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Blurred Lines: Mobile and eCommerce Growth in China

Nitin Sumangali |

As both social media and eCommerce Internet sites grow in markets like China, there’s an emerging shift from people accessing these sites only via desktop computers to people using these services via a mobile device. What’s making this migration even more interesting is that companies previously operating in one space or the other are now entering each other’s territory, making the landscape more difficult to map than it has been in the past.

Jonathan Lu, the new CEO of Chinese eCommerce behemoth Alibaba Group Holding Ltd., is looking to make shopping via smartphone easier. According to some recent comments, it more than savvy strategy, it’s a competitive necessity.

In an article from the Wall Street Journal [subscription may be required], Lu notes that the landscape for eCommerce, social networking and search has rearranged itself. Tencent Holdings Ltd. is a Chinese Internet company focused on social media and gaming. According to the Wall Street Journal, they’ve gained a strong smartphone user base through their WeChat messaging app and are now moving into the eCommerce space.

At the same time, Alibaba spent $586 million in April to buy an 18 percent stake in Weibo, a Chinese microblog service comparable to Twitter. This extension of an eCommerce company into the social media space and a social media company into the eCommerce space shows that the lines between these previously separate online businesses are blurring—and the mobile phone has emerged as the center of this future state.

Lu notes that when online shopping or social networking took place only via personal computers, companies could afford to have a singular focus on one business. Smartphones have forced companies to rethink this, as consumers are interacting with social networking and eCommerce when they’re on the move. Understanding the opportunities that exist around mobile is more important than ever—if a user switches to a competitor’s social media site or eCommerce portal because of a superior mobile experience, they may never return.

MasterCard’s Mobile Payments Readiness Index, launched in 2012, looked at the factors influencing how ready 34 markets were for mobile payments. Looking at China, which scored the 10th place on the Index, the state of the Chinese consumer stands out. Chinese consumers are familiar with, willing to use, and currently using mobile payments at rates above the Index average. As the Wall Street Journal article indicates, China is the world’s largest smartphone market and has the world’s largest Internet user base. For the variety of social networking and eCommerce businesses in China, it’s crucial to get the smartphone experience right.

China Consumer Willingness

The crossing of the different types of Internet businesses means that Jonathan Lu and Alibaba have an opportunity to become more central to the lives of Chinese Internet consumers. The amount of data that Alibaba collects from its eCommerce transactions and users gives it a unique position when building its future. As the Insights team has written about previously, a key factor for Alibaba to keep in mind is how to ensure users that their data is managed in a way that users feel is appropriate. If they can manage that process correctly, Alibaba may be able to ride the smartphone wave to continued success.

Topics: Economic Outlook, Mobile, Retail Trends

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