Pandemic may help China's big 3 ecommerce giants keep lion's share of market

China's strongest ecommerce players are about to get stronger at the expense of smaller rivals, as COVID-19 put supply chain and logistics networks to the test, according to eMarketer's latest forecast. 

The research firm predicts Alibaba, JD.com and Pinduoduo (PDD) will control 83.6% of China's retail ecommerce market in 2020, compared with 80.3% last year. While JD and PDD have been growing market share for years, mostly at the expense of undisputed number one Alibaba, this year the frontrunner will also reverse its losing trend, gaining 0.2% thanks to its ability to continually supply buyers, eMarketer says. 

Meanwhile, much smaller but fast-growing rivals like Vipshop, Dangdang, Mogujie and Jumei, which rely heavily on discretionary goods sales like cosmetics, electronics and apparel, will be hit harder in H1. Their market share is expected to stay flat or decline this year.

Interestingly, eMarketer predicts this trend will continue into 2021, with the big players expanding at the expense of smaller ecommerce competitors. While PDD is expected to continue gaining the most, followed by JD, Alibaba too is expected to increase its market share growth by 0.6% next year to 56.6%. 

These gains come at a time when China's retail market overall is expect to shrink for the first time on record (dating to 1985) by 4% in 2020, eMarketer predicts. But with American retail contracting even more sharply, China is expected to supplant the US as the world's top retail market in 2020, the research firm says. 

Meanwhile, retail ecommerce will continue to grow by 16% in China, representing roughly $288 billion (RMB1.990 trillion) in additional spending compared with 2019, though that is 7.7% less than eMarketer's pre-pandemic forecast and 9.9% behind the 2019 growth rate. The post-COVID outbreak projections now predict total Chinese retail sales will remain roughly half a trillion dollars behind pre-pandemic forecasts for both 2021 and 2022. 

The share of ecommerce sales in China as a percentage of total retail sales, however will continue to climb onwards and upwards to 41.2% this year from 34.1% last year.  By 2023, eMarketer predicts ecommerce will form 57.2% of Chinese retail overall.  

“Like in many other countries in 2020, China’s retail ecommerce performance is a tale of two countervailing coronavirus-related outcomes,” said eMarketer analyst Ethan Cramer-Flood. “On the one hand, ecommerce jumped because China’s residents were forced to remain indoors for long stretches and could not go to brick-and-mortar stores. On the other hand, ecommerce has been constrained by recessionary pressures, negative consumer confidence, and a short-term move away from luxury items and discretionary purchasing (which form the core of many ecommerce platforms).”