Social e-commerce has been growing exponentially in popularity among Chinese consumers for the past three years. Its GMV, or total volume of sales, is expected to keep growing at a fast pace to reach RMB 1.3 trillion (more than USD 180 billion) this year and more than double to reach RMB 2.86 trillion in 2021, according to a report released by China Internet Watch (CIW).
The sector saw its sudden surge two years ago when the GMV grew 255.8% to reach RMB 626.85 billion, up from RMB 176.20 billion YoY.
The report covers major e-commerce platforms that combine social elements into their sales processes, such as Pinduoduo, Xiaohongshu, and video streaming apps, such as iQiyi, among the biggest players. It does not specify whether and to what extent it also includes informal sales via social media in its GMV estimate.
Pinduoduo is an e-commerce platform combining social interactions and elements of social media. One of its main features is that it allows consumers to form groups or take part in existing ones, to purchase an item for a discounted price. This not only works as an incentive to lure friends to buy a budget-priced product but also incites more social engagement among people resulting in higher user traffic.
The app was founded in 2015 and has gained large popularity since. The end of 2017 saw a turning point when many performance indicators of this Shanghai-based start-up exceeded those of JDs.
Xiaohongshu, which means “Little red book” in English, attracts mostly female users born after 1990 since it specializes in the niche product sector of beauty and fashion. Besides traditional sales, the website is a community for like-minded users who share their advice and recommendations on various products. Many of them post photographs and videos of themselves showcasing everything from make-up, cosmetics, and clothes. Potential buyers can see how the products fit and exchange their opinions.
Xiaohongshu instantly became popular and in January this year, it reached more than 200 million registered users, according to the data on its website. However, two weeks ago, the app was pulled from Chinese app stores for a “content rectification” and hasn’t come back since.
Both Pinduoduo and Xiaohongshu, have their platforms linked to Chinese social media networks, such as WeChat, QQ or Weibo, where users share posts or invite their friends.
The third player in the new social e-commerce space highlighted in the report is video and movie streaming platform iQiyi. The so-called “Netflix of China” has stepped up the game compared to its American counterpart. While watching their favorite TV show, users can click on links to purchase items they see on the screen. This June, iQiyi announced it had more than 100 million paying subscribers and the prediction sees a continuous growth.
The latest trend of blending social activity with online shopping is not anywhere near the end in China. According to the data compiled by CIW, the annual growth rate of the companies is 100.6% with an 11:9% increase in their penetration rate. Currently, over 80% of online shoppers purchase their products through social e-commerce platforms. Shoppers are online and buying, only now their demand has shifted to purchases that combine authentic experience with personalized engagement.