China cashing in on online retail boom

0 comments

BEIJING- Chinese consumers are responding to a powerful new marketing tactic that plays to a widespread fear of food contamination - the promise of safe groceries sold online.

Pledging produce direct from the farm, vendors have found food is becoming one of the fastest-growing segments of Internet retailing as they cash in on scares from cadmium-tainted rice to recycled cooking oil.

The trend is adding momentum to a Chinese online retail boom driven by a rapidly expanding middle class, with companies such as COFCO Ltd and Shunfeng Express betting that a decent slice of a 1.3 billion population will pay for the peace of mind they say their services offer.

"I think people are willing to pay a higher premium than in the West. In other markets, like the UK, food e-commerce is about convenience. Here, there's going to be a higher quality and safety premium," said Chen Yougang, a partner at consultancy McKinsey.

But convincing some skeptical Chinese consumers on food quality will remain a battle. Shanghai-based Zhang Lei expressed doubt on the credentials of some products being touted as organic.

"Everyone knows that in China organic is not the real thing," said the mother of one.

Nonetheless, total online sales of fresh produce in China could rocket to 40 billion yuan ($6.5 billion) in five years from about 11.5 billion yuan this year, said Zhou Wen Quan, a senior analyst at Beijing Orient Agribusiness Consulting.

Research firm Euromonitor has more modest expectations, but still sees growth comfortably beating major overseas markets. It looks at volumes rather than values of online purchases of fresh food, with the Chinese market expected to grow by around 8 percent by 2017 from 664 million tonnes this year, compared to U.S. growth of about 5 percent from 77 million tonnes.

So far, most food sold on China's largest online shopping sites such as Yihaodian, majority owned by Wal-Mart, and Jingdong Mall has been packaged items or fruit with a relatively long shelf-life.

But a wave of new businesses are focusing on fresh and premium produce, using the Internet to target higher-income consumers than supermarkets, which typically serve a broader customer base, analysts say.

"The vegetables are really fresh," said Beijing resident Lei Na, who shops on websites such as Womai.com, owned by China's top food processor and trader COFCO.

"Supermarket food doesn't look that fresh, especially if you only get there in the evening."

Shunfeng Express, China's largest delivery company, last year launched Shunfeng First Choice offering a range of food to around 500,000 consumers. About 70 percent are imported products such as wine and milk powder, but it also sells local seafood, meat and vegetables.

"We go directly to the farms to pick the produce, and then using our own logistics, deliver straight to the consumer. So from the tree to the consumer's dining table, we'll remove all the sectors in between," said Yang Jun, director of sales and marketing. - Reuters


Leave Your Comment


Leave Your Comment:

New Straits Times reserves the right not to publish offensive or abusive comments and those of hate speech, harassment, commercial promos and invasion of privacy. Your IP will be logged and may be used to prevent further submission.The views expressed here are that of the members of the public and unless specifically stated are not those of NST.