China will bb cashless in 15 years, predicts Zennon Kapron

There has been a really massive change in the way people shop. They are more willing to pay by mobile (Alipay or WeChat Pay) and it’s going to be 10-15 years before China can go completely cashless.

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Interview with payment expert Zennon Kapron, the speaker of the Baltic E-Commerce Summit 2018.

What were the main trends in 2017 when it comes to e-commerce in China?

Over the past couple of years and in 2017 what we saw continue to grow in China was mobile commerce.

In 2017 we saw a lot of other parts of the market that we hadn’t traditionally seen in e-commerce become more popular. The one that comes to mind is especially groceries and food. That increased dramatically in 2017 as well. Food was always one of the last bastions, brick and mortar in China because they always wanted to go and touch the fruit to make sure it was ripe and fresh. And now people are much more comfortable with buying food online. So there has been an incredible uptake and a lot of competition in building that cult or supply chain and do food ordering online.

What about the payment methods?

Since 2016 mobile payments have developed rapidly in China and a lot of that was driven by the m-commerce, so the ability to shop on your phone and make a payment on the phone. That’s the first half of the driver for mobile payments.

So if I go to a SevenEleven convenience store here in China I can use my phone to pay with Alipay or WeChat Pay. That has been a really massive change in a way that people shop, not just online but offline as well. And often when you go to a food vendor on the street, they will only take digital payments, because it’s a lot easier and you don’t have to handle cash, they don’t have to deal with the security concerns, the cost of cash, etc. So there has been a dramatic shift in that case to mobile payments as well, over the past couple of years.

Another aspect is social and so the idea of combining social with e-commerce has really picked up a lot of because the Chinese side is very digital, there is a lot of goods and products and services that got sold through influencers or true friends, social media channels. So when you’re in a WeChat group chat and you just bought something and you want to share it with your friend, you can share a link and completely within the app your friend can buy that product too. So that aspect of the social recommendations integrating with e-commerce and m-commerce has been probably the third big trend that we’ve seen over the past couple of years.

It’s going to be a good 10-15 years before China can go completely cashless, because there are areas of the country where the infrastructure is not particularly amazing so it makes it a little bit more difficult for people to conduct mobile payment transactions or digital transactions in general so that could be kind of traditional card payments or the newer mobile payments. So there will always be a need for cash in China but I think in probably in 10-15 years everything will go digital.

What could the Western e-retailers learn from China or could implement from the best practices from China?

There are a lot of similarities already between the e-commerce models, when you look at Taobao and Tmall it’s either a single-vendor marketplace approach to selling mainly products and services, across the platform. Comparing those models on Amazon marketplace or in eBay, they are very similar.

I think the difference are mainly down to the cultural considerations and the consumers habits and different geographies.

In the back-end many things are similar, you are taking a product or a service from one vendor or multiple vendors and giving it to the consumer, but how that shopping experience is customized for the different cultural norm, different consumer habits I think it’s where it is varied.

There are certain things that are unique to the market, that’s mainly the customer habits, but then there are also basic things that all e-commerce vendors over the world have to keep in mind, like friction of experience, quick delivery and competitive pricing. These are the elements that all the platforms have in common.

What would happen with the traditional retail stores? We read from the news that big shopping malls are abandoned in the US and nobody builds new ones anymore. What is happening in China: is the furure in e-commerce or are people still visiting the malls?

Here in China the economy is still growing rapidly, there is more middle class, there is high penetration of shopping malls. In Shanghai there are 30-40 upscale shopping malls and they focus on the high end brands, such as Gucci or Ralph Lauren.

More everyday goods are sold online, but for upscale brand products like Hermes bag or Louis Vuitton purse people want to go to the store, you don’t really want to buy them online.

Luxury brand stores are not disappearing even in the US, it’s more the everyday goods which move online.