Facing market saturation and more selective consumers, online retailers will need to make better use of data analytics to gain ground.
China’s online retail market is the world’s largest, and e-commerce now accounts for more than 13 percent of the country’s total retail sales of consumer goods. In fact, the penetration of e-commerce has begun reaching saturation levels: in top-tier cities, roughly 90 percent of Internet users and 70 to 80 percent of consumers as a whole are shopping online (exhibit). As Chinese consumers enjoy the options and transparency available online, they also are becoming increasingly choosy—often visiting four to five sites before reaching a purchase decision, according to our research.
The implication is that grabbing e-commerce share will depend increasingly on coaxing customers to shop more frequently, to make larger purchases, and to buy from a broader array of online-shopping categories. E-commerce players have a fighting chance to do all this because they are sitting on an enormous volume of information. The growth of data on digital shoppers, product SKUs, price changes, promotional performance, and purchase habits has been exponential. This tidal wave of data is a strategic asset for e-commerce players, and leaders have begun employing advanced analytics to up their game in at least three ways.
First, leading players are building models aimed at boosting retention rates and spending per customer.