It’s been almost a month since China plunged into its biggest public health crisis in almost two decades. The panic seems to have slightly died down as people got used to the current state of affairs. Working from home, cooking instead of ordering takeout and wearing a mask when going out have become the new normal. Instead of worrying about the drawbacks of the current situation, many entrepreneurial Chinese are trying to figure out how their country could benefit from this challenge.
One example, in particular, has become extremely popular on the Chinese internet, prompting very diverse reactions. Comparing the current crisis to the SARS outbreak of 2003, some people argue that similar to how SARS boosted China’s e-commerce industry, the COVID-19 outbreak could also propel new innovations. But here is the question, did SARS really give that much of a boost to China’s e-commerce giants and is it correct to attribute the success of an entire industry to one temporary misfortune?
First, let’s make it clear, 2003 was not the year that e-commerce became a thing, even in China. eBay had already been going strong, and Alibaba’s B2B platform was founded in 1999. However, it was in May 2003 that Alibaba created Taobao, the B2C version of their e-commerce platform that has become the core of their business in China. A year later, Richard Liu, owner of a chain of computer stores who almost went bankrupt because of the SARS outbreak, created jdlaser.com, the precursor of the JD.com.
By matching the years people often tend to exaggerate the impact that SARS had on China’s e-commerce boom. In fact, the epidemic officially ended in July 2003, which is when the World Health Organization declassified mainland China as an epidemic area. Taobao was registered as a commercial enterprise only two months before that, which is too short for users to grow dependent on the platform.
With JD it’s even more evident. Until 2004 Richard Liu was selling camcorders from his physical stores, while occasionally taking orders through QQ and college forums. He did admit though that during the SARS epidemic, as his business plummeted, he began to seriously consider doing e-commerce. Thus, it is fair to say that SARS inspired the birth of JD. However, mark the word “inspired”.
Duncan Clark, author of “Alibaba: The House that Jack Ma Built” shared during one of the discussions of his book that SARS struck at a time when many Chinese started getting access to high-speed connectivity at home. “This is just when people began to be offered broadband connections, and people began to experience what they could do when they were stuck at home,” said Clark, noting that this was not when e-commerce came into its own, but “this was the genesis.”
Clark makes a very important point highlighting that SARS was not the reason behind the e-commerce boom in China, it was merely an inspiration. The real engine behind the rise of e-commerce was the increased proliferation of smartphones, mobile internet and online payments, all of which arrived long after SARS was over.
For one, the rise of Taobao relied largely on Alipay, an online payment platform officially established by Alibaba in 2004, with the first transaction completed in October 2003. However, the platform only made serious waves in 2008, when Alibaba rolled out its mobile e-wallet. A year earlier Apple released the iPhone, starting a revolution in the mobile phone industry. To make it clearer, in the five years between 2003 and 2008 Alipay registered roughly 100 million customers, but only in the first two months of 2009 the platform managed to add 20 million new users. Today, Alipay has 785 million monthly active users.
The big moment for JD came in 2013, after Tencent introduced WeChat pay, essentially a next step from their in-game payment platform Tenpay. Besides, it was in 2013 that JD actually became JD abandoning the 360buy.com domain that it started using in 2007. A year later, in 2014, Tencent bought a 15% stake in the e-commerce company, prompting the integration between the two companies’ products. JD got access to WeChat Pay, and Tencent had a potent Alibaba competitor on its side.
What’s happening with e-commerce and China Tech as a whole now is slightly different. Delivery robots, autonomous drones, AI-powered diagnostics, have all been long on the Chinese agenda. What the COVID-19 outbreak did was not inspire, but provide a suitable environment for testing and a valid use case for the technologies in question proving their importance. Meituan did not build their autonomous delivery vehicles from scratch in two weeks, nor did data scientists make any notable methodological breakthroughs. However, both of them got a chance to test technologies that would otherwise require years of in-house small-scale testing.
A simple Google search reveals that first articles characterizing China’s e-commerce industry as “booming” started appearing online around 2015, which was arguably the year that WeChat Pay and Alipay became truly ubiquitous in the country. Bain predicted the potential of China’s e-commerce segment to grow earlier, in 2012, a whole decade after the SARS outbreak, in their report “China E-commerce: Heading Toward RMB 1.5 Trillion.” Therefore, while it is not completely wrong to say that SARS played a role in kick-starting China’s romance with e-commerce, saying that the lingering fears of contracting the disease were behind the rise of the industry is a vast overstatement that is to be taken with a grain of salt similar to heaps of futuristic speculations surrounding the current COVID-19 outbreak.