Chinese firms go digital to expand overseas business
Updated: 2015-01-27 10:05
By Wang Hongyi(China Daily)
The digitization of the world is redefining industry boundaries and up to 90 percent of Chinese executives are actively looking for cross-border growth powered by e-commerce, according to Li Gang, chairman of Accenture Greater China.
"With its explosive growth of the mobile Internet and smartphones, China has the largest digital population in the world, with more than 600 million Internet users and 500 million mobile Internet users," said Li.
The popularity of third- and fourth-generation telecommunications networks means that Chinese consumers' lives are increasingly digital. They engage in mobile shopping anytime and anywhere, use social media to make their voices heard, switch among multiple screens, experience seamless shopping in both online and offline channels and are more willing than ever to change suppliers if their experience with one falls short, he said.
According to Accenture, about 87 percent of Chinese executives said they plan to pursue new market opportunities in, or in collaboration with, other industries over the next five years. This is much higher than their peers in developed economies such as the United States, France or the United Kingdom.
As the Chinese economy enters the "new normal" era of moderate growth, many enterprises are pursuing new business by turning to digital technologies as crucial elements of their cross-sector growth strategies. They believe that digital technologies can assist them in opening up new sales channels, developing products and services and improving the consumer experience, Li said.
Driven by Chinese consumers' increasingly digital way of life and the recognition among businesses that new growth strategies are needed, a new market ecology is taking shape in China, which is termed "digitally contestable markets" by Accenture.
For instance, some Internet companies are entering the banking industry, which has traditionally had an extremely high threshold for entry.
In China, four such markets have emerged in the areas of shopping, paying, listening/watching and traveling.
Each of these markets has a core sector. For example, financial services is the core sector for the digitally contestable market for paying. But each also includes "ecological sectors" that are now encroaching on what have traditionally been the domains of core sector players, the firm said.
To predict the market scale and growth prospects of digitally contestable markets, Accenture and Oxford Economics conducted research focused on the shopping (retail) and paying (financial services) markets. They found that digitally contestable markets are expected to grow faster than their corresponding core sectors.
In 2013, the gross output of the core retail sector in China was $234.3 billion; while for the core financial services sector, the figure was $714.6 billion.
The annual growth rates of output value for these sectors are expected to be 9 percent and 8.7 percent, respectively, between 2013 and 2020.
In contrast, output growth rates in the digitally contestable markets for shopping and paying are expected to be 9.7 percent and 9.6 percent over the same period. That means that by 2020, the gross output of the digitally contestable markets for shopping and paying is expected to reach $550 billion and $1.6 trillion, respectively, according to the research.