailers. Expect that number to grow as more companies try to use the holiday as a foray into China. And in addition the hundreds of millions of Chinese customers, another 100 million consumers will take part in the event next year, thanks to Alibaba's $1 billion investment in Lazada, Southeast Asia's largest and most important e-commerce marketplace.
Amazon introduced its Prime service to China this year. The company was never able to crack more than 2% market share with Amazon.cn but have made major inroads in the last 18 months selling to Chinese consumers from Amazon.com. According to Amazon, 10 million purchases were made by Chinese consumers on its non-Chinese international sites. Additionally Amazon has about 30,000 Chinese companies selling on its U.S. platform. Prime China is a bold statement of intent from Amazon that China still matters.