In the realm of ecommerce, China has carved out a unique success story that has transformed global trade dynamics. This success is attributed to a blend of factors such as robust infrastructure, a vast consumer market, and strategic industry clustering. The effects of this transformation extend to areas like sustainable agriculture and poverty alleviation. This discussion offers crucial insights into the potential of ecommerce as a tool for promoting sustainable development and fostering global economic integration.

Understanding the Logic of E-commerce

Understanding the logic of e-commerce involves answering a critical question: Which products are better suited for e-commerce and which for offline business? The fundamental concern of any business is the transfer of products from producers to consumers while ensuring monetary returns.

Offline businesses traditionally address this concern by initiating the process from factories' products, moving through branding, channels, terminals, and finally reaching the consumers. This process incurs a considerable transaction cost, accounting for over 70% of the final price. This cost comprises transportation and information costs, the latter including expenses from product stock, shop rent, staff, window-shopping, face-to-face negotiation, and middlemen commissions.

The advent of the internet has significantly reduced information costs. E-commerce reverses the traditional business process by prioritizing consumers and eliminating intermediary steps. This shift allows for quicker response to consumer demand, eradication of middlemen, removal of the need for stock, reduction in labor costs, savings on shop rent, and an increased exposure to a broader consumer base. It enables local producers to reach consumers nationwide, intensifying competition and making internet influencers a scarce resource. This transition sharpens the competitive edge of economies that have embraced e-commerce.

However, e-commerce isn't without its disadvantages. The individual packaging and deliveries involved in e-commerce incur significant transportation costs and contribute to pollution. These high transportation costs limit the range of products sold by e-commerce and establish the boundary between e-commerce and offline business. Offline business has the advantage with products that require instant delivery, have low demand uncertainty, and high transportation costs (e.g., heavy, cheap, volume cargo). Conversely, online businesses are better suited for products with high demand uncertainty and low transportation costs, typically niche or "long tail" products that are expensive, high in value, and do not require immediate delivery.

As the efficiency of logistic systems improves with the automation of parcel sorting systems, integration of parcel pick-up stations, self-service machines, freelance delivery systems, group purchases, and big data predictions, the equilibrium boundary line is gradually shifting towards offline business. The continuous evolution of e-commerce is bringing a broader range of products and services into the online market, thereby satisfying the nuanced and diverse demands of customers.

Since e-commerce transactions take place over the internet where consumers and producers are often far apart, it can lead to information asymmetry on product quality and trust issues on payment. This necessitates the emergence of third-party payment systems, unconditional return policies, and consumer review systems. Given that the internet retains memory and reputation holds more value for e-commerce shops due to economies of scale, online product quality and post-sale service could potentially be better, except for products that are difficult to return and verify (e.g., chicken fur removing machine).

With further improvements in e-commerce technology, particularly the automation of production and transportation, it is expected that more products will become niche products. This shift could potentially lead to the dominance of e-commerce, possibly replacing offline businesses entirely in the market. Consequently, nationwide competition via e-commerce could enhance the overall competitive advantage of economies in the international market.

The Success of Chinese E-commerce

Chinese ecommerce stands out as the most successful not only among developing countries but also globally, even though it originated in the West. Why is this so? The following six factors are crucial to understand this success.

First, the role of ecommerce platform entrepreneurs cannot be underestimated. Chinese Ecommerce platforms were initially emulated by Alibaba, taking inspiration from the USA. Jack Ma, upon encountering the internet in the USA, was completely taken aback by its potential value for business. As a result, he developed the Taobao platform and introduced the Alipay system, modelled after Paypal. This move was designed to attract business people to carry out their transactions on the Taobao platform, largely for free. Alibaba didn't make any profit from the platform for a considerable period, but Ma believed in its value, as it empowered numerous businesses to make money. As more and more business people began conducting transactions on Taobao, Alibaba gradually monopolized the ecommerce landscape, marking a significant success. To enhance the quality of the products sold on the platform, Alibaba created the Tianmao platform for premium products. Ecommerce operators must pay a deposit to obtain a Tianmao account. The success of Alibaba has drawn other platforms like Jingdong, Pingduoduo, and Tiktok, leading to multiple ecommerce platforms competing with each other, thereby enhancing ecommerce business models, technologies, and overall efficiency.

