China E-commerce Growth Was Torrid in 2013, But Can it be Sustained? [Charts]

The turbocharged growth of China’s e-commerce market continued last year but the rate of expansion is expected to begin to moderate, according to a new report from Beijing-based market research firm iResearch.

Total e-commerce GMV in China—including wholesale trading among businesses, or B2B—reached  RMB 9.9 trillion ($1.63 trillion) in 2013, an increase of 21.3 percent compared with 2012, iResearch reported. That’s down from the 28.1 percent growth rate in 2012.

Analysts from iResearch called the growth “tremendous” yet it appears that the law of large numbers may be catching up to online retail and wholesale in the PRC, meaning the sheer size of the market has started to make it increasingly difficult to sustain high growth rates. After peaking this year at 27.9 percent, year-over-year rates will gradually decline to 16.8 percent in 2017, iResearch predicts.

That’s still faster growth than that of other major e-commerce markets. China, which is expected to soon surpass the U.S. as the largest online shopping market in the world, is getting hustled along by tailwinds from favorable government policies, researchers said, along with the ascendance of efficient, open marketplaces that are displacing more traditional websites carrying their own inventory, and from an ongoing boom in online shopping. Online shopping GMV in 2013 accounted for 7.8 percent of total retail spending on consumer goods in China, up from 1.6 percent the previous year, said the iResearch report.

In terms of e-commerce market activity, the B2B sector, consisting mainly of online trade among small and medium-sized business, still ranks first by GMV. In coming years, iResearch predicts, the fastest-growing sectors will be mobile shopping and “online-to-offline” (O2O) commerce, which is transactions that mix elements of traditional retail with e-commerce, and includes electronic payments for lifestyle services such as movie tickets and taxi fares.