Digital China Overview
How Covid changed the internet
Digital China Overview How Covid changed the internet
The future of e-commerce is in China. If that was ever true before the pandemic, it certainly is now. Nowhere else has a user base so large, and nowhere else does digital penetrate more deeply into daily life. How did this happen and what could a post-Covid world look like? By John Millichap.
It's not until Singles Day that one gets a true sense of the scale of China’s digital boom. The heaps of packages being sorted by the roadside and the stream of delivery couriers whizzing by express an energy and activity that seems to add up to something more than mere retail. So named for the collection of lonely '1's in the date 11 November (11-11), Singles Day was launched in the late 1990s by a group of students as a celebration of bachelorhood and an excuse to party. By the mid-2000s, online retailers had picked up on it as a good chance to reach the nation’s middle-class millennials, enticing them with one-day-only discounts and special offers. By 2012 – the year Alibaba trademarked the name “双十一" (shuang shiyi), meaning 'double 11' – Singles Day had transformed into a 24-hour digital retail frenzy unlike anything else. That year it achieved sales of more than US$3 billion, against US$1.25 million on Cyber Monday in the United States, making it the world’s most valuable online sales day. By 2018, its total sales value was more than ten times that figure, topping US$30 billion. Why did this happen in China? Why not in another rich, populous, technophile nation such as the US? An answer is suggested by Jack Ma: 'In the US, e-commerce is just online shopping. In China, e-commerce is a lifestyle.'
Digital Behemoth
China’s embrace of the internet is engineered as much as it is organic. State support keeps the price of devices and connectivity down, ensures new infrastructure is swiftly rolled out, and shields local companies from foreign competition. Yet it is sheer scale that provides critical mass. Despite internet penetration of around 60%, compared to around 78% in the US, China has three times as many internet users. The contrast is even more eye catching when it comes to mobile payment, where China has more regular users than the entire US population. One consequence of this is a crop of giant domestic tech companies, which have thrived on a vast, captive market. The largest of these are collectively known as BAT: Baidu, a search engine; Alibaba, originally an e-commerce platform, and Tencent, a gaming and messaging company. The latter is significant for developing WeChat, a social media platform which has done much to change the way China's urban middle class lives, works and consumes.
Super apps represent a profound lifestyle change that has important knock-on effects for industries from retail and communications to banking and entertainment.
Here, it is worth noting a distinct characteristic of the internet in China. In the West different companies specialise in different services – Facebook for social media, WhatsApp for messaging, Amazon for ecommerce. In China, by contrast, the aim of platforms such as WeChat is to create a ecosystem that its users need never leave – a so-called "omnichannel".
All that’s needed for it to function is a valid ID, a bank account and a smart phone.
The Wechat digital wallet allows users to pay bills, order goods and services, transfer money, play games and pay in stores if the stores have a WeChat payment option, which most of them do.
WeChat is not the only such omnichannel. Weibo is China's second-largest social media platform and hosts a similar constellation of apps based on the Alipay digital wallet. It is WeChat, however, that continues to reign as the nation's most popular social platform. Today, it is famously known as 'the app for everything.'
Such super apps represent a profound lifestyle change that has important knock-on effects for industries from retail and communications to banking and entertainment. That it has happened in the way it has is the result of a series of interrelated factors that have in common the relative newness of disposable incomes, the dominance of the smart phone for personal internet use, and a determination on the part of the state to develop domestic social ecosystems that are wholly independent of foreign technology.
Convenience China applies strict conditions to international credit cards. As a result, uptake has been low, both among consumers and merchants. WeChat Pay and other digital wallets neatly fill the convenience gap while sidestepping cultural attitudes to debt. Contactless payment via a digital wallet using a mobile phone is now as widespread on the high street as it is online. Even the local street hawker will display a laminated QR code for customers to scan and pay. Trust Online payment technology has been around in China since 2004 when Alibaba introduced Alipay. As a result, the idea of online payment is well familiar, especially to Chinese millennials who grew up with it and up until the Covid-19 outbreak were its biggest users. Lockdown, meanwhile, has obliged a whole new audience to adapt to the technology. Official endorsement has also encouraged uptake. And while data protection has not received as wide discussion as in the West, public outcry following a spate of online scams has caused the authorities to accelerate the introduction of data laws modelled on Europe’s GDPR. Innovation The huge numbers at stake are a powerful motivator, not only for tech companies and app developers, but also retailers, who have leapt to adopt the technology. Competition is
is extremely fierce and the life cycle of an app is typically shorter than in the West. The result is ever-changing and ever-expanding ecosystems. The government, keen that China should be seen as a world leader in tech, is quick to smooth bureaucracy and rollout updated infrastructure.
Culture China’s digital landscape is remarkably homogeneous. Facebook might claim twice as many monthly active users, but the overwhelming majority of WeChat’s one billion subscribers speak the same language, live in the same time zone, celebrate the same festivals and share many of the same life experiences and cultural references. Moreover, WeChat, Weibo and the rest are Chinese social media companies, which many subscribers use on a Chinese-branded mobile device, which has been made in China. In many ways the internet can feel like a national project.
