In the past eleven months, China's retail sales have seen a year-on-year growth rate of 3.5%. Remarkably, around 50% of this growth has been attributed to online sales of physical goods, which increased by 6.8%. This suggests a significant shift in consumer behavior towards online shopping, a trend that has been increasingly prevalent in the last few yearsFactors such as convenience, variety, and competitive pricing have made online platforms a preferred choice for many consumers in China.

Looking ahead to 2025, projections anticipate that online sales of consumer goods (excluding services) in China will surge by over 5%, representing 28.8% of total social retail sales

This unprecedented figure will mark a historic high, reflecting the deepening penetration of e-commerce into the Chinese retail landscapeThe rapid growth of platforms like Alibaba, Pinduoduo, and JD.com underlines this trend, as they continue to innovate and enhance user experience to capture larger market shares.

Within the upcoming 12 months, major e-commerce players and social commerce platforms such as Douyin and Kuaishou are set to intensify their efforts in providing competitive pricing and expedited delivery servicesThese developments reflect a fierce market competition that is expected to elevate online penetration rates significantlyBy the period from January to November 2025, it is projected that the competition for market share in e-commerce will account for 50% of the growth in retail sales (excluding automobiles) in China

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During major shopping events like the Spring Festival, e-commerce channels may also contribute substantially to retail sales increases, perhaps even accounting for half of the growth.

With the continuous rise in demand for services in the Chinese market, companies such as Meituan, Alibaba, Didi, and Douyin are poised to benefit from burgeoning revenuesBetween 2019 and 2023, average annual expenditure in this sector grew by 3.4%, a stark contrast to the mere 0.5% growth in offline sales (excluding automobiles). This shift indicates a significant structural transformation in consumer spending, moving away from tangible goods and leaning towards servicesAdjusting for online service expenditures, the year-on-year growth in retail sales for the first eleven months could reach 3.8%.

Several trends are likely to emerge as we approach the new year:

Luxury brands are currently positioned most favorably within the market

Major luxury companies may maintain their expectations of low single-digit market growth for 2025, consistent with the return to normality in industry forecasts since MayHowever, the slower recovery in the Chinese market, sluggish travel retail performance, and limited demand may lead to challenges in the first half of the year, delaying expectations for a rebound until the latter halfThis presents a heightened level of uncertainty, yet the demand for high-quality products from top luxury brands such as Hermès, Cartier, and Brunello Cucinelli remains robustIn the accessible luxury segment, brands under Capri (Michael Kors), Burberry, and Kering (Gucci) will need to invest more time and resources to elevate their market profiles.

Increased consumer emphasis on health may invigorate sales in the activewear sector

China's investments in improving sports infrastructure are expected to boost participation in athletic activitiesCoupled with heightened health awareness among consumers, sales of sports apparel may experience significant growth in 2025. This surge is likely to benefit brands like Nike, Adidas, Anta, and Li Ning, encouraging them to enhance their product offerings in the Chinese market.

Retailers may also introduce exclusive online products in China to stimulate consumer spending as the year draws to a closeMajor distributors of Adidas and Nike indicated that despite a decline in foot traffic in physical stores from September to November, their online sales experienced double-digit growth year-on-yearThe introduction of exclusive online products could assist in regaining market share within the domestic market

Should foot traffic to physical stores continue to wane heading into 2025, activewear retailers may focus more heavily on online sales to bolster overall revenue.

Social media is expected to play a significant role in boosting cosmetics salesCompanies such as L'Oréal, Estée Lauder, and Shiseido are likely to shift a larger portion of their advertising budgets towards Chinese online communities and social platforms, including WeChat, Douyin, Kuaishou, Bilibili, and WeiboThe reliance on product information and reviews from these channels remains strong among consumers, with 97% of Chinese internet users reportedly engaged in video streaming platforms as of JuneThis shift is anticipated to enhance cosmetics sales both online and offline in retail settings by 2025.

During the month-long "Double Eleven" promotional event, effective online advertising has significantly bolstered the sales of both global and local beauty brands