E-commerce is exploding in China, taking the wine market with it. In just a few years, we have seen the birthplace of sites that manage to distribute hundreds of thousands of bottles a month throughout China.
On Taobao (B to C online sales platforms), Tmall e-shops have recently entered this business, and have managed to attract a large clientele.
I) Significant competition in e-commerce
China’s e-commerce industry is an extremely competitive environment, even excluding major Western counterparts to a large extent.
Dominated mainly by local companies like Alibaba, JD, YHD… Jiuxian and Yesmywine, they gradually become wine professionals.
Competition between e-commerce players largely reflects the ecosystem of the Chinese IT industry, as e-commerce depends largely on technological support and traffic control.
BAT is short for Baidu, Alibaba and Tencent, three of China’s most successful and powerful IT companies.
Among them, Baidu offers a local search service; Alibaba manages platforms and Tencent supports much of social communication. This partly explains the competitive landscape between Alibaba (Taobao and Tmall) and Tencent (WeChat) in particular.
It is anticipated that Baidu will also join this competition directly or indirectly. Indeed, it is natural for the company to take full advantage of its high penetration rate among Chinese netizens.
Today, competition has gone from attracting consumers sensitive to prices to the diversity of customer needs. Furious competition now mainly targets top-tier cities in the eastern region, leaving the west to explore.
For wine e-commerce, suppliers may be wine producers, importers or other types of distributors. China is now the fifth-largest wine market in the world and the potential is still huge, so it is a natural target for all suppliers.
A) Supplier influence
Suppliers directly affect the market by, for example, increasing the price of their products or producing less, which affects e-commerce revenues and profits.
The bargaining power of suppliers is really weak because there are too few platforms with traffic; brands and producers hope to enter a new low-cost market.
B) Disadvantage for suppliers
Not all producers are in e-commerce. Indeed, the main concern is the authenticity of the product online.
Especially for iconic high-end wines. Suppliers who want to cover a wider area and sell in large quantities are the only ones present in e-commerce.
The number of wine consumers in China continues to grow as a new and growing middle-class increases. However, consumption patterns vary by population and city.
A) Current consumption patterns
China is a country that imports mainly red wine from France and Australia, while these countries establish a respected brand image. Consumption habits in 1st level cities and 3rd/4th level cities are very different.
For those who live in the cities of the 1st level, wine is part of education.
In 3rd/4th tier cities, the purchasing decision is largely influenced by suggestions from peers and KOLs (influencers). Depending on these two models, the bargaining power of consumers varies.
B) The emerging middle class
The emerging middle class is growing rapidly. Interest in wine is growing and purchasing power is increasing.
Today, 300 million middle-class citizens in China with the very distinct habit and preference of drinking wine, form an overwhelming bargaining power.
The Chinese seem to be big E consumers. They associate the internet with a sales space where prices become cheaper.
For now, online wine sales experiences are multiplying and offer a great choice to E wine consumers.
Yet not all online sellers will have the same success. The winners will be those who will know enough to differentiate themselves: aggressive prices, wine selections, sales concept, use of social networks…
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