Growth in the online grocery space in China has been strong since the pandemic with 62% growth in 2020. In 2021, the growth is estimated to be at ~25%. Though this was a slowdown, there is no doubt that the online channel will become increasingly important. The segment is expected to grow between 13-25% per annum over the next 3-4 years.
In a survey conducted globally by AlixPartners in 2021 (link to article), consumers in China were seen to be the most “aggressive” in shifting their purchasing online. This was especially so in the “Groceries” category where most consumers from other countries saw a net shift back to offline buying.
As seen, the Chinese consumer is clearly digitally savvy and has increasingly been more focused on convenience. As such, offline grocery players, purely online grocery providers and third-party platforms have developed different online delivery models to fulfill this need for convenience.
In the offline grocery players space, traditional retailers such as Yonghui have focused on beefing up their online presence and have also developed their express delivery options to gain a larger market share among existing customers.
Freshippo, a retailer launched by tech giant Alibaba has focused on leveraging its strong online capabilities to offer a seamless omnichannel offering centered around home delivery whilst building out its offline presence as well.
Purely online grocery providers such as MissFresh and Dingdong have also sought to fill this need for convenience by providing express delivery services, with orders being filled from their Distributed Mini Warehouses (DMVs) usually within 30-40 mins.
Third party platforms act as enablers for smaller grocery chains and providers. JD.com launcher JD Supermarket/JD Daojia and has seen increasing sales and reach throughout China (one hour delivery across 1,400 cities in China). In addition, these platforms (Ele.me and Meituan) often act as the “last mile delivery” options for many consumers and retailers alike.
In recent times, these third party platforms have also started to offer “Community Group Buys”. However, the viability of this model is still being ascertained as the market has witnessed the failure of certain early adopters.
As different players in China explore the various models to best fulfill this need, one must consider how best to balance the insatiable demand for being “quicker” and other increasing consumer demand. Online grocery providers should start to develop core capabilities beyond the home delivery that present a value proposition, which attracts and retains consumer to enable long term growth.