Second, the contribution of a large number of ecommerce entrepreneurs and live streamers is significant. Numerous young ecommerce entrepreneurs, capable of skillfully utilizing the platform and making money through self-exploration, have also contributed to the success of Ecommerce platforms. Today, a vast number of live streamers and ecommerce shop operators are competing with each other and innovating a multitude of skills. One of the most famous live streamers, Li Ziqi, a countryside girl, has attracted a significant fan base by showcasing the traditional countryside lifestyle.

Third, there are numerous entrepreneurs in logistics. An efficient logistic system is a key element for the competitiveness of ecommerce over traditional businesses. The traditional logistic system, monopolized by China Post, was slow and expensive. The first private logistic system, Shentong, was founded by Chen Dejun, a 23-year-old with a middle school education, who spotted a business opportunity when he realized he could make 200 RMB by sending a document from Nanjing City to Shanghai, only 300 kilometers apart. He established Shentong in 1993. He passed away in a car accident when he was 25, and his sister took over the company, which now has a net worth of 15.675 Billion RMB. Later on, its employees duplicated the model and established different logistic companies, like Yunda, Yuantong, Zhongtong, T-Express (Tiantian Kuaidi), and Best Express (百世汇通). All of these company founders hail from Tonglu County, Zhejiang province. Later, other logistic companies, like Shunfeng, emerged. The competition among the logistic companies has decreased the logistic cost and improved the logistic system. Three important developments in the logistic system include automatic sorting machines, a freelancer system for deliverymen, and the integration of parcel pickup stations. The automatic sorting machine in the logistic center (usually in big cities) can allocate the parcels automatically and swiftly to different destinations according to the barcode of the parcels. People with e-bikes can voluntarily join the platform as partner deliverymen who earn income based on the number of parcels delivered. The integration of pickup stations, such as supermarkets or grocery stores, built jointly by some logistic companies, simplifies the process for customers to collect their orders by themselves according to the messages they received. The reduced logistic cost of individual packages makes ecommerce increasingly competitive, and more and more products can be sold through ecommerce channels, gradually eroding the market share of traditional businesses.

Location	Product	Production quantity
Danyang County, Jiangsu province	Glass lens and frame	50% of world glass lens (400 million pairs), 100 million spectacle frame a year
Caoxian county, Shandong Province	Japanese coffin and Han Cloth (an ancient Chinese style cloth)	90% of Japanese Coffin and 1/3 of Han Cloth  in China.
Hui-an County, Fujian	Tombstone	80% of Japanese tombstones.
Shaodong County, Hunan province.	lighters	70% world lighters
Chuji County, Zhejiang province	pearl	73% world pearl
Hengxian county, Guangxi Zhuang Nationality Autonomous Region	Jasmine flower	60% world arabian jasmine flower.
Changle County, Shandong province	Guitar	1/3 of world Guitar
Panyu district, Guangdong province	Claw machine/UFO catcher	90% world  claw machines/UFO catcher
Xuchang, Henan province	periwig	80% world periwig/hairpiece
Jinjiang county, Fujian province	Sports shoes	30% world sports shoes

Fourth, the internet infrastructure provided by the government plays a critical role. The robust internet infrastructure in China not only provides consumers and producers with cheaper access to the internet, but also a high speed of data transfer that enables live streaming and other ecommerce models to be feasible.

Fifth, the enormous market in China plays a significant role. A defining feature of ecommerce is the economy of scale. China has a vast population of young people who are eager to try new internet technologies and have substantial purchasing power. This market scale provides the foundation for the development of various ecommerce models or technologies.

