Alibaba chief sees China online retail boom Jack Ma: expects a huge surge within five years Jack Ma, the Chinese e-commerce tycoon, has predicted that almost a third of China's retail will be online in five years, suggesting an unprecedented transformation of consumption in the world's most populous country. "People always ask me what is the difference between ecommerce in the US and ecommerce in China," Mr Ma said at an investor conference held by Credit Suisse in Hong Kong. In the US, ecommerce is just a dessert - it is supplementary. The infrastructure of commerce is already so good. In China, ecommerce is the main course. We are building China's infrastructure," said Mr Ma, who will step down as chief executive of Alibaba Group in May but will stay on as its executive chairman. Online retail sales now account for slightly less than 6 per cent of China's total retail sales, according to McKinsey, the consultants. In the US, ecommerce sales accounted for 5.2 per cent of total retail sales last year, according to the US department of commerce. A much larger role for online commerce could help raise the role of private consumption in the Chinese economy but force foreign companies to adapt their strategies for penetrating this market. Today, Alibaba is 5 per cent of the whole retail market in China . . . I think 30 per cent of all retail in China will be online in five years," said Mr Ma. As founder of Alibaba, the group that dominates China's Rmb1.2tn ($193bn) online retail market, Mr Ma is not an objective observer. Taobao, the group's eBay-like marketplace, accounted for 90 per cent of online trade between consumers by transaction value in 2011. TMall, its online mall, made up 51 per cent of the business-to-consumer segment, according to iResearch, an internet research house in Beijing. But the industry has been growing at an average 120 per cent a year for the past decade and there are indications that online retail websites have triggered new consumption, giving Mr Ma's prediction credibility. Online retail in China "is not just a replacement channel for purchases that would otherwise have taken place offline - it actually spurs incremental consumption," McKinsey says in a new report to be published on Thursday. We estimate that [it] added roughly 2 per cent of incremental value to China's private consumption in 2011, and by 2020 we project that it could potentially generate an incremental increase of 4-7 per cent in private consumption. Richard Dobbs, a director of the McKinsey Global Institute, the consultancy's research arm, said data from 266 Chinese cities suggest that only about 60 per cent of online consumption is replacing sales in brick-and-mortar stores. About 40 per cent represents consumers buying things online that they would not have bought otherwise. The study found that this is particularly true in China's smaller cities, with more than half of online sales there accounting for new consumption. "Traditional retail there is inadequate, and there were many products people didn't previously have access to," said Yougang Chen, an MGI partner and another of the report's authors. In small-town China, new consumption is most evident in apparel, while in the largest cities additional purchases are made for higher-end products such as imported shoes. The McKinsey analysts agreed. "In China, we are unlikely to see a massive rollout of brick-and-mortar retail infrastructure nationwide as we have it in the US," says Mr Dobbs, adding that online retail would be used instead. As a result, McKinsey expects China to overtake the US as the world's largest online retail market by 2015, and grow to $420bn in sales by 2020.