China’s online FMCG market has reached value of more than $25.3 billion, making it worth more than the American and British markets combined, according to a new report from consultancy firm OC&C Strategy Consultants.
Its research has shown that, on Singles’ Day – a consumer holiday in China where people celebrate not being in a relationship – Alibaba alone sold almost double the amount as the so-called Cyber Monday, Black Friday and Thanksgiving combined. Singles’ Day is now the world’s biggest online shopping day of the year, OC&C said.
But, despite its growth, FMCG still has a relatively lower online penetration than other categories in China, providing ample opportunities for both domestic and international businesses.
Much of the sales boom is being driven by younger generations, who London-based OC&C said were ‘fast becoming an important customer segment for driving overall growth of FMCG e-commerce’, though older generations are also helping to generate sales. The study revealed an increasing number of people aged between 30 and 50 who intend to devote more of their FMCG spending to online channels in the next six months, marking a shift away from traditional bricks-and-mortar retail.
As part of the report, OC&C also conducted a survey of over 4,600 respondents to find out which e-commerce platforms were the most highly rated. Despite Alibaba’s dominance, none of its platforms such as Tmall and Taobao were the most highly rated by Chinese consumers. But they did receive the highest brand awareness and shopper penetration, explains why Alibaba commands a 52% share of the FMCG market and 70% of the ecommerce market overall.
A third of survey respondents ranked ‘familiarity’ as being the key reason why they rely so much on any particular online platform. Beyond benefiting from being an early entrant, Alibaba is also able to provide competitive prices, a convenient one-stop shopping destination and a ubiquitous payment system, OC&C said.
And despite Alibaba’s control of the market, the online FMCG market is more fragmented than retail in general.
Jack Chuang, partner, Greater China for OC&C Strategy Consultants, said: “Selling online in China is rewarding yet not easy. Brands can benefit and achieve their online objective through partnering with strategically-aligned platforms and by customising their offerings to cater to various needs of different market segments. In addition, brands need to figure out the level of control and capability which an online store demands, so as to determine whether to establish in-house operations or to rely solely on platforms. Choosing the right model and strategy can definitely make it much more effective.
“Price and convenience related factors are consistently placed as the top reasons for buying FMCG online in China. Growing middle class want to save money on everyday consumables so they can use these savings towards a better lifestyle including for dining out or buying international fashion brands. Consumers’ need for convenience is fuelling the demand to buy FMCG online anywhere, anytime. All these are favourably fulfilled in China given the rapid development in infrastructure and logistics across the country, with leaps and bounds in both intra-country movement of goods as well as last-mile delivery to consumers. These make online shopping of FMCG easy, inexpensive and fast.”
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