Bustling e-commerce market creates new growth opportunities for overseas companies in China

British retailer Burberry Group may never have imagined that its scarves and trench coats would be sold from virtual stores in China. But the iconic luxury brand and other biggies like Marks & Spencer, Mothercare, Nike, Levi's and Sony are increasingly finding that having an online presence is essential for continued success in China.

For most of these companies, the online attraction is understandable as surfing the Internet is not only the favorite leisure activity for young people in China, but also the main influencer for purchasing decisions. Physical risks and costs associated with setting up stores also have prompted many of these companies to instead have an online presence.

In April, Burberry opened a virtual store on Tmall, the biggest business-to-customer site in China, and now offers a wide array of items, ranging from woolen scarves priced at 4,000 yuan (461 euros; $640) to high-end trench coats called Heritage, priced at 17,500 yuan.

Though Burberry is the first pure luxury brand to join Tmall, the platform has already attracted more than 70,000 sellers. British fast-fashion retailer ASOS has also established a store on Tmall to supplement its existing outlet in China.

While it is still too early to gauge whether Burberry would reap gains in the long run, there is no doubting the huge growth potential of China's e-commerce market.

growth rates typically represent the true potential of any industry. The e-commerce industry has been no exception and has clocked consistent growth rates of over 70 percent in China since 2006.

Last year, Chinese shoppers purchased 1.8 trillion yuan worth of goods online, which means that 7.9 percent of the country's total retail trade was conducted over the Internet in 2013.

Industry experts, however, say that Chinese e-commerce platforms have played a big role in shaping consumer preferences. They point out that though e-commerce sites such as Taobao and Tmall were initially used by Chinese consumers to leverage pricing advantages, the platforms have now become more sophisticated. E-commerce platforms are focusing more on branding and product qualities and this has benefited multinational firms, they say.

Carrie Yu, a partner who specializes in retail and consumer practice with global consultancy firm PricewaterhouseCoopers in Hong Kong, says it is an opportune time for tapping the e-commerce potential in China.

"China is moving toward a consumption economy and more and more of its citizens are becoming affluent and they want to spend to indulge themselves," Yu says.

She says that unlike some people who have reached a certain age and regard savings as a virtue, the young Chinese love to spend, as they want to have a comfortable life rather than just save money.

Yu says China's love affair with Apple products is the best example of this trend. "Rather than smartphones they are street phones in China, especially among the younger generation. Obviously price is not an issue here, as the higher prices have not deterred purchases. It is not uncommon to find many young Chinese who have spent more than a month's salary to acquire the latest iPhone," she says.

That, experts say, is also the driving force for the e-commerce industry in China. Consumption is no longer determined by prices and is more a combination of qualities and services, they say. Adding further credence to these statements are reports that China overtook the US to become the biggest e-commerce market in the world last year.

Though the e-commerce market is unlikely to post growth rates of over 100 percent it recorded between 2006 and 2010, it still has enormous potential due to the huge size of the market.

China's real consumption in 2013 was 36.5 percent of total GDP, which is significantly lower than that of other countries, such as the United States, which had a consumption penetration rate of 66.8 percent in 2013, according to Euromonitor International.

Moreover, only about half of China's 618 million Internet users are online shoppers. With the increasing number of Internet users and the growing number of people making purchases online, the online shopping market in China is likely to remain the world's largest forever simply due to the large number of people who shop online, says Egidio Zarrella, partner for clients and innovation consulting services with consultancy firm KPMG China.

"Even though China's e-commerce market is big, it accounts for just 8 percent of the global retail market. In the next 10 years, it (e-commerce market) would account for over 50 percent of the retail market," says Zarrella, adding that the Chinese are becoming more tech-savvy and enjoy purchasing goods online.

According to research Zarrella did in 2013, a large number of Chinese people have three or four mobile devices compared with one or two for people in Europe and the US.