By Scott Cendrowski, writer
FORTUNE -- Just as cash-strapped consumers in the developing world bypassed so-called landline phones in favor of mobile devices, so China's lower-income consumers are skipping physical stores in favor of e-commerce sites.
A recent report by McKinsey & Co. shows that e-commerce sales in China reached an estimated $190 billion last year, almost equaling the U.S. market as largest in the world. China's online retail industry is expected to grow to at least $420 billion by 2020 -- which would total more than the U.S., Japanese, U.K., German, and French markets combined. China will overtake the U.S. for the top spot next year, if it hasn't already.
In an economy known for astonishing growth, e-commerce stands out. China's market has grown at a 120% annualized clip since 2003 compared to the U.S.'s 17% growth rate. It shows no signs of stopping.
What interests McKinsey isn't just the massive growth -- it's the potential for e-commerce to drive the government's goal of increasing domestic consumption and diversifying the world's No. 2 economy from a reliance on infrastructure projects. The authors of the report, titled "China's E-tail Revolution," conclude that consumers are more than replacing what they might buy at the mall. E-commerce is driving consumers to buy new stuff, especially in the so-called lower-tier, lower-income cities where physical retail stores, if they exist at all, don't have anywhere near the same selection as online marketplaces.
"China remains an under-retailed country, and customers' needs are very strong overall," says Peggy Yu Yu, co-founder of Dangdang, a Beijing-based e-commerce site that competes with Amazon China. "I live [in] downtown Beijing, and I drive any direction, and one hour later, still within Beijing, I don't see good stores anymore, be it supermarket or clothing store."
More than 70% of China's e-commerce business is consumer to consumer. eBay-like (EBAY) auction sites called Taobao, Tmall, and Paipai host hundreds of millions of listings. But Amazon (AMZN) wannabes such as 360Buy are setting up operations in second-tier cities, and analysts believe they'll eventually start moving into third- and fourth-tier cities.
While the ordering process on many e-commerce sites is done via mobile phones and apps, distribution is often a combination of high-tech and old-fashioned customers service -- which suits Chinese consumers just fine. 360buy, for example, offers same-day delivery (depending on when the order is placed) often via bike messenger.
Consumers in smaller cities like to pay via cash on delivery; one upside is that the customer can try on their wares before making payment, employing what's been called the "mobile fitting room" option.
What's surprising in the McKinsey report is that consumers in China's lower-tier cities actually spend as much online as higher-tier cities even though their consumers have far less disposable income. In the small and mid-size cities dotting the countryside, e-commerce sites are proving a revelation. Many consumers can now buy books, movies, clothes, and other goods for the first time.
That means lower-income consumers who shop for newly available goods online are increasingly propelling the economy forward, even as some are skeptical that China can transition into a consumption economy. For China, as it becomes the e-commerce capital of the world, that might be the best news of all.
Yes, Groupon's whimsy-prone founder is gone. That doesn't mean the e-commerce company has changed its ambitions much.
FORTUNE -- Eric Lefkofsky does not know what became of Montgomery Ward & Co., the iconic Chicago catalog merchandiser and retailer that was built to last more than 100 years.
I am of two minds on his knowledge gap. On the one hand, you'd think that the man whose several companies, including the much-criticized deal-promotion site MOREAdam Lashinsky, Sr. Editor at Large - May 9, 2013 7:22 AM ET
Few stocks involve more guessing than Amazon. The company is tightfisted when it comes to disclosing data or metrics.
By Kevin Kelleher, contributor
FORTUNE -- No matter how much research is done before an investment, there always remains a little bit of faith when it comes time to place a trade. People may mock analysts when their forecasts are off, but the analysts who aren't pressured by their firms to dress up MOREKevin Kelleher - May 9, 2013 5:00 AM ET
Expect a big jump in sales on Black Friday and Cyber Monday this year. Online, sales from mobile platforms are expected to surge 110%.
By Kevin Kelleher, contributor
FORTUNE – Some day in the future, anthropologists may be able to explain the bizarre shopping rituals of the 21st Century American consumer during the holiday season: Why, for example, so many people look for bargains on one day – Black Friday – MORENov 19, 2012 11:27 AM ET
As the Web grows more social and more mobile, women - entrepreneurs and users - are heeding the call.
By Jennifer Alsever, contributor
FORTUNE -- It's a woman's World Wide Web. Today's online experience is increasingly about connecting with people and sharing information -- and female users have responded enthusiastically. Some 56% of Twitterers are women; they are more than half of Facebook subscribers; and they make up 70% of Pinterest's MOREOct 1, 2012 5:00 AM ET
Since becoming CEO in 2002, Boyd has turned this former poster child of the dotcom bust into one of the great e-commerce success stories.
By Jon Birger, contributor
FORTUNE -- To say that Priceline CEO Jeffery Boyd's persona is different from that of the Negotiator -- the boisterous, charmingly obnoxious Priceline pitchman portrayed so delightfully by William Shatner -- is an epic understatement.
Boyd may try to dress like an Internet entrepreneur MORESep 11, 2012 5:00 AM ET
A new software platform from LightSpeed works between retailers and e-commerce.
By Caitlin Keating, reporter
FORTUNE -- Everyone -- from J.C. Penney (JCP) CEO Ron Johnson to Barnes & Noble (BKS) CEO William J. Lynch -- wants to bridge the divide between online sales and in-store experience. They might use Saturdays Surf as an example. Saturdays is a surf shop without many surfboards in sight -- they're often stashed in the MOREAug 6, 2012 5:00 AM ET
The Argentina-based online marketplace has weathered political and economic storms over the last decade and come out on top.
By Richard McGill Murphy, contributor
FORTUNE -- Founded in 1999, Marcos Galperin's Argentine startup was the only Latin American dotcom to survive the 2000 crash and go public. "They placed a bet on e-commerce really early on, and it paid off," says veteran Latin America tech executive Javier Carrique. No kidding. Today MOREMay 9, 2012 5:00 AM ET
The web startup has thrived by making it easy to list and find rooms to rent. But CEO Brian Chesky thinks the site can be an eBay for the social age.
FORTUNE -- The house-sharing website Airbnb lists 4,881 apartments for rent in Paris, but CEO Brian Chesky is paying a lot of attention to listings like the one for a parking spot in Île-de-France for $20 a night. Strange things MOREJessi Hempel, writer - May 3, 2012 5:00 AM ET
Everyone from Apple to Visa is looking to shape the way we spend money in the digital age. As PayPal rolls out pieces of its new platform, it's looking like a strong contender for a broad new standard.
by Kevin Kelleher, contributor
FORTUNE -- As long as the Internet has been a venue for commerce, some companies have dreamed of making electronic cash as seamless and intuitive to use as possible: no MOREMar 21, 2012 10:05 AM ET
|Feds seize 14 7-Eleven stores in ID theft case|
|How to talk about money before saying 'I do'|
|Kickstarter pulls plug on scam minutes before $120,000 heist|
|10,000 Apple accounts subject to data requests|
|NASA selects more women astronauts|