Understanding Alibaba’s potential means understanding China. Access to the Internet, rising incomes and a highly fragmented retail industry have made e‑commerce a way of life for China’s aspirational middle class. And for them, e‑commerce is synonymous with Alibaba.

See how e‑commerce is changing the way people live in today’s China.

In 2013 China surpassed the U.S. as the largest e‑commerce market in the world.

2011

$198b
$130b

2012

$227b
$217b

2013

$264b
$318b

2014

$306b
$473b

2015e

$349b
$672b

Source: eMarketer, July 2015.

Here’s why.

China’s population is four times larger than the U.S. population.

The size of China’s Internet population is already double the size of the entire U.S. population. Yet, only half the country is online.

The most popular way to access the Internet in China is through a mobile device. Rural populations are getting online by leapfrogging PC use altogether.

CHINA TOTAL POPULATION 1.36b
INTERNET
USERS 649m
MOBILE
USERS 557m
U.S. TOTAL POPULATION 319m

Source: World Bank, populations as of 2014.

Source: CNNIC, China Internet users as of Dec 2014.

Source: CNNIC, China mobile users as of Dec 2014.

Incomes are rising, which means Chinese consumers have more disposable income than ever before.

2010

2.9%
10.1%

2011

1.7%
9.0%

2012

1.1%
7.2%

2013

1.2%
7.2%

2014

1.3%
6.8%

Source: World Bank.

China’s consumer class is large and growing.

319m
U.S. POPULATION
2014

2005

157m

2013

483m
14m

2015e

523m
22m

2022e

632m
58m

2030e

610m
219m

Source: McKinsey Global Institute. McKinsey Insights China. Middle class is defined as those in a household with an annual income between the average income of Brazil (45K RMB) and Italy (171K RMB) based on the World Bank methodology. Affluence is defined as those in a household with an annual income of 171K RMB (2005 real term) and above.

People save more in China compared with people in the rest of the world.

49.9%

2013

CHINA

22.8%

2013

WORLD

Source: World Bank.

Retail infrastructure in China is underdeveloped, so consumers in China don’t have the same spending opportunities as consumers in the U.S.

CHINA

4x More retail space per capita in the U.S.

UNITED STATES

Source: Euromonitor International, 2013.

For all these reasons, e‑commerce has taken off and there are 361 million online shoppers in China.

361m CHINA 198m UNITED STATES ONLINE SHOPPERS

Source: CNNIC, number of Internet shoppers as of Dec 2014. eMarketer, number of Internet shoppers in 2014.

Shoppers are seeking high-quality international products, and global brands are seizing that opportunity. By 2020, China is expected to be the world’s largest e‑commerce market for imported products.

2014

$21b

2020e

$245b

Source: Accenture/AliResearch.

And more of what people buy will be bought online.

2014

6.5%
12.4%

2015e

7.2%
15.9%

2016e

7.8%
19.6%

2017e

8.5%
23.8%

2018e

9.1%
28.6%

2019e

9.8%
33.6%

Source: eMarketer, July 2015.

By 2017, China’s e‑commerce market is expected to exceed USD $1 trillion.

2014

$306b
$473b

2015e

$349b
$672b

2016e

$394b
$911b

2017e

$443b
$1.208t

2018e

$494b
$1.568t

2019e

$548b
$1.973t

Source: eMarketer, July 2015

Alibaba is poised to capture this growth opportunity for years to come.

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