While Baidu is about one-sixth the size of Amazon, it is growing very quickly. This is why Baidu was one of Motley Fool's major buy recommendations in 2016. Baidu is just the tip of the iceberg when it comes to Chinese e-commerce but it reflects many changes the region is facing in this area.
Beijing is no Longer the Epicenter
There have long been jokes that the capital or largest city of a nation is the entire nation and that everything of importance happens there. This is how e-commerce rolled out in the United States, primarily in San Francisco or in New York City. This isn't true in the case of China. In fact, e-commerce growth in China is driven by demand in third-tier and lower cities. A similar trend is seen in India, too, as middle-class consumers with less access to physical retailers order goods online.
Online Selling through Social Media Platforms is becoming the Norm
The Facebook Marketplace that rolled out in 2016 can be seen as copying WeChat's e-commerce model. A third of WeChat users were buying items online through WeChat in 2016, a percentage guaranteed to rise as the WeChat ecosystem of service providers continues to grow. Other messenger platforms in China are adding bots, online marketplaces, and information appliances capable of voice recognition to facilitate e-commerce like Amazon's Alexa.
Social Commerce now the Soul of China's e-commerce
In Asia, half of all e-commerce is driven by social media. This is facilitated in part by the online selling that popped up on social media sites like WeChat. It is also driven by Baidu hosting two-thirds of all web searches in China and offering many items for sale online. Tools like The Email Finder remain critical for B2B sales, but reaching consumers requires going onto the platforms where they shop.
Chinese Preferences are Fueling Innovation
Alibaba pioneered the 'pay with your face' feature to let you authenticate payments by taking a picture of yourself. This builds on the technology of the billion-dollar Chinese startup Face++ used by Alipay, a Chinese equivalent to PayPal. It even protects against fraudsters using a photo by requiring people to move during verification. Alipay itself is starting to rival PayPal and other payment options. Not only is it accepted by half a billion businesses in China, but it is being used by Chinese as they travel overseas. Alipay launched in Europe in 2016 and 60% of its users are already outside of mainland China.
Chinese e-commerce is growing the fastest in the third and fourth tier cities that lack the shopping opportunities of big cities like Beijing. Selling through social media sites is the norm in China and the Chinese prefer to use one, large site than shop with smaller sites. The preference is so ingrained that Amazon chose to partner with Baidu rather than try to move into China under its own name. China is far ahead of the United States in using facial recognition for payments and integrated ecosystems built into sites like WeChat to support e-commerce. China's large population at home and abroad is likely to make IT companies like Alipay a global brand.