China to be world's leader in Web retail

Chinese online shoppers are placing orders that will allow the country to get a new title by the end of this year: the world's largest Internet retail market.

The value of the nation's online retail market will increase from $294 billion this year to $672 billion in 2018, a compound annual growth rate of 18 percent, said Forrester Research Inc, a United States-based consultancy.

The US - currently the largest Web retail market - is expected to spend $262 billion on online shopping in 2013, said Forrester. The world's largest economy will see demand for online retail jump at an annual growth rate of about 10 percent until 2017, boosted by a strong economic rebound, it added.

Japan, the United Kingdom, Germany and Australia are among the busiest online retail markets globally.

Although the turnover of the consumer-to-consumer market in the US, which is not significant, was not included, it's clear that the size of China's online retail market is shooting past that of the US, said Zia Wigder, co-author of the report.

Yet C2C turnover was a major contributor to the Chinese online retail market. In the third quarter, the sector contributed more than 63 percent of total Internet-based retail, according to Beijing-based iResearch Consulting Group.

"As more brick-and-mortar retailers open online branches and competition increases among existing players, the business-to-consumer sector is set to erode the territory of C2C business," said Zhang Jing, an analyst at iResearch.

By the end of 2014, the number of online buyers in China is set to surpass the total population of the US, said Forrester.

However, despite rapid increases in the total number of online buyers and online spending per shopper, China remains a developing e-commerce market in terms of the proportion in the entire retail industry and penetration rate of online shoppers.

The China Internet Network Information Center said that the country had more than 270 million online shoppers in June, representing more than 45 percent of China's total Internet users. The number will continue to grow over the coming years after online payment systems get well established and the mobile Internet becomes more popular, it added.

Unique market

Chinese online shoppers buy across a wide variety of categories, the Forrester report showed, a characteristic often seen in highly developed e-commerce markets.

Cosmetics have emerged as a key online category in a way that has not happened in many other emerging markets, according to the report.

Consumer electronics and apparel products are also favorite items for Chinese online shoppers.

The nation's online retail market is also unique because a single player holds a dominant market share in both the C2C and the B2C sectors, said Forrester.

The Hangzhou-based Alibaba Group Holding Ltd controls about half of the country's B2C business and more than 90 percent of the C2C sector.

"Companies looking to set up online retail offerings in China must recognize this extreme market concentration in order to understand just how different the dynamics of the market are," said the Forrester report.

The top player tends to command no more than one-third of the market share in the rest of the world.

Japanese e-commerce giant Rakuten Inc controls about 29 of the local market share, while Amazon.com Inc, the biggest retail website in the US, takes about 19 percent of market share.

Logistics could be a weak link for the e-commerce companies' business in China, where the buyers are scattered and demand in small cities is surging.