China Online Trends - 2019 | EMQQ
The growth of the internet and computing power has created great
opportunities as well as serious concerns for the global population. In
her annual report, Mary Meeker, general partner at Bond Capital, highlighted
the major trends seen in the online world. In a previous note, we discussed
overall trends in the online space. In this note, we highlight trends
that are transforming the online space in China.
Transformation of the Chinese Economy
Services grew from under 30% of Chinese GDP in 1970 to over 50% in 2018.
At the same time, the urban population in China grew from 10% of total
population in 1950 to well over 50% in 2018.
Business and consumer confidence have weakened recently. China’s current
account surplus is narrowing as net exports decrease at the same time as
outbound tourism has increased. China’s share of world exports, after
peaking in the 2015/16-time period, have trailed off to around 12%-13%.
Mobile Use Moderating but Data Usage
Mobile users increased by 8% in 2018 to reach 817MM, which moderated from the
9% increase seen in 2017. However, driven primarily by short-form videos,
the growth in mobile internet data usage accelerated to an increase of 189% in
2018 over 2017 versus a comparable year-over-year (YOY) increase of 162% in
2017. On average, mobile users in China spent 600MM hours daily viewing
short-form videos during April 2019.
Online Gaming Driving Further Innovation in
Online games are driving innovation in payment, ecommerce, retail, and
education platforms. For example, Tencent’s WeChat Jump Jump game has
driven the creation of other apps related to the game and has also generated
advertising revenue for Tencent as companies insert their brands and logos into
the game platform.
Alipay’s Ant Forest, which boasts 500MM users, has driven philanthropy
and resulted in over 100MM trees planted. Pinduoduo (PDD) is using games as a
way of generating credits that consumers can use to lower the prices they pay
for purchases on their ecommerce platform. And many platforms are using
games as a way to drive education.
From Apps to SuperApps
is a prime example of an app becoming a superapp. WeChat began as an
instant messaging app but now is much more. Underpinned by its popular
WeChat Pay payments platform the app supports additional functionalities such
as allowing users to shop, pay, order food, buy movie tickets and make
restaurant reservations and doctor’s appointments, hail rides, find out how
crowded their favourite restaurant is, and much more without leaving the
Meituan Dianping (XHKJ) is another example. The company started as
a group buying platform and now encompasses functions including travel
services, food delivery, and entertainment. The app boasts 30 services,
412MM annual transacting users during 2018, which was a 26% increase from 2017.
Alipay has gone from a payments platform to a financial services
superapp with 200 mini-programs and over 1 billion users during 2018.
Retail Strategy Evolving from Ecommerce to
Bricks and mortar retailing and ecommerce are no longer mutually
exclusive. Rather, they are becoming more integrated with companies
digitaliing a physical retail presence. This enables consumers the
ability to buy online, in a store, or a combination such as ordering online and
picking up in a physical location.
Alibaba’s “New Retail” strategy is a case in point. The company
owns several physical retail chains which it is digitalising. Its grocery
format, Freshippo (formerly HEMA) allows customers to order groceries online
and either have them delivered to their home or to pick them up at a physical
location. It is also employing this strategy with formats such as home
improvement, department stores, electronics, and delivery for 2,100 Starbucks
Chinese companies are using the internet to expand offline education
online. For K-12, apps are offering online courses, tutoring, and
homework help. For children aged 3-10, companies are offering English
classes, coding courses, and other coursework outside of regular school.
Online Access to Government Services
China’s internet companies are enabling online access to government
services. For example, through Alipay and WeChat payment platforms, 400MM
users in China are able to make utility payments, apply for social security,
make hospital appointments, pay fines for traffic violations, and access a host
of other government services.
Advances in technology have resulted in radical changes in the way that
consumers and businesses interact. The growth of the internet has moved
many of these interactions online and has facilitated the growth of
ecommerce. The next evolution may involve the integration of online and
offline into an omni-channel platform.
Companies that are able to adapt to and capitalise on the changing
technology may be able to reap many benefits.
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Article Date: 22nd August 2019.