Fresh food e-commerce in China is forecast to hit a total gross merchandise value (GMV) of CNY 495 billion (USD 72 billion) by the end of 2021, as cool chains improve and hybrid online/offline models expand.
The perishable side of online shopping is taking off at a staggering pace in China with annual growth rates of over 40 per cent for the last five years. According to a new report by China-based iResearch Consulting Group, 2018 saw fresh food e-commerce rise 41.2 per cent year-on-year to reach CNY 184.8 billion.
A total of 50 per cent of Chinese consumers bought products online weekly, compared to the global average of 22 per cent, according to PwC’s Global Consumer Insights Survey 2018, which highlighted that 59 per cent of them were likely to buy groceries online.
Data from iResearch Consulting Group from 2018 shows that of Chinese consumers who buy fresh food online, 63.8 per cent purchased once a week, while 28.6 per cent purchased two to three times a week.
The research company notes that during 2016 and 2017, the fresh food e-commerce market underwent restructuring and consolidation in China, with many middle- and small-sized companies shuttering their business or being acquired.
The entrance of e-commerce giants, Alibaba and JD.com, into the fresh food market over recent years along with their continued investment in perishables logistics supply chains and other related infrastructure has not only furthered the market growth, but also spawned the “great new retail mode integrating online and offline business,” iResearch says.
JD.com has been offering fresh food online since 2012, and in 2016 launched its JD Fresh as an independent fresh food business unit. JD.com also employs blockchain to help ensure the safety of its fresh food products.
Fruit – followed by milk and dairy products, vegetables, meat and poultry, and seafood – is the most popular category among online grocery shoppers accounting for USD 8.4 billion in 2018, up 35 per cent from a year earlier, according to Chinese research firm AskCI Consulting.
Imports from Southeast Asia are particularly brisk, as the region is regarded as a convenient source of high-quality produce. Malaysia recently struck a deal with Chinese authorities allowing whole frozen durian fruit (as compared to pulp or paste) to be shipped into China.
An expected 1,000 tonnes of whole frozen durians from Malaysia are expected to enter the Chinese market each month, worth an estimated MYR 500 million (USD 120 million). Thailand is also a big exporter of the pungent fruit.
Fresh food is regarded as difficult to sell online due to its short shelf life and the way around that is to integrate brick and mortar with the e-commerce aspect. JD.com, for instance, sells fresh produce and other perishables offline at its directly-run 7Fresh supermarkets. JD.com, China’s second biggest e-commerce platform has also been building a cold chain spanning nearly 300 cities across China. It has also secured access to more supermarkets that can store fresh food.
Alibaba was earlier into this segment, having made several investments in recent years, including purchasing shopping mall group Intime, an 18 per cent stake in Lianhua Supermarkets, and a 36 per cent stake in Sun Art Retail, which owns 446 hypermarkets and many smaller stores. All in all, Alibaba has spent USD 10 billion on traditional retailers since 2016. The e-commerce giant also opened its own brick and mortar online/offline supermarket chain, Hema, in January 2016 and as of end-2018 there were over 100 scattered across China.
JD.com and Alibaba dominate China’s online market, together accounting for about an 80 per cent share. But as growth slows in this ‘traditional’ e-commerce space, the two see fresh food as an opportunity to expand their scope.
In 2018 the top five players in the fresh food e-commerce market account for 37.6 per cent of the total market, up 12.5 per cent compared with the previous year, iResearch says.
IResearch says 2019, has seen a settling down of the fresh food e-commerce market in China with growth settling down and more strategic adjustment taking place now. But it adds that
“modes such as forward storehouse and community purchasing are booming.”
“The fresh food e-commerce market is expected to develop fast in the future as the business model become more mature and fresh food e-commerce covers more shoppers.” It adds that growth will also be spurred as technology becomes more advanced and cool chains become more sophisticated. And of course rising incomes are a key driving force.