China’s booming e-commerce market hit another milestone on the 11 November Single’s Day, a shopping holiday celebration for those not yet paired off.
Alibaba group, China’s largest online shopping company, which owns TMall, processed more than RMB35bn (US$5.6bn) in its online payments system, a record for a single day anywhere in the world.
While the Single’s Day shopping frenzy centres on products such as clothes and cosmetics, rather than fresh produce, TMall and other B2C platforms are increasingly adding fresh fruit to their mix, opening up an exciting new channel for marketers.
Following its success in selling cherries with Northwest Cherry Growers earlier in 2013, TMall recently launched a Chilean cherry promotion. Loren Zhao of online fruit retailer Fruitday, which managed the logistics for the promotion, said around 35,000 2kg cartons (70 tonnes) were sold in one week during late November, with further large-scale campaigns planned for 12 December and the run-up to Chinese New Year.
TMall has plenty of competition for selling fresh produce. JD.com, China’s second-largest B2C platform, and Yihaodien (yhd.com), which is mainly selling pre-packaged fruit, are both promoting more cherries – and they’re being joined by many others.
“This year is very interesting because all the e-commerce players have begun selling cherries from Chile given their timing in the run-up to Chinese New Year,” says Zhao. “Most of them aren't making money on it but they’re using it as a tool to get into the market. I think it’s a good thing for the whole fresh fruit business as this shows the online sales are really taking off.”
The direct route
This new channel has several advantages for fresh produce marketers. It allows them to go more directly to consumers, potentially boosting both returns and sales volumes.
Online retail also gives them direct access to the younger consumer demographic in the 20-45-year age range that are most likely to buy high-value imported fruits, said Heidi Zhang of Shanghai Supafresh, an importer-wholesaler with its own online sales platform.
In bypassing traditional layers of wholesalers and even supermarket buyers, online retail enables marketers to reach a broader customer base and promote a wider product range. Zhao said many people in northern China had never tasted imported cherries before the advent of online promotions. “They didn’t realise how sweet and juicy they are compared with locally-grown cherries.”
Zhang added that this channel has created pull-through demand for new products. “Last July/August, we began importing a New Zealand apple called Diva to the wholesale market,” she said. “At first nobody asked for it, but then we began selling it on yhd.com and the consumer response was very good, so we then had wholesalers requesting the apple because the final customers were asking for it.”
Profitability a problem
The challenges to selling produce via such channels are equally significant, however, as Jason Bosch of Shanghai-based importer Origin Direct Asia outlines. “Hundreds of companies are starting online sales and most of them are actually losing a lot of money, but their end goal is to be bought out by a big multinational wanting to make an entry into the growing Chinese market,” he said.
“The reason these companies are sometimes marginal is that logistics is very challenging and expensive. The absolute demand for perfect quality by customers results in a very high volume of returns. This in turn results in a high rate of fruit loss because of excessive handling and a very broken cold chain.”
Both Zhao and Zhang said their companies have the experience and systems to survive and thrive amid such challenges.
“We’re cooperating with leading global fruit brands and we’re always on the look out for new varieties,” said Zhao. “We must differentiate to avoid being drawn into price fights.”
Fruitday also has its own logistics team, supported by a fleet of vans to control deliveries, and it recently set up a Beijing warehouse to compliment its operation in Shanghai.
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