China’s Mobile Internet Industry
China’s Internet industry has taken a turn to focusing on monetizing the smart phone market. Companies are gradually shifting their businesses from PC to mobile due to high mobile phone penetration rates in the country. Mobile phone penetration is nearly at 100%, and the majority of the aforementioned commoditization is coming from the increasingly popular, lower-cost, domestically produced smart phones, particularly within rural areas. Monetization for the industry is primarily coming from mobile gaming, e-commerce, and new forms of mobile payments.
At the end of 2013, Chinese mobile phone users exceeded one billion, with over half of them being smart phone users. It has been estimated that the smart phone penetration rate in China will reach or even exceed 90% by the end of this year. Despite this prediction, foreign smart phone shipments to China in the 4th quarter of 2013 decreased by 4.3%, quarter-on-quarter, the first drop since the 2nd quarter of 2011. This is mostly because of the attractive prices of domestic brand phones, such as Lenovo, Xiaomi, and Coolpad, (which typically go for less than half the price of an Apple iPhone). The average purchase price of a smart phone in China actually dropped from 2,321 RMB in 2011 to 1,773 RMB (US$286) in 2013.
The availability of these new, affordable smart phones allows for residents of rural areas to be able to access the Internet for the first time. It has been reported that 62% of mobile Internet users earn less than 4,000 RMB per month, with migrant workers making up a significant part of this total. The Chinese government, however, has plans to help rural areas catch up to the more affluent cities by aiming to achieve 85% fixed broadband penetration and 95% 3G/4G user penetration by 2020.
With smart phone penetration on the rise, mobile e-commerce is growing rapidly. Online transactions in China reached 1.9 billion RMB in 2013, making up 7.8% of total retail sales in the country. The mobile shopping industry’s total transaction value grew by 165% to 168 billion RMB, nabbing 9% of the total online shopping industry, as compared to just 4.8% in 2012. It has been estimated that it will eventually reached one trillion RMB by 2017.
Besides smart phone penetration getting so high, what else is contributing to the growing rates of mobile shopping? The big e-commerce platforms are heavily promoting mobile shopping by providing discounts to those making purchases via their mobile devices. Also, people are increasingly choosing to spend the little free time they have to shopping through their mobile devices instead of stepping foot in shopping malls.