food and e-commerce: case china
TRANSCRIPT
F&B going Online –case China
© Finpro
A shift in consumer behavior opens up for a new business model
Industries like consumer electronics, appliances, toys and games, and other household products are already firmly established in the e-commerce space, but food and beverage manufacturers have overall been slower on the uptake.
As more consumers shift to a preference for online shopping, F&B manufacturers need to find ways to adopt e-commerce as part of their sales and marketing strategies.
The trend is global, and F&B companies are developing their strategies accordingly
“We’re experiencing dramatic changes within our industry. This is causing significant shifts in the drivers of our business – consumer, customers and channels – that are redefining the way our customers eat, live and shop. We’re constantly evaluating all aspects of our business and working to capitalize on these shifts to maintain our leadership in the snacking industry over the long term.” Irene Rosenfeld, chairman and chief executive officer, Mondelez International (Feb. 21, 2017, at the Consumer Analyst Group of New York conference in Boca Raton).
In 2015, Mondelez announced a growth plan that set an aggressive e-commerce goal: $1 billion in revenues by 2020.
Resources
• Mondelez hired a VP-global head of e-commerce, removing the segment from the marketing department and creating its own division, proving the company’s attempt at better integrating e-commerce into its broader corporate strategy and growth objectives. Mondelez has also spent the last 2 years growing its e-commerce team.
Partnerships
• in 2016, Mondelez partnered with Alibaba Group, China's e-commerce leader, and opened a flagship Alibaba’s B2C marketplace Tmall to sell its products.
Own efforts:
• In 2015, it added "buy now" buttons to shoppable online ads, making it easier for consumers to feed their craving while browsing online.
• For 2 consecutive years, Mondelez has hosted a consumer-facing December gifting site that allows special products and personalization.
Results:
• Net revenues in e-commerce grew more than 35% in 2016.
The e-commerce business model is here to stay –Asia (China) is leading the development
• Online retail sales is growing globally, China is leading the development.
• Worldwide Retail Ecommerce Sales was expected to reach $1.915 Trillion in 2016. Double-digit growth will continue through 2020, when sales will top $4 trillion.
• China remains the world’s largest retail ecommerce market, with sales representing almost half (47.0%) of digital retail sales worldwide (eMarketer).
• Spending via mobile is booming and accounted for 55.5% of all ecommerce sales in 2016, and is expected to reach 68% by 2020 (eMarketer).
• Expanding middle classes, greater mobile and internet penetration, growing competition of ecommerce players and improving logistics and infrastructure are the key growth factors.
China –growing demand for safe, imported food
• 40% of Chinese consumers buy food online, in contrast to just 10% of the US consumers (McKinsey).
• The food currently offered online is dominated by dry packaged or canned food.
• The product categories of imported fruit and other types of fresh food are among the fastest growing categories in urban areas.
• Chinese consumers are looking for quality & safe imported food products. The demand for health food and supplements is also growing.
• Domestic food scandals and concern for food safety are some of the key drivers of the demand.
What are Chinese consumers buying online? Frequency and percentage purchased by Chinese online consumers
Where are they buying it from? Two marketplace players control 80% of the B2C market (domestic as well as cross-border)
Marketplace store VS individual brand store
Marketplace store (Alibaba’s Tmall/Tmall Global, JD’s JD.com)
• 90% of all sales
• 50% of the brand’s SKUs (mainly bestsellers)
• Heavy marketing
• Needs a perfect quality of service (chat function, etc)
• Sales are public
• Volume driven
• Enclosed world –the marketplace owns the customers and the data
• Vague search results on Baidu
Brand store (.cn store)
• 10% of all sales (some brands have less than 1% sale on their own website)
• Full assortment of SKUs
• Branding/History/Values/E-magazine
• Shop locator/OmniChannel
• Loyalty/eCRM
Who’s buying? And why?
• According to Nielsen research, the typical online buyer of imported products in China is female, younger than 30 and with an income of more than RMB 11,000 (approx €1500) per month.
Frequently cited reasons for shopping online include:
• Accessibility.
• Convenience.
• Price/discounts.
• Greater assortment.
• Detailed product information & customer reviews.
• Confidence: consumers place higher levels of trust in the authenticity of purchases made on major B2C platforms such as Tmall, JD.com and Yihaodian.
How to sell your products online?
Market access models
E-commerce model
Domestic (local
presence in market)
Cross-border
Marketplace (flagship/distributor/
third party/ online supermarket
Direct sales
Marketplace flagship/distributor/ third party/ online
supermarket
Direct sales
From home country to consumer
From bonded FTZ warehouse
How to get started?
• Are my products suitable for e-commerce?
• Is there a demand for my products in China?
• Consider domestic VS cross-border?
• Consider business model: flagship? Third party? Distributor? Sell directly?
• There are no quick fixes! Developing the e-commerce channel requires time and investments.
• Branding, marketing, story-telling –key for commercial success.
Thank You!
Jonna Wibelius, Senior Market Specialist (e-com, China, USA)
+358504681764, [email protected]
Esa Wrang, Head of Industry, Director
+ 358 400 243 076, [email protected]
Annaleena Soult, Program Manager
+ 358 40 343 3447, [email protected]
Tiina Luoma, Senior Program Coordinator+ 358 50 464 3385, [email protected]