Food fight! The next battle for China e-commerce
In this article (5)
A number of e-commerce firms in the mainland are inking deals to import foreign delicacies, reflecting growing consumer worries over a series of domestic food scandals.
JD.com, the mainland’s largest online direct sales company, announced on Monday the launch of a new channel dedicated to selling a range of authentic Australian food products, including milk, meat and fruit, as well as wine from Treasury Wine Estates. Australia is the latest entrant to JD.com’s online ‘country malls’, which already include France, South Korea and Japan.
“Chinese consumers are increasingly enthusiastic about trying, buying and using products from all over the world” said JD.com founder and CEO Richard Liu.
Online supermarket Yihaodian opened a similar exclusive channel for Canadian seafood and meat earlier this month in an agreement with Agriculture and Agri-Food Canada (AAFC). Alibaba, meanwhile, already leads the way in terms of foreign food products. Last week, the e-commerce giant announced it added 11 more countries to its Tmall Global site, a platform dedicated to foreign brands. Food is Tmall’s most popular product category, according to Alibaba.
The transaction volume of imported goods purchased online could reach $245 billion in five years, with more than 200 million Chinese consumers engaging in cross-border shopping, said a recent report from Accenture and AliResearch, Alibaba’s research arm.
The taste for imports comes as no surprise given the country’s ongoing battle with food hygiene. Last week, authorities seized a batch of smuggled frozen meat that was 40 years old. Scandals like these explain why 75 percent of Chinese have no confidence in domestic food safety, a March survey by the China Food and Drug Administration (CFDA) showed.
“Chinese consumers are increasingly enthusiastic about trying, buying and using products from all over the world”
“Food safety issues, an increased focus on health and wellness, and a growing willingness to spend on children have made organic or fresh fruits, meats and vegetables, and baby-related products top spending priorities this year,” Boston Consulting Group (BCG) in a report on Monday.
While JD.com was unable to share top-selling brands, it told CNBC that dairy and wine had traditionally been two of the biggest selling categories of Australian products.
A two-speed market
E-commerce trends are only a partial reflection of Chinese consumption, consulting firm BCG noted.
China has a “two-speed consumer market,” where middle to upper-middle-class and affluent households, known as high-speed consumers, make up the bulk of digital shoppers, it said. Forty percent of these consumers shop online frequently-at least once a week-compared with 20 percent of less affluent households, i.e. the low-speed consumers.
Wealth gaps account for the difference between the groups, BCG explained.
“The average affluent household is expecting nearly 11 percent income growth; the average aspirant household, only 6 percent. This 5 percentage point difference, given the vast disparity in income levels between these two groups of consumers, translates into a 20-fold difference in actual earnings.”
Questions & Answers
Q.Why are Chinese consumers increasingly buying imported food products?
Why are Chinese consumers increasingly buying imported food products?
Growing concerns over domestic food scandals and a desire for health and wellness are driving demand. Reports show 75 percent of Chinese lack confidence in local food safety, influencing their purchasing decisions for foreign goods.
Q.Which foreign products are proving most popular with Chinese online shoppers?
Which foreign products are proving most popular with Chinese online shoppers?
Food is the most popular product category on Alibaba's Tmall Global. For Australian imports on JD.com, dairy products and wine have historically been among the biggest selling categories.
Q.How does income level affect online shopping habits in China?
How does income level affect online shopping habits in China?
Wealthier 'high-speed' consumers, who are middle to upper-middle class, shop online much more frequently. Forty percent shop weekly, compared to 20 percent of less affluent 'low-speed' households.
Q.What is the projected value of online imported goods purchases in China over the next five years?
What is the projected value of online imported goods purchases in China over the next five years?
The transaction volume for imported goods bought online is expected to reach $245 billion within five years. More than 200 million Chinese consumers are anticipated to participate in cross-border shopping.
Reader pulse
Is imported food China's retail future?
23,461 votes so far