Sector insights

E-commerce

Overview

Chinese e-commerce has performed strongly during the COVID-19 outbreak, despite earlier challenges in supply chain systems and a shortage of delivery personnel.

NZTE understands that Alibaba Group Holdings' arms for parcel and meal delivery are now back to pre-outbreak staffing levels, and its O2O retail platform Hema Fresh (Fresh Hippo) is also now operating at full capacity or close to it. Meanwhile, JD.com is forecasting 10% Q1 revenue growth.

Alibaba has suggested that many Tmall promotions have been cancelled for at least the first quarter. Reasons include Alibaba staff not yet returning to work, ongoing concern over the outbreak, and logistics challenges. This could result in a dip in revenue on Tmall and Taobao. Consumers are also likely to be favouring low-cost daily necessities (such as vegetables) over high-value products.

Alibaba has announced a number of support measures for SME merchants, including:

  • reducing or waiving platform fees for new Tmall Global merchants coming onboard before 1 July 2020

  • waiving fees for warehouse rental space and logistics (Cainao bonded warehouses and overseas warehouses)

  • reducing operational fees for 21 service providers to the Tmall Global platform

  • low-interest and interest-free loans for Tmall Global merchants.

JD Fresh, and other vertical fresh produce e-commerce platforms such as Missfresh, Dingong Vegetable and Suning, have reported positive performance. JD has reported that sales of staples such as rice and dairy products rose significantly.

Similarly, there has been strong demand for fresh produce through both JD's online and offline platforms. Feedback from JD team members suggests that consumers have been favouring "normal types of seafood" that are in daily supply rather than trying a wider variety of products.

Three business models are being used to speed up home delivery of perishable foods:

  • Using satellite warehouses not open for consumer shopping. Miss Fresh, DingDong and PuPu are examples of companies using this business model. Miss Fresh sales are reported to have grown 300% since the COVID-19 outbreak, with average basket size now at RMB120. In addition, daily vegetable supply for Miss Fresh has grown from 500 tonnes to 1000 tonnes and is forecast to increase further to 1500-2000 tonnes. Miss Fresh is currently aiming for two-hour delivery, which, while fast, is slower than its previous delivery target of one hour (a result of staff shortages). DingDong sales have also grown by 200%.

  • Using retail stores as satellite warehouses. This is the model being used by Hema, for example. Goods can be delivered to consumer homes within a specified radius of the stores in as fast as 30 minutes from the time of placing an order on the Hema app.

  • Offline retailers combining with third-party delivery providers. This model has been adopted by retailers such as Walmart, Sam's Club and Yonghui. The delivery service is handled by providers such as JD Daojia.

China Skinny has published an infographic on online usage behaviour. Read it here.

Advice to exporters

For companies that already have an online presence, it's time to review campaigns for the next six months of the year with their trade partner (TP). This includes the logistical aspects of these campaigns, the brand messaging, and any events. It may also be time to look at shifting offline promotional budget to online formats, with many retail promotions cancelled (or indeed prohibited) during the epidemic control period.

Review whether your 'hero' products fit with the current market situation. Products more closely associated with health and wellness, or personal care, look to be in higher demand.

O2O platforms, including 7-Fresh and Hema, should still be of interest to companies exporting perishable products that require fast delivery.

Community-based social commerce is growing. Many community-based 'grocery shopping' WeChat groups have quickly established themselves to meet demand and to share product supply information. This model existed before the COVID-19 outbreak, but growth could well accelerate. Therefore, it is worth asking partners in the Chinese market whether they can service this business and if it would be appropriate.

Manufacturers or distributors that are traditionally B2B in focus are also ramping up their e-commerce efforts through their own WeChat platforms and mini programmes. Their aim is to reach not only restaurants or retailers, but also direct to consumers.

Companies that do not have an online presence should accelerate work to assess the commercial viability of channels for their products and qualify their trade partner options.

Further insights

Contact NZTE

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