China’s online retailing market will grow to $1.7 trillion by 2020 compared with $750 billion last year, according to a new report from Goldman Sachs.
Goldman expects penetration to increase from 16% last year to 25% in 2020, up from a previous forecast of 22%.
While there have been concerns of a slowdown following the deceleration in growth to mid-20% in 2016, we expect online retail growth to sail on at 23% CAGR over 2016-2020, continuing to grow at nearly triple the pace of offline retail.
Goldman expects China’s online and offline FMCG market to reach $2 trillion by 2020, with online penetration rising from just 5% last year to 13%.
While Goldman predicted FMCG online GMV growth would average 34 percent annually between 2016 and 2020, growth is expected to remain strong in major, more mature product categories including clothing and consumer electronics. Currently apparel, footwear and accessories make up almost a quarter of all e-commerce sales, with Alibaba the dominant e-tailer, according to Goldman.
Goldman believes AR/VR with offline experience stores will part contribute to rise in apparel online penetration (from) 31% in 2016 to 49% by 2020. It estimated the online apparel market would reach RMB 2 trillion in GMV by 2020, with Alibaba’s dominance to continue with over 70% market share in the B2C market (Tmall).
Goldman predicted average spending would increase at a combined annual growth rate of 10% from 2016 through 2020 as incomes grow and as consumers buy a wider range of products and more branded goods through the internet.
The total retail sales of consumer goods in China reached 3,175.7 billion yuan in December 2016, up by 10.9% yoy (nominal growth rate. The real growth rate was 9.2%) according to National Bureau of Statistics of China. In 2016, the national online retail sales of goods and services in China was 5,155.6 billion yuan, increased by 26.2% yoy.
Alibaba annual active buyers on its China retail marketplaces reached 443 million, an increase of 4 million from the 12-month period ended in September. Jingdong annual active customer accounts increased by 46% to 226.6 million in 2016 from 155.0 million in 2015.