DEC 2021

Ethan Cramer-Flood,
Man-Chung Cheung

Insider Intelligence’s China

Trends to Watch in 2022
More Innovation but Also More Headwinds in the World’s Largest
Ecommerce Market

Contributors: Debra Aho Williamson, Benjamin Silverman

 Insider Intelligence’s China Trends to Watch in 2022: More Innovation but
Also More Headwinds in the World’s Largest Ecommerce Market
China is a world leader in ecommerce and digital marketing innovation. But what’s in store for China’s digital economy as
retail growth slows and a new tech regulatory climate comes into play?

■ As China’s economy slows down, how will ecommerce

Retail Ecommerce Sales in China*, 2020-2024
sales be affected?
trillions and % change
■ How will Alibaba recover from a regulatory crackdown $3.506
$3.216
by the Chinese government?
$2.898
■ What is the outlook for Meituan and Didi, China’s $2.564
biggest players in food delivery and ride hailing, now $2.164
that the government has stepped in?

■ What’s next for short-form video and its standard-

bearers like Douyin and Kuaishou? 20.0% 18.5%
13.0% 11.0% 9.0%
■ Will China win the race to commercialize artificial reality
(AR) and virtual reality (VR) metaverse shopping?
2020 2021 2022 2023 2024
Retail ecommerce sales % change

Note: includes products or services ordered using the internet via any device, regardless of
the method of payment or fulfillment; excludes travel and event tickets, payments such as bill
pay, taxes or money transfers, food services and drinking place sales, gambling and other
vice good sales; *excludes Hong Kong
Source: eMarketer, May 2021
271058 eMarketer | InsiderIntelligence.com

KEY STAT: Ecommerce growth in China will decline to

13.0% in 2022. After a decade of unbelievable expansion
in digital shopping, China’s sales increases are expected to
settle into globally normal levels going forward.

Contents
2 Insider Intelligence’s China Trends to Watch in 2022
3 Introduction
3 Trend: China's Booming Ecommerce Growth Will
Moderate More Quickly Than Expected
3 Trend: Alibaba's Core Ecommerce Operations Will
Survive China's Anti-Monopoly Tech Crackdown
4 Trend: Dominant Sharing Economy and Food Delivery
Players Will See Profits and Market Power Diluted
5 Trend: Short-Form Video Players Will Become
Formidable Ecommerce Players
6 Trend: With the Metaverse Looming, Virtual Experiences
Will Come to the Fore
7 Read Next
7 Sources
7 Editorial and Production Contributors

Copyright © 2021, Insider Intelligence Inc. All rights reserved. Page 2

 Introduction Consumers are tightening their belts amid long-term
economic uncertainty. Although China has handled the
The digital economy developments that emerged coronavirus more successfully than most countries, GDP
growth is expected to slow in both 2021 and 2022. As a
over the past two years in China are now entrenched.
result, we forecast just 6.5% year over year (YoY) growth in
Livestreaming ecommerce, short-video social media, retail sales this year and 6.0% YoY growth next year. While
on-demand grocery and food delivery, and many those figures look healthy by advanced economy standards,
other newly popular services are now a part of the they are far off the usual pace for China, where double-digit
mainstream and charging toward their next stages. annual retail growth has been common for decades.

But there are headwinds, as China’s economy and business
environment is not what it once was: Retail sales growth
has declined dramatically from its heyday, and government
regulators have been on the anti-monopoly prowl for over a
year. What does all this forebode for China’s biggest digital
economy players?
Major online sellers will be affected, but there will still
be bright spots. Alibaba, JD.com, and Pinduoduo (PDD)
will all see slowed retail ecommerce growth in 2022, though
PDD is still at the tail end of its explosive growth stage. But
there will be two silver linings: Livestreaming ecommerce will
increase 60.0% in China next year with social livestreaming
sales growing 61.1%.

Government interventions will create a mixed outlook

Trend: China's Booming for ecommerce. Over the past 18 months, Beijing has
Ecommerce Growth Will Moderate undertaken an anti-monopoly regulatory blitz against China’s
most successful platform economy players. On one hand,
More Quickly Than Expected this crackdown is designed to limit the disproportionate
success and accumulation of capital—and outsized
Post-pandemic social conditions, a slowing economy profits—by the tech behemoths. On the other, several policy
(especially slower retail growth), and a renewed focus initiatives are intended to increase consumption by regular
on brick-and-mortar will lead to slower ecommerce households. How this contradiction plays out will determine
expansion in China in 2022. the outlook for retail growth in China in 2022 and beyond.

