Higher number of Internet users likely to propel fast expansion, report predicts

China is likely to surpass the United States as the world's biggest online retail market around 2015, as the nation's online retail sales will triple to more than $360 billion that year, according to a report from the Boston Consulting Group.

The growing number of Internet users, combined with an increasing consumer acceptance of e-commerce, is driving the online sales surge, the report said.

China is forecast to have 700 million Internet users in 2015, nearly 200 million more than now, and twice the online population of Japan and the US combined.

The Internet has fast become a mass medium in China. Over the past few years, people in rural areas have got access to the Internet. The Internet "was going down to smaller cities, villages and counties in China", said Christoph Nettesheim, a BCG senior partner and co-author of the report.

China's overall Internet penetration rate will exceed 50 percent by 2015, compared with 38 percent in 2011.

The country already has more online shoppers (193 million) than any other market, including the US (170 million).

Between 2009 and 2011, the share of Internet users who shop online rose from 28 percent to 36 percent. The share of online shoppers will likely reach 47 percent by 2015. Close to 10 percent of retail sales will occur online, the report said.

The Internet is becoming a central part of life, said Nettesheim. The average online time per user increased from 2.8 hours to 3.6 hours a day between 2008 and 2011.

Chinese users spend about an hour a day more on the Internet than those in the US.

"In just a few years, China has become the largest Internet market in the world. It will shortly be the most significant, too," he added.

Zhou Yuan, senior managing director of BCG, said Chinese Internet users are willing to spend more money online, and therefore, the e-commerce business will maintain its growth momentum in the coming years.

Business-to-consumer revenues are expected to grow twice as fast as consumer-to-consumer revenues between 2011 and 2015, due to increasing demand for higher-quality goods and after-sales support.

"The rapid growth represents a once-in-a-lifetime opportunity for companies that figure out how to connect with China's digital generations," said David C. Michael, a BCG senior partner and co-author of the report.

However, most companies have not yet shifted their marketing budgets and orientation to the online world.

The share of overall ad spending devoted to the online channel is expected to rise from an estimated 13 percent in 2011 to 17 percent in 2015 - far less than the 64 percent of media time that users now devote to the Internet.