Sixth, the county-based production clustering is a significant factor (see Table 1). China, often referred to as the world's factory, produces almost every product at a very low cost. How is this possible? The secret lies in industry clustering. Typically, one country specializes in one product. The coordination of the entire supply chain, the competition, and the technology sharing among the network in the cluster, along with the economy of scale, reduce the product cost. The cheaper products and efficient supply chain provide a variety of products for ecommerce. The limiting factor of the Chinese economy lies not in production, but in marketing. The development of ecommerce serves the role of large-scale marketing. Ecommerce and industry clustering complement each other.

These six factors, all attributing to the entrepreneurship and hardworking spirit of Chinese people, are unique in the world. Compared to developed countries, China has low-cost products and a low cost of labor force as deliverymen. In comparison with developing countries, China is an industrialized country with good infrastructure, a vast market purchasing power, high innovation capacity, high production capacity, and an efficient logistic system. These are probably the reasons why China's ecommerce is the most successful in the world.

The Ecommerce Technology Transfer and Investment

What are the effects of China's ecommerce on the rest of the world, particularly in developing countries?

The Ecommerce Technology Transfer and Investment

Currently, China's TikTok has made such a profound impact in the United States that the former US President, Donald Trump, even attempted to ban TikTok in the country. Recently, it was reported that WeChat is being emulated by the new Twitter owner, Elon Musk.

Shein Company, established in 2014, is a cross-border B2C fashion retailer. It has a market value of USD 100 billion in 2021. Leveraging China's flexible clothing supply chain and manufacturing capabilities, Shein can deliver quality fashion clothing at very affordable prices and high speed. It's experiencing rapid growth in Europe.

Chinese ecommerce platforms and their mature business models are also being replicated in Southeast Asian countries. Sea Limited in Singapore, founded by Forrest Li from Tianjin, China, in 2009, has become the number one internet company in Southeast Asia, worth USD 117.47 billion in 2021. It runs three business divisions: Shopee, Garena, and SeaMoney.

Alibaba is promoting its eWTP (Electronic World Trade Platform) hub in China's Yiwu County, as well as in Belgium, Ethiopia, Rwanda, and Malaysia. Alibaba also has significant ownership stakes in Daraz (used in Pakistan), Lazada (used in Southeast Asia), and Miravia (used in Spain).

Due to its early development and accumulated experience, applying the Chinese ecommerce model may reduce learning costs for the rest of the world and help build an international ecommerce ecosystem. This presents a considerable potential for cooperation.

Cross-Border Ecommerce and Ecommerce-Based Innovation in Sustainable Agriculture and Poverty Alleviation

It is expected that the world market might feel the impacts from China through ecommerce. The rapid development of cross-border ecommerce promotes Chinese products globally, resulting in China earning a trade surplus with almost all its trading partners. Despite the challenges, the high penetration power of ecommerce makes it difficult to avoid these impacts. Of course, ecommerce can also provide opportunities for importing products from other countries.

Ecommerce, especially beneficial for long-tail products, can be used to import sustainable, smaller, and cheaper agricultural machinery or tools. This can help small farmers improve their production efficiency and protect the environment.

Internet-based ecommerce can provide flexible organizational arrangements and cooperation models for Chinese and international ecommerce talents.

Conclusion

In summary, the emergence of e-commerce in China has transformed business practices domestically and globally. The success of Chinese e-commerce platforms like Alibaba and innovative business models can be attributed to pioneering entrepreneurs, a massive market, robust infrastructure, and clustered manufacturing.

Chinese e-commerce innovations are now spreading worldwide through platforms like TikTok and Shein, benefiting developing countries by reducing costs. The mature Chinese e-commerce ecosystem also provides opportunities for international collaboration and investment to build a shared e-commerce infrastructure.

For agriculture and poverty alleviation, e-commerce enables access to markets, technologies, and flexible organizational arrangements. Cross-border e-commerce can promote exports but also facilitate imports of sustainable equipment to aid smallholder farmers. While bringing some challenges, e-commerce penetration can drive inclusive growth.

Overall, China's e-commerce revolution has transformed its economy and is now propagating worldwide. With prudent regulation, e-commerce can be harnessed for innovative solutions to promote sustainable development, reduce inequality, and raise standards of living globally. The lessons from China's e-commerce success can guide international efforts to construct an integrated and inclusive digital economy.