Retail Ecommerce Sales in China*, 2020-2024

trillions and % change
Prediction
$3.506 With consumer spending in China slowing, expect
$3.216 to see ecommerce firms double down on marketing
$2.898 innovations. Chinese ecommerce firms already use cutting-
$2.564 edge digital approaches to customer acquisition and
$2.164 engagement; increased competition for consumer spending
will only enhance that trend.

20.0% 18.5%
13.0% 11.0% 9.0% Trend: Alibaba's Core Ecommerce
Operations Will Survive China's
2020 2021 2022 2023 2024 Anti-Monopoly Tech Crackdown
Retail ecommerce sales % change

Note: includes products or services ordered using the internet via any device, regardless of Alibaba Group’s ecommerce properties—Taobao, Tmall,
the method of payment or fulfillment; excludes travel and event tickets, payments such as bill
pay, taxes or money transfers, food services and drinking place sales, gambling and other
vice good sales; *excludes Hong Kong
etc.—will navigate the “techlash” and consolidate their
Source: eMarketer, May 2021
positions as China's dominant ecommerce platforms.
271058 eMarketer | InsiderIntelligence.com

Copyright © 2021, Insider Intelligence Inc. All rights reserved. Page 3

Government attention will be more focused on non- far ahead of JD.com’s 17.6% share or PDD’s 14.6%. More
ecommerce aspects of the country’s tech ecosystem. troublesome for Alibaba’s prospects is the slowdown in
For example, China’s leaders appear to be far more consumer spending growth.
concerned with the financial risk and opacity embodied
by Alibaba’s fintech, payment, and investor services
operations—such as those offered by Ant Group—than they Predictions
are with Taobao’s ecommerce market share. Generating
revenue from financial services will become more challenging
■ New regulations on privacy, data security, and
thanks to new government regulations. As a result, social welfare will serve to entrench China’s
Alibaba’s management will refocus on their core ecommerce strongest ecommerce players. Alibaba, JD.com, and
businesses. Sales growth will still slow down next year but PDD will be able to endure the new compliance costs
roughly in line with China’s overall national retail trends. better than smaller or newer competitors, thus locking
in their positions.

Alibaba Retail Ecommerce Sales in China*, ■ Alibaba will gain more than WeChat from the
2019-2022 opening of the companies’ respective walled
trillions and % change gardens. Alibaba will develop new mini programs
$1.329 within WeChat and will benefit from the new ability to
$1.209 place outbound links within WeChat. As a result, it will
$1.042 eventually see significant gains in social commerce.
$0.920
■ Alibaba’s long-term prospects will be constrained
by China’s slowing consumer spending growth.
However, its challenges with government regulators will
fade and will largely be able to defend its market share.
JD.com and PDD are growing faster for now, but that’s
16.0%
14.0% 13.2%
10.0%
mainly because they are coming from smaller bases.

2019 2020 2021 2022

Alibaba retail ecommerce sales % change Trend: Dominant Sharing Economy
Note: includes products or services ordered using the internet via any device, regardless of
the method of payment or fulfillment; excludes travel and event tickets, payments such as bill
and Food Delivery Players
pay, taxes or money transfers, food services and drinking place sales, gambling and other
vice good sales; *excludes Hong Kong
Source: eMarketer, May 2021
Will See Profits and Market
271059 eMarketer | InsiderIntelligence.com Power Diluted
The breakdown of China’s walled garden of digital Beijing’s regulatory crackdown will have a materially
platforms and payment systems by antitrust regulations
adverse impact on a range of services, including
will increase consumer choice. As a result, shoppers
ride-hailing service Didi, delivery platforms Meituan and
starting their customer journey on competing properties (like
Tencent’s WeChat or various ByteDance apps and networks) Ele.me, and Airbnb-like housing sharing services.
are more likely to eventually convert on an Alibaba property
than they were before. In this more open environment, Beijing’s scrutiny of platform-economy internet
Alibaba will likely gain more customers than it loses, and the companies will threaten their prospects, though some
only real drawback will be the mandate to accept WeChat companies are at more risk than others. China's new
Pay instead of using Alipay to settle all transactions. anti-monopoly, data security, and worker protection
regulations will directly impact the revenues and net income
Alibaba’s real challenge is China’s economy, not the of many of China's emergent stars in the sharing economy.
government or its competitors. Alibaba has been losing For example, Didi reportedly controlled roughly 90% of
ecommerce market share to innovative and aggressive new China’s ride-hailing market as of August 2021. But its user
players like PDD over the past several years. This trend growth completely stalled in July when the government
will continue, but it will not noticeably accelerate. Alibaba removed its app from domestic app stores as a part of a
will claim 45.9% of China’s ecommerce market next year, months-long data security review.

