Residents of lower-tier cities and towns have become the new growth engine to boost online sales, and enthusiastically unleashed their massive buying power during Monday's Singles Day shopping extravaganza, industry insiders said.
Behind this is the rise in these buyers' disposable incomes and desire to upgrade their lifestyles by purchasing high-quality products, the insiders said.
The record 268.4 billion yuan ($38.4 billion) in sales achieved by e-commerce behemoth Alibaba Group during the shopping frenzy also shows how the enormous purchasing power of consumers injects new vitality into China's economic growth, they added. The figure represented a 25.7 percent increase over the 213.5 billion yuan last year.
During the 24-hour event this year, more than 60 percent of cosmetics and furniture orders came from smaller cities and even rural areas, with sales growth of some sought-after products made by homegrown skin care brand Pechoin and home appliance manufacturer Midea surpassing 100 percent year-on-year, according to Juhuasuan, a group-buying online platform of Alibaba.
Jiang Fan, president of Alibaba's Taobao and Tmall, said in the past two years, over 70 percent of its new active users resided in third- and fourth-tier cities and smaller locations.
George Ren, a senior partner and vice-president of global consultancy Roland Berger China, said thanks to e-commerce and mobile phone penetration, those customers stand out in today's e-commerce landscape.
"More than 50 percent of middle-income buyers' consumption will come from lower-tier cities in the future, which helps us foresee great consumption potential," Ren said.
"The shifting focus to this segment helps platforms and brands not only see where the growth is, but also where the possibilities are," he said.
JD, another e-commerce giant, said third- to sixth-tier cities drove new customer growth during it's 11-day Singles Day promotion, from Nov 1 through Monday. Orders placed by customers in lower-tier cities increased 60 percent year-on-year, with over 70 percent of new JD users coming from lower-tier cities.
Many consumers in lower-tier cities sought high-quality and big-ticket items online. The sales of luxury products from lower-tier cities surged 230 percent compared with same period last year, according to JD, which racked up a staggering 204.4 billion yuan in sales during its 11-day event.
Sales in lower-tier cities on JD Daojia, an online grocery and delivery company, increased by 5.7 times year-on-year during the 11 days.
Buying in third- and fourth-tier cities and rural areas is seeing the fastest growth across the nation, said Zhao Ping, a researcher at the Academy of the China Council for the Promotion of International Trade.
Zhao said in terms of purchasing power and willingness to buy, the growth rate of consumers in rural areas is higher than that of city dwellers, adding that rural areas are seen as an important source of future sales growth.
Pan Helin, a senior researcher at public policy think tank Pangoal Institution, said consumers in third-tier cities and below, counties and rural areas account for about 70 percent of China's population, indicating a huge pool of consumption potential to tap.
Inflation-adjusted year-on-year growth of per capita disposable income in rural regions was 6.4 percent from January to September, compared with 5.4 percent for urban areas, according to the National Bureau of Statistics.