It’s no secret that online shopping is booming in China. But did you know that online grocery shopping is growing in popularity too? In a recent report, it was revealed that the share of online grocery shoppers in China has more than doubled over the past four years. This just goes to show that more and more Chinese consumers are trusting online retailers when it comes to buying their groceries. So what are the reasons behind this surging trend and how you as food brands/producers can take advantage of it? Let’s take a look.
China: the world’s biggest online grocery market.
In 2018, China’s online groceries (foods, beverages, personal care, household care, and pet care) accounted for 32.5%of all grocery expenditures, up from 1.4% in 2010. Between 2014 and 2018, online grocery revenues increased at an average rate of 35.1% per year in China, whereas the annual growth rate of brick-and-mortar grocery varied between 5.7% and 3.7%.
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In 2019, the market value reached around USD 65.5 billion. Online grocery sales in China are expected to reach $219 billion by 2026.
The leaders of the industry with no surprise Chinese online marketplace with 3 of them (Alibaba/ JD & Pinduoduo) making 75% of the market revenue in 2020
The Chinese grocery industry “modern trade” is projected to grow at an annual rate of 8%. Online and convenience stores will drive much-needed innovation in this traditional market, while offline retail plays a vital role for rural areas as well as many smaller cities.
Indeed, The demand for convenience and efficiency continues to drive technology development, which changes how people shop as well as what formats stores are in. Retailers have focused on community-style supermarkets or premium groceries such that they can offer their customers more options than ever before
Several factors boost online sales revenue in China.
There are 5 principal reasons for the increasing demand:
- Higher penetration of the internet and smartphones
- Increasing affluence and emerging middle-class
- The rising population of the young generation
- Less shopping time (social competition and job pressure)
- E-commerce facilities (home delivery service)
The fast-paced lifestyle, booming economy, and high food safety lead to a growing interest in packaged foods. Internet use is on the rise across China which has led many people to online grocery shopping as well! There’s also growth coming from demographics – there are more younger generations joining our society every day that will fuel this market even further with their spending power when they become adults
- Demand: From Alaskan Crab to Italian cheese, the demand for authentic and exotic products has grown in the Chinese market. The meat, seafood, dairy, fruits, and vegetables from the US are being sold widely in the Chinese market.
Mid-budget shoppers are increasingly interested in experimenting with these products. Foreign cuisines, thanks to media for promotion, have been a major influence in the Chinese food industry which is resulting in a booming demand for such supplies.
- Supply: These business opportunity has been successfully utilized by the e-commerce portals like Alibaba and JD.com. These two websites have been leading providers of digital gadgets, apparel, and everyday products. But they have introduced a fresh food section to meet the growing demand for foreign products.
- Covid 19 and Innovation: When the Chinese economy was hit by Covid-19, it quickly became clear that brick and-mortar stores could no longer keep up. Online channels took over as people looked for ways to survive without going hungry or being unable to find medicine when their lives were threatened by this coronavirus outbreak in particular which caused a flashpoint between traditional retail outlets versus e-commerce companies like Amazon Prime Now who offered delivery services at affordable prices during those difficult days following news reports detailing how everyone had become sick from one thing – lack of food!
Selling foreign brands on Chinese online grocery distribution platforms
One of the major challenges that have been taken care of is collaborating with wholesalers from overseas. Alibaba has launched an edible section on the Tmall website which directly allows producers from Australia and New Zealand to sell products to Chinese customers.
While for some tier cities where it is impossible to purchase exotic groceries, e-commerce platforms are channels for those people who live far away from big cities like Shanghai and Beijing to have access to imported trendy products.
Several renowned foreign brands like Quaker cereals and ocean spray juices have tied up with JD and Alibaba and are now directly selling commodities to Chinese consumers via these two websites.
Cost optimization by online grocery channels
Cost: Believe it or not, the price of most of these fresh foreign products is much cheaper than those available in the supermarket. Several exotic products like Kiwi fruit, Mexican avocados, mackerel, live lobster, and other imported food items are available for a cheaper price.
One of the most used online food portals is Alibaba’s Taobao. This is because Alibaba and other e-commerce websites are directly working with the wholesalers and as a result, are able to make ingredients available at a cheaper price.
Foreign brands are perceived as more reliable in China
In China, consumers prefer imported dairy, baby & mother groceries as they are perceived as reliable and premium. And for the young generation, foreign snacks are very fashionable and have different and better tastes.
Health Hazards: When it comes to food safety and health-related issues, Chinese products rank at the bottom. Lack of awareness, safe food processing, and negligence has made Chinese food very unsafe for consumption. Food corporations like Shuanghui International, one of China’s leading meat supplier, has been reported for the presence of maggots, harmful bacteria, and illegal additives in their meat. Yet, they continue to conduct their business.
The availability of fresh imported food has been a blessing in the Chinese market. The knowledgeable people on the mainland rely on these products rather than local products. Food poisoning and cancer have plagued the Chinese population, and as a last resort, people head toward foreign products even, at times, at a higher price. (more information on Food scandals)
Benefits of online grocery selling
Instead of setting up a store, it is always beneficial to sell the commodities online. Not only does it reduce the establishment charge, but also excludes the complicated government policies which can lead to a hassle.
Tiresome legal proceedings often prevent foreign traders to set up a store in China. Moreover, the option to buy online and fast delivery services are also making online grocery purchases more popular amongst the masses. Advertising can cost a lot in China… that’s sure!
A major section of the Chinese population is well-off and prefers premium groceries over unhealthy local products. Apart from JD and Alibaba, other grocery companies like Walmart have also launched their own food e-commerce portal. Hema offers express delivery options.
So, the grocery and food products are made available in less than 24 hours to the buyers. The flexibility, availability, and hygiene of groceries and produce are the primary reasons behind the rampant growth of food in e-commerce in China.
Chinese online grocery platforms are a great opportunity for foreign brands, especially for those companies who are not yet present in China, because they don’t have to have a physical presence in China to sell their products.
However, it is easy said than done. If you need any help, you can contact us, we will guide you hand in hand until your brand’s success. Gentlemen Marketing Agency, an expert in Chinese marketing.
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