Online retail sees drop in turnover

Online retail turnover fell for the first time in the first quarter, according to a new report, as shoppers caught their breath after a series of high-profile sales promotions at the end of last year.

Beijing-based iResearch Consulting Group said Chinese shoppers spent 352 billion yuan ($57.4 billion) online in the first quarter of the year, a drop of 17.1 percent compared to the previous quarter.

But the company said annual turnover should still reach 1.85 trillion yuan.

"Several large-scale promotional campaigns at the end of 2012 consumed buyers' purchasing power - that's the major reason for the decline," said iResearch analyst Zhang Jing.

The country's top e-commerce websites - Tmall, JD and Suning - launched sales promotions in November and December in a bid to lure customers and stimulate online sales.

The industry's turnover in the fourth quarter of last year topped a staggering 424.9 billion yuan, a surge of more than 100 billion yuan compared to the previous quarter, iResearch's data showed.

But because increasing numbers of Chinese Web users are starting to buy goods on the Internet, analysts said they remain optimistic about China's online shopping sector, despite the first decline.

Statistics from China Internet Network Information Center showed that China had 242 million online shoppers by the end of last year, or the equivalent of more than 40 percent of its total Internet population.

Chinese people are among the world's most frequent online shoppers, said a recent PwC survey, which reported that 58 percent said they shop online at least once a week, against a global average of 30 percent.

"We estimate the turnover increase of China's online shopping industry will be around 40 percent year-on-year in coming quarters," said Zhang from iResearch.

"Annual turnover could hit 1.85 trillion yuan in 2013, so I would not be surprised if turnover breaks 425 million yuan in the second quarter."

The market's annual turnover in 2012 was 1.3 trillion yuan, said iResearch.

Alibaba Group Holding Ltd's customer-to-customer platform Taobao contributed nearly 70 percent of turnover, although the share of business-to-customer websites is gradually rising, according to iResearch.

Tmall, another shopping website also owned by Alibaba, was the country's largest B2C portal, generating more than half of the sales in the sector, followed by JD, which was considered the instigator of last year's promotional price war.

Steady growth in the online shopping market has turned Alibaba into China's most profitable Internet company, after it overtook Tencent Holdings Ltd this week.

Its net profits for the three months through December rose to $642 million. Revenues were more than 80 percent higher.

"Future competition among e-commerce websites will no longer just be about price - players will focus on lifting service quality to attract customers," Zhang added.