U.S. set to lose its position as world’s biggest retail market

China’s economy may be slowing, but it is on track to overtake the United States and become the world’s top retail market this year.

The latest forecast by eMarketer predicts that retail sales in China will increase 7.5% to $5.636 trillion in 2019. That’s approximately $100 billion more than the United States, where retail sales are expected to grow 3.3% to $5.529 trillion.

And while growth rates are slowing for both countries, China’s growth rate will exceed that of the United States through 2022. By 2022, total retail sales in China are expected to hit $6.757 trillion, while U.S. total retail sales will reach $6.030 trillion.

"In recent years, consumers in China have experienced rising incomes, catapulting millions into the new middle class," said Monica Peart, senior forecasting director at eMarketer. "The result has been a marked rise in purchasing power and average spending per person."

A major driver of China’s retail economy is e-commerce. Online retail sales in China will increase 30.3% to $1.989 trillion in 2019, accounting for 35.3% of the country’s total retail sales, which is the highest percentage in the world, according to Marketer. The United States lags far behind, with e-commerce on track to represent 10.9% of total retail sales this year.

By the end of 2019, China will account for a whopping 55.8% of all online retail sales globally, with the metric expected to exceed 63% by 2022. The United States is expected to account for 17% of all global online sales, followed by the U.K. at 3.8%, Japan at 3.2% and South Korea at 2.4%.

Emarketer noted that Alibaba will lead e-commerce sales in China with a 53.3% share. But its share has been steadily declining for the past several years as smaller players chip away at the e-commerce giant’s dominance. In particular, social commerce platform Pinduoduo has seen triple-digit growth since 2016, although its share remains small, according to eMarketer.

“Relative newcomers and multichannel retailers continue to take share from giants Alibaba and,” Peart said. “The mature players set their sights on further international expansion. Smaller local players are finding their niche in the Chinese e-commerce market by integrating WeChat and using online-to-offline data to better target consumers.”