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eCommerce Insights: China Dominates Global Online Grocery Markets

July 8, 2015
Lisa Byfield-Green
Written By
Lisa Byfield-Green

The Chinese online grocery market is set to be worth almost $180bn by 2020 – nearly five times its current value of $40bn. In other leading markets, online growth is expected to continue at double-digit rates. This guest post from IGD’s Lisa Byfield-Green discusses why investment in the channel is essential for companies wishing to meet the needs of the rapidly evolving multichannel shopper.

China’s rapid pace

Online grocery sales in China are soaring as shopper habits gravitate towards the channel, which is maturing at a much faster rate than we have seen in other markets. Mobile is a key driver of this growth. Most online sales are via digital marketplaces such as Tmall (owned by Alibaba) and The scale of these pureplay sites means they can offer an increasingly broad product selection.

Busy shoppers are increasingly using China’s online marketplaces to seek out imported goods including food, which is seen as an affordable luxury. As more shoppers come online and China’s population increases, we expect this growth to continue.

New opportunities in leading markets

Meanwhile, in more mature markets such as the UK (the world’s second-largest online market for grocery), we continue to see strong growth and innovation. The click & collect sub-channel is giving retailers new ways to drive loyalty and reach potential customers on-the-go at remote locations. Last week, Asda opened its first fully automated 24-hour online grocery collection point at Haydock, a concept that is likely to be seen shortly in Walmart’s other markets too.

Remote collection is also being trialled in Belgium, where Carrefour has introduced an after-work pick-up point for shoppers at an office car park, and Australia, where lockers and drive-thru’ solutions have been introduced by the two major retailers.

In the UK, 27% of shoppers now shop online on a monthly basis, with 11% citing it as their main way to shop. Loyalty schemes such as delivery passes are helping to drive frequency and overall multichannel spend.

Maximising opportunities in larger markets

There are also some exciting developments in larger markets, particularly the US, where Walmart is adding scale to boost online grocery, estimating that online and digital in-store purchases could reach up to 6% of revenue by 2017. Innovation and rapid delivery is a big theme in this market, driving shopper expectations. Here Amazon is particularly active, combining key global growth trends of convenience, mobile and loyalty with new services such as Amazon Prime Now’s one-hour delivery. This is available exclusively on mobile devices to Amazon Prime members in 14 US cities and recently launched internationally for the first time in London. Disruptors – companies and services innovating across the supply chain or tapping into opportunities created by the increase in the use of technology – such as Instacart and Uber are also driving the channel and bridging the gap where retailers are not yet present.

Meanwhile in Germany, recent research indicates that shoppers are becoming more willing to shop for groceries online and established online retailers such as Rewe are boosting investment in the channel. Discounters Aldi and Lidl are beginning to invest online in specialist areas such as wine and pet food. Together with Amazon, these retailers have the potential to change the German market significantly with their increased investment.

Where should retailers and suppliers focus their efforts?

For FMCG retailers and suppliers, the online channel presents many opportunities. In leading markets, retailers are likely to see the majority of growth occurring online over the next five years, so a focus on this fast-moving channel is essential. We can expect new online entries by retailers across the majority of markets, so flexibility will be essential. Understanding sub-channel growth, such as remote click & collect, as well as mobile and wearable technology, will also be key to unlocking new potential.

Key considerations for retailers and suppliers:

  • What is changing and how will it impact my market / category / shoppers?
  • