This week’s Voices on the Ground features Jason Gao, Market Leader for Advantage China, providing his perspective on how the pandemic is developing and impacting the Chinese grocery industry.
Q1 - Given that China was impacted earlier than other markets by COVID-19, retailers in other markets have been monitoring China for an early indicator of the changes in shopping behaviour that could be expected. What would you highlight as three main lessons that retailers abroad can take from what has happened in China so far?
From January to April 2020, China’s consumption fell by 16% year-on- year. In the context of this, China’s business has undergone tremendou s change – practically everyone stay ed at home , and consumers were barely visible in crowded streets, shopping malls , and gourmet food stores.
As one of the first countries to discover COVID-19, Chinese business es w ere also the first to be impacted, and unprecedented changes have taken place in consumers’ s hopping behavio u r s . M any enterprises realized that they ha d opportunities to adapt, and this brought great inspiration to innovate. Accelerating online customer acquisition, experiential learning, and working in hybrid environments became critical for businesses during the initial crisis period . These three “Chinese experiences” will also have a profound impact on businesses outside of China in the future. If we ad apt to these trends as soon as possible, we will be able to find new growth for Chinese enterprises and foster long-term sustainable development.
Q2 - The penetration rate of fresh produce e-commerce in China has lagged that of non-food categories (ex. clothing and electronics). What are some of the challenges associated with the distribution and delivery of fresh produce, and how are these being overcome as fresh food delivery apps enter the picture?
2019 can be labelled as the first year of development for the online fresh market. At the beginning of the year Meituan Dianping , an online shopping platform, launched its own fresh business, which began to attract a large amount of investor attention. In March, Hema , Alibaba’s offline retail store, announced four new e – commerce models . Alibaba also formed a cooperati ve partnership with Ding Dong Maicai, a grocery delivery service expanding its operation to more than 100 cities.
Online fresh is one of the strongest trend s in e – commerce, but because consumers have not developed a habit of buying fresh food online, a long with enterprise constraints in warehousing, logistics and cold-delivery technology, t he development of online fresh food still has opportunities for improvement . F resh foods are a basic demand for people’s live lihood , and many industry experts believe that if online-fresh wants to overcome current difficulties, then it is necessary to improve the core competitiveness of e – commerce . This i nclud es giving consumers a better-refined experience and creating an efficient delivery model . Secondly, through systematic and digital warehousing management and innovative warehousin g , profitability can be optimized.
Over the past year, new e – commerce companies continue to innovate new business models. After several rounds of innovation, online fresh has made considerable progress and the development of the online fresh model is becoming more mature. O nline fresh has become a major feature of the Chinese market but reducing cost s across the supply chain is still the top priority.
Q3 - The Chinese consumer, versus consumers in other markets, has historically looked quite favourably on foreign brands. Do you see a shift towards a preference for local brands because of COVID-19?
With the outbreak of COVID-19 across the world, many enterprises’ export orders were se vere ly affected. In the face of this, many governments created measures to help busines s es stabilize foreign trade and strengthen commercial confidence. But w hile grasping policy dividend s , enterprises are also acti vely reinventing themselves. In other words, while loc al enterprises are stabilizing the ir business outside of China , they are also making full use of the ir e – commerce platform s and regimes , actively carry ing out their own digital transformation s t o shift most of their trading from export s to domestic s elling .
In the first half of the year, many enterprises signed strategic cooperation agreements with e – commerce platforms such as Pinduoduo and Taobao to help expand orders, stabilize production capacity, and promote export-oriented production capacity to wards domestic demand. A s a result, many high-quality products for export that are well known to consumers are brought to the domestic market through e – commerce platforms . This promotes purchase upgrades and enables consumers to buy high – quality goods at low prices. It can be said that during the epidemic period, the state – owned brands’ emphasis on domestic sales rose unprecedentedly. Coupled with strong support from the government and a positive , cooperative relationship with e – commerce platforms, Chinese consumers’ preference for d omestic products will only grow in the future.
Q4 - Chinese retailers and delivery apps have been pioneering innovative solutions and technologies around contactless delivery. How have these been received, and which of these innovative solutions do you believe will last beyond COVID?
China has been improving its delivery methods in recent years, and the outbreak of COVID-19 has caused many consumers to stop shopping offline and choose instead to order online and have products deliver ed to their homes . This has r esulted in a surge of online orders, which has put e – commerce companies and courier companies under tremendous pressure. To meet the needs of th is unique period and prevent the spread of the virus , many e – commerce enterprises have launched and advocated for contactless distrib ution .
However, t here are also other methods of distribution, among which the most surprising one is “unmanned distribution” , where autonomous vehicles , robots and drones deliver products . Could unmanned distribution become part of the new normal after the epidemic? At present, no one can give a clear answer, but it is certainly at the frontier field of science and technolog ical development . It had also attracted a lot of attention in China with new innovations , such as remote UAV distribution and intelligent sorting . This can help serve customers in a safer and more efficient way , and these necessities will be even more important to consumers in life after the pandemic .
Q5 - In many markets, digital marketing and engagement have become the key channel for connecting with the customer. What innovations have you seen in the market as it relates to digital engagement as a form of promotion?
The development of digital marketing cannot be separated from the rise of e – commerce . It has gradually become a critical tool to establish and maintain contact with customers . Digital Marketing is used through e – commerce platform s to collect various data on consumer behavio u r, which is then used to classify and segment consumers into groups. This data is then used to send personalized offers , such as discounts , advertisements, and promo tions to the various categories of consumers. Continuous attention to consumer wants and needs can not only significan tly improve the success rate of digital marketing , but it can also provide better service to consumers themselves .
New s olutions based on digital marketing are also emerging in China . A currently popular medium is promo ting products through live broadcast s . This establish es stickiness between brands and consumers , increas ing their presence in consumers’ personal lives. Additionally, Chinese celebrities and popular stars will also take part in these live broadcasts, which creates a ‘ fan economy’ with more relevance in consumers’ private domain.