Charts of the Day: Chinese Shoppers Flock to Virtual Supermarket Aisle
Even as China’s “Double 11” shopping extravaganza grabbed headlines on Wednesday with its thousands of online promotions, a quieter but more pervasive trend of buying everyday groceries online was building momentum in the world’s largest internet market.
The trend intensified during the height of China’s Covid-19 outbreak in the first half of the year, with many people turning to online channels for daily groceries as they were encouraged — or forced — to stay home to prevent the virus from spreading.
Even before the virus, online grocery buying in China was growing more than 30% annually, and reached a market penetration rate of 10% last year, according to a report issued this week by McKinsey and Co. It added that more than half of Chinese consumers currently buy packaged foods online, and more than a third buy fresh food.
The online movement picked up during the height of the outbreak in China, with more than 70% of people saying they were buying more groceries online at that time compared with before the outbreak began, according to the report. That number declined sharply as things returned to normal, though 15% of people said they were still buying more groceries online even after China’s outbreak had largely subsided compared with their habits during the height of the outbreak.
“China’s grocery stores played (a key role) in keeping the country on its feet, or rather off its feet and safe at home, during the height of the Covid-19 crisis,” McKinsey said in the report. “Amid widespread closures of shops and workplaces, China’s grocery ecosystems emerged as beacons of resilience, their lights on and deliveries running through otherwise silent cities.”
In China, the broader online grocery trend is being driven by a mix of online-only names as well as traditional supermarket operators that are taking a growing volume of their orders online.
The month of July alone saw two major funding deals in the online space worth more than $1 billion combined. The larger saw community group-buying grocery specialist Xinsheng Selected raise $800 million, while the other saw Tencent-backed online grocer MissFresh also raise nearly $500 million.
Meanwhile, e-commerce giant Alibaba has been plowing huge sums into efforts to combine traditional with online grocery shopping, including its most recent investment in October that saw it pay $3.6 billion for control of one of the nation’s leading hypermarket operators.
Another major trend in the space has been the rise of neighborhood-based fresh food marts, which are becoming a preferred destination for young people who are more likely to eschew traditional large supermarkets, McKinsey said. A survey it conducted last year found that 40% of people 25 and under said they rarely visit traditional supermarkets, and tend to visit neighborhood-based fresh food marts for impulse and last-minute buying.
“Unless hypermarkets take significant remedial action, they are set to lose market share (to these smaller neighborhood fresh food marts) as a result of shifting consumer habits and a sub-optimal category mix,” the report said.
Contact reporter Yang Ge (email@example.com) and editor Joshua Dummer (firstname.lastname@example.org)
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