Copyright © 2021, Insider Intelligence Inc. All rights reserved. Page 4

Incumbents will face increased labor costs and new
competition from smaller players. Government regulators
are forcing the market leaders to increase compensation and
benefits for delivery drivers and other contractors, reducing
their ability to undercut competitors on price. That—along
with the end of exclusivity deals between these platforms
and their vendors and partners—will open the door for
smaller competitors to gain share.
■ Didi will partially recover from its regulatory
scrutiny but not before it pays a massive price, both
in fines and lost customers. Eventually, it will delist
from the New York Stock Exchange and offer shares in
Hong Kong to make amends for its perceived political
offenses against Beijing. In the meantime, dozens of
new ride-hailing players will battle it out before one or
two emerge as the primary new competitors.

This new dynamic will also disperse digital advertising

dollars, as consumer traffic is shared among more
service providers. Meituan’s user growth will start to
Trend: Short-Form Video
decline next year, and we forecast its previously spectacular Players Will Become Formidable
ad revenue growth will decelerate as well. Ecommerce Players
Meituan Ad Revenues in China, 2019-2023 Short-video apps are becoming an ideal channel to
billions and % change drive impulse purchases in China, as more and more
$7.52 consumers surf these platforms to discover products.

$5.84 Short-video users are growing and spending more time

67.1% with the services. We forecast Douyin (China’s TikTok)
64.1%
users in China will grow to 639.4 million this year. In its latest
$4.33
earnings report, Kuaishou said time spent on the platform by
daily active users increased 25.2% YoY to 106.9 minutes per
$2.64
$2.20 day in Q2 2021.
34.9%
28.8%
20.0%
Douyin Users and Penetration in China, 2021-2025
millions, % change, and % of smartphone users
2019 2020 2021 2022 2023
835.0
Billions % change 795.3
746.5
Note: excludes Hong Kong; net ad revenues after companies pay traffic acquisition costs 692.5
(TAC) to partner sites 639.4 87.0%
Source: eMarketer, Oct 2021 84.3%
80.8%
270933 eMarketer | InsiderIntelligence.com 76.6%
72.4%

Predictions
■ The new rules will result in a rash of new local
12.2%
and regional competitors to emerge in 2022 and 8.3% 7.8% 6.5% 5.0%
beyond. Some of these new competitors will develop
into unicorn-level startups and become nationally 2021 2022 2023 2024 2025
significant. New anti-monopoly M&A rules will prevent Douyin users % change % of smartphone users
the incumbents from acquiring these firms. Note: internet users who access their Douyin account via any device at least once per month
Source: eMarketer, Nov 2021
271421 eMarketer | InsiderIntelligence.com

Copyright © 2021, Insider Intelligence Inc. All rights reserved. Page 5

Short-video apps’ blend of addictive content and
interactivity will pull more consumers into their
ecommerce orbits and away from traditional players.
This behavioral shift favors apps like Douyin and Kuaishou
over traditional ecommerce players, such as Alibaba and
JD.com. Short-video players have been investing in their own
commerce operations to keep users within their ecosystems
with promising results. During their respective Singles’
Day events in 2021, Douyin said livestream views reached
39.5 billion, and Kuaishou reported its gross merchandise
value (GMV) skyrocketed by 433%. Beijing’s anti-monopoly
crackdowns have also freed vendors to sell their wares on
any site and have opened up previously blocked platform-
to-platform linking—two developments favorable to short-
video players.
The biggest risk to short-video commerce is usage
decline. During the pandemic, short videos—and mobile
internet in general—benefited from increased time at home,
but we expect growth in time spent with mobile internet
in China will continue to slow over the coming years, as
regulations limit the amount of time minors can spend on
short-video apps like Douyin. What’s more, most traditional
ecommerce players have successfully incorporated short-
video features into their own platforms, so it will likely take
years before short-video players catch up in GMV.
Predictions
■ Douyin and Kuaishou will further cement their
positions in social commerce, as browse and shop
proves irresistible among younger consumers.
■ With the draw of engaging content, short-video
apps will continue to snatch time spent away from
other app categories, which will have a positive
spillover effect on their commerce businesses.
■ Short-video platforms will excel in new product
discovery and experiential purchases like travel
and dining.
Copyright © 2021, Insider Intelligence Inc. All rights reserved.
Trend: With the Metaverse
Looming, Virtual Experiences Will
Come to the Fore
The virtual world will change the way consumers in
China interact online and shop.
Companies like Alibaba, Baidu, ByteDance, and Tencent
have participated in a wave of trademarks filings
and investments in the metaverse space, after Mark
Zuckerberg touted it as “the next chapter for the internet”
at the October Facebook Connect conference. Even before
all of this, China’s digital shopping leaders made online
shopping more immersive and virtual using technologies like
3D spaces, virtual personalities, and AR try-ons.
Metaverse-Related Information Technology*
Spending in China, 2021-2025
billions and CAGR
2025 metaverse-related information technology spending in China $200.1
CAGR (2021-2025) 20.2%
Note: *includes AI, big data and analytics, blockchain, AR/VR, gaming, public cloud services,
and others
Source: International Data Corporation (IDC), "Q2 2021 AR and VR Market Tracker," Oct 29,
2021
270811 eMarketer | InsiderIntelligence.com
There now seems to be real momentum behind AR
and VR experiences in China. The necessary ecosystem
appears to finally be in place: a supportive regulatory
environment toward emerging tech, expansive 5G networks,
advances in affordable consumer-ready AR and VR
hardware and software, and surging interest among local
tech giants. Immersive and virtual tools have already been
used in commerce, and in recent years, internet users in
China have warmed to avatar-based social platforms,
nonfungible tokens (NFTs), AR try-ons, and virtual
celebrities, especially after the pandemic drove people to
seek more immersive online experiences.
How much virtual shopping experiences will impact the
bottom line is still unknown. The whole industry seems to
agree that online shopping needs to be more real, but most
retailers are still grappling with what that actually means and
how much consumers want to shop on virtual storefronts
versus real ones. Past virtual shopping experiences were
introduced to consumers on an ad hoc basis with poor
measurement of performance. And though Beijing has
shown a supportive stance toward these new technologies
and concepts, regulators wary of internet addiction could still
crack down on them.
Page 6
Predictions
■ In the short term, metaverse and VR shopping
experiences in China will feel disjointed and
piecemeal, but there will be a gradual building-out
of more holistic experiences.
■ Consumers in China, especially younger ones, will
be some of the first people around the world to
embrace metaverse shopping experiences.
■ The government in China will show support for the
metaverse concept and the development of related
technologies and will soon signal how it wants to
govern the space.
Read Next
Top 10 Trends in 2022: A Guide to the Biggest
Developments in Our Coverage Areas
Global Media Intelligence 2021: China
China Mobile Payments Forecast 2021: Government
Crackdowns and Innovation Could Disrupt a Mature,
Duopolized Market
Sources
ByteDance
Kuaishou
Copyright © 2021, Insider Intelligence Inc. All rights reserved.
Editorial and
Production Contributors
Anam Baig Senior Report Editor
Rahul Chadha Director, Report Editing
Jason Clinkscales Senior Report Editor
Matthew Corkins Copy Editor
Justin DeVoursney Graphic Designer
Joanne DiCamillo Senior Production Artist
Magenta Fox Senior Chart Editor
Donte Gibson Senior Chart Editor
Katie Hamblin Director, Charts
Dana Hill Director, Production
Erika Huber Senior Copy Editor
Ann Marie Kerwin Vice President, Content
Na Li Senior Data Research Manager
Penelope Lin Copy Editor
Reuben Loewy Director, Report Editing
Jennifer Merritt Executive Editor
Stephanie Meyer Product Specialist
Heather Price Senior Director, Managing Editor
Amanda Silvestri Senior Copy Editor
Julia Woolever Senior Report Editor
Ali Young Copy Editor
Page 7
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