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China's online grocery market to double

News, 28 April 2017
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SINGAPORE: China already has the world's largest online grocery market in terms of value, but a new report expects this to double by 2020 on the back of increased smartphone usage, shifting demographics and more focused investment by retailers.

According to IGD, an international grocery insights group, online currently accounts for 3.1% of China's total grocery market, but this is forecast to leap to 6.6% over the next three years.

That would equate to a compound annual growth rate (CAPR) of 31.8%, leading IGD to predict huge opportunities for global brands willing to enter the Chinese market.

"Set against our forecast CAGR of 5.9% for China's total grocery market over the same timeframe, the size of the opportunity for retailers looking to trade online is clear," said Shirley Zhu, the Singapore-based Asia Programme Director at IGD.

She noted that a growing population of young, middle-class shoppers is "creating an aspirational class of shoppers who want access to grocery products at the click of a button" and who are "increasingly looking to source international goods".

She explained that JD.com and Alibaba's Tmall are two major players in the Chinese online grocery market, although their strength lies in combining online marketplaces with brick-and-mortar stores as well as their efficient distribution networks.

"These platforms are also increasingly delivering cross-border opportunities, both selling international products in China, but also selling globally, enabling lots of international retailers to enter the Chinese market through them. We're also seeing marketplaces like Alibaba and JD investing in bricks and mortar stores," Zhu said.

"Other key online grocery retailers in China include Walmart via JD.com and Sun Art Retail, which sells via multiple platforms," she added.

"There are also lots of other retailers investing in online – for example, Bee Quick, which focuses on fresh products, can deliver to its shoppers within an hour in the 14 cities in which it operates, while Carrefour launched in April 2016 and is extending its service to more cities."

As the majority of people in China access the internet via their smartphone, IGD stressed that getting mobile commerce right is critical for grocery retailers looking to sell online in China.

"Thinking mobile first is vital. Many retailers are rolling out apps offering exclusive discounts and special features, while other apps allow for easy e-payment solutions that allow people to shop online," Zhu said.

"Brands and retailers are also advertising and have shops set up on WeChat, China's biggest social media network. Indeed, as China's online grocery channel continues to grow, we expect to see more partnerships created between retailers and manufacturers."

Data sourced from IGD; additional content by WARC staff

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