E-commerce changing China’s supply chain

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News and insight for North America's fresh produce buyers
John Hey

BY JOHN HEY

@john_asiafruit

E-commerce changing China’s supply chain

Delegates to Fresh Produce Forum China heard from e-commerce leaders on their investments to meet ever-changing consumer demands

E-commerce changing China’s supply chain

E-commerce revolution 2.0: Chris White (left) chairs the discussion at Fresh Produce Forum China with Ocean Liu of Tmall Fresh, Zhang Yi of Floruit and Yiguo's Chen Ren

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E-commerce has already demonstrated its powers as a consumer-direct channel for China’s fresh produce business, but its influence is reaching a whole new level as leading players pour huge investments into supply chain development.

Some of China’s leading e-commerce players were on-hand to explain their investments and the future direction of the market during the keynote session to last week’s Fresh Produce Forum China.

Co-organised by Asiafruit Magazine and Asia Fruit Logistica, China’s leading international trade conference took place on 23-25 May at Hangzhou’s JW Marriot Hotel, drawing together industry decision-makers for expert talks, discussion, networking and study tours.  

Introducing the keynote session ‘E-commerce revolution 2.0’ on 24 May, Asiafruit’s China editor Yuxin Yang said e-commerce had evolved from a platform for fresh produce marketers to become an integral part of the business.  

Fresh food is the next frontier for China’s e-commerce giants, he noted. Between 2012 and 2016, the value of China’s fresh food e-tail market grew from under RMB4bn (US$580m) to almost RMB91bn (US$13.2bn), recording an 80 per cent growth last year alone, according to analysis from China International Electronic Commerce Center (CIECC). And the market value is projected to ramp up to RMB150bn (US$21.86bn) in 2017.

While Chinese consumers have embraced online purchasing of fresh food, their demands and expectations are on the rise. Following a shakeout among e-commerce companies over the past year, the bigger players are now forging ahead with investments into the supply chain to meet consumers’ evolving demands.

Conference moderator Chris White, managing director of Asiafruit’s publisher Fruitnet Media International, was joined for the panel discussion by several e-commerce pioneers, including Chen Ren, director of strategic sourcing for Yiguo E-commerce Co, Tmall Fresh operations expert Ocean Liu and Zhang Yi, CEO of Cuixianyuan/Floruit.

Alibaba-invested fresh food e-tailer Yiguo has invested heavily in its cold chain logistics business Exfresh on the back of recent rounds of funding, and Chen explained the drivers.

“First of all it’s about providing high-quality, safe food,” she said. “The younger generation wants convenience, and they’re very demanding – quality, freshness and on-time delivery are all very important, so we need to make a huge investment in sourcing and the supply chain to meet that demand.”

Online-to-offline integration

E-commerce is also leading bricks-and-mortar retailers to raise their game. Contrary to some predictions a few years ago that online channels could decimate their offline counterparts, online and offline retailers have been integrating their operations to better serve the consumer, White noted. This trend has spawned some exciting new retail concepts, such as Alibaba-invested online-to-offline fresh food chain Hema Food Market, where consumers can order produce online to be delivered express from their nearest store. 

“There’s a growing awareness that neither channel can service the consumer adequately on its own,” explained Tmall Fresh's Liu. “Online, the consumer might see the goods but not be able to get them in reality. Offline, retailers might not have the efficiency, the data about the consumer, or the capacity to optimise the supply chain.”

Online to offline integration is very difficult for conventional retailers to do effectively, Liu added. “This is why we don’t see great examples of this model in Europe,” he continued. “With Hema Fresh, we started with e-commerce at the core, it was born from an internet mindset. We were able to build stores and tailor their design to match the demands of a particular consumer demographic. The store is the experiential entity – the place to taste and experience. After that, we expect consumers will buy more goods on the online version – that’s the ideal.”

E-commerce is also driving change in other parts of the supply chain beyond retail, notably China’s wholesale markets. Floruit has taken Beijing’s conventional wholesale fruit import market at Xinfadi online with its business-to-business trade platform, and the company’s CEO Zhang Yi outlined some of the benefits.

“We’re connecting the producers and the retailers and providing a third-party logistics service for them. We also provide sales data and brand promotions for producers,” said Zhang. “One of the most important things is the transparency the system brings. International suppliers want to know the prices in the Chinese market in real-time, who is buying their product and via what channels. We can monitor and coordinate all this information and share it with the producers.”

Sharing consumer data?

As questions flowed from the audience, Lisa Cork of New Zealand grower-marketer Mr Apple was curious to know about big data. How do e-tailers collect information on shopper demographics and frequency of fresh produce purchases? And do they share this information with suppliers?

Yiguo has two key methods of sharing information with suppliers, according to Chen. “Firstly, for suppliers from foreign countries who are new to the Chinese market, we can form a partnership where we help them to search out who their target consumer is,” she said. “Once we have identified that demographic, we can market their brand to these consumers and seek their feedback, information which can in turn be shared with suppliers.

“Our second model is the joint business partners programme – some major suppliers have entered into contracts with us. Once they become joint business partners, we can open our consumer database to them.” 

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