Venture capitalists in China are betting big on e-commerce. The sales at the virtual stores have been rising at the rate of 60% for the past several years. The potential is still enormous as it has a long way to go before it catches up with the level of penetration in the US. And that’s why a large amount of investment is being pumped into online purveyors of high-end merchandise, cosmetics and lingerie whose demand keeps growing with the increasing disposable income of the Chinese households.
Kleiner Perkins Caufield & Byers China has decided to invest $20 million in the high end online store Xiu.com which is operated from Shenzhen. Sequoia Capital reportedly invested $10 million in the group-buying cosmetics seller, Jumei.com. Moonbasa, another online retailer of clothing and lingerie is also reported to have raised $25 million from investors including GSR Ventures and DT Capital. If you go through the data McKinsey & Co.’s Shanghai-based partner, Yuval Atsmon has collected you will realize why the investors are so confident about the future of the online channels in China.
It is the tier II and tier III cities that are leading the growth of the online sales in China. They generally don’t have access to the kind of range and selection in their physical stores as is available online. And more importantly people are getting more confident shopping online. As per the study conducted by Yuval Atsmon the households earning between $15,000 to $30,000 annually has grown to 10 million. The way the economy is growing in China, this figure is expected to reach 76 million by 2015. This is the upper middle class of the Chinese society who would form about 25% of the entire population. It is this segment of the population the online retailers are targeting to keep their cash registers ringing.