China eCommerce BP 20141106

November 6, 2014
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MORGAN ST ANL EY BL UE PAPER
China Internet
eCommerce: China’s Consumption Growth Engine
China has the world’s largest eCommerce market: The segment is one of the country’s key
economic drivers, and leading competitors are expanding in rural China and creating value. In 2013,
China generated 35% of US$890bn global eCommerce sales, and the value of China’s eCommerce
was equivalent to 3.3% of GDP, the highest percentage globally. As the country’s consumers
embrace the channel and incomes rise, we expect China’s share to expand further. We estimate
China’s sales will rise by a CAGR of 28% in 2013-18 to reach US$1trn, or 50% of the global market.
China is aging and so are its consumers: The implications are broad, and we think companies
need to align themselves to capture the needs of an “older” China. We estimate the number of online
shoppers will exceed 660mn by 2023, with half of the 330mn incremental online shoppers over 40
years old. We think this class of “Digital Hybrid” consumer will account for one third of the online
shopping population and potentially >50% of spend, becoming the driving force of China’s
eCommerce.
Opportunities: China is in the midst of a digital revolution. Leading companies have the opportunity
to 1) drive mass consumption, 2) realign cross-regional imbalances in employment and income, 3)
streamline supply and distribution value chains, reducing inefficiencies, 4) enable data-driven
logistics management, 5) provide sustainable growth for SMEs and rural markets, and 6) integrate
online and offline commerce to accelerate a “different” omni-channel retail experience.
Challenges: Growth could be impeded by 1) regional economic imbalances, resulting in logistics
inefficiencies, 2) slower delivery in lower-tier cities and uneven service quality, given a fragmented
third-party logistics industry, 3) higher costs and greater competition among sellers and participants
in the ecosystem, 4) possible taxes on C2C transactions, and 5) an extended macro slowdown.
MORGAN STANLEY RESEARCH
Gl obal
Robert Lin
1
+852 2848 5835
Rob.Lin@http://wendang.chazidian.com
Angela Moh
1
+852 2848 5405
Angela.Moh@http://wendang.chazidian.com
Philip Wan, CFA
1
+852 2848 8227
Philip.Wan@http://wendang.chazidian.com
Navin Killa
1
+852 2848 5422
Navin.Killa@http://wendang.chazidian.com
Katy L. Huberty
2
+1 212 761 6249
Kathryn.Huberty@http://wendang.chazidian.com
Jennifer Au
1
+852 2239 7825
Jennifer.Au@http://wendang.chazidian.com
Claire Cao
1
+852 3963 4387
Claire.Cao@http://wendang.chazidian.com







*See page 2 for other team memb ers
1 Morgan Stanley Asia Limited
+
2 Morgan Stanley & Co. LLC


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