The year saw a rise in convenience stores, group-buying, and private labels.
The pandemic has accelerated trends in China’s grocery retail industry such as the rise of community stores and livestreaming, but the draft of new anti-monopoly rules may impact the country’s e-commerce players. With these included, a report from IGD noted seven key trends that have emerged in the sector in 2020.
About 30% - 40% of urban consumption spending is within 1 km of the community in China, an area that big format stores and online players find very hard to reach. This has translated to the development of community stores, and shoppers were especially more inclined to shop locally during the pandemic.
Examples of new stores launched in 2020 include Alibaba’s Hema mini, JD.com’s SEVEN FRESH Live, RT-Mart’s RT-Mini, Younghui’s Yonghui mini, and CR Vanguard’s Vanguard LiFE. French retailer Carrefour also opened its first community store in October.
Livestreaming also played a crucial role during the pandemic, with major grocery retailers such as Carrefour, Walmart, Wumart, Yonghui, and G-Super trying out the channel for the first time, achieving favorable results.
“Retailers might ease off the focus on livestreaming as more footfall flows back to the physical stores post-COVID. Nevertheless, livestreaming has established itself as a new and effective social-selling channel,” IGD’s senior retail analyst Jiong-Jiong Yu said.
However, major e-commerce players took a hit as the State Administration for Market Regulation’s (SAMR) issued a draft of anti-monopoly rules, which aims to prevent monopolistic behavior such as ecommerce firms penalising merchants who sell goods in more than one place online.
“The use of subsidies and discounts might also be outlawed, as the new regulation regards such practice may deter fair competition. China’s major ecommerce players, such as Alibaba, JD.com and Tencent, are likely to be impacted,” Yu said.
Still, the year saw the expansion of convenience stores, as well as a rise in group-buying and private labels amidst the economic downturn.
In particular, Lawson plans to ramp up its stores from 3,000 to 6,000 by end-2022 and 10,000 by 2025. Likewise, Meiyijia announced on WeChat that its store network is approaching 20,000 as of May. It has opened more than 10,000 stores in the last three years.
Meanwhile, group-buying involves discounted prices when purchases are made in bulk, which appeals to a wide range of consumers of all ages eager to shop collectively, and was predominantly more popular in lower-tier cities.
Thus, retailers rode along this trend, with JD.com investing $700m in group-buying firm Xingsheng. The deal will see JD.com join the race with Alibaba, Tencent, Pinduoduo and Meituan, who are already several steps ahead.
Retailers such as Walmart, Alibaba and Yonghui are also leading the development of private label brands. Walmart China’s private lavel range has hit nearly 4,000 SKUs, launching 200 new products in 2020. Total sales value of private label goods has doubled in the last three years and Walmart plans to triple that by end-2022.
Likewise, Alibaba opened its first membership-only wholesale store, Hema X, in September. More than 40% of the X store's products are Freshippo’s exclusive products, including those from its private label range Hema MAX. Yonghui tripled its market share of private label goods in 2020 when compared to 2018.
Lastly, more retailers are doing collaborations. Walmart launched a range of premium ready-to-eat signature dishes in collaboration with more than 30 restaurants, whilst beauty brand Perfect Diary collaborated with Oreo on two sets of cushion compacts printed with the cookie print. The latter sold out on the first day of the release on JD.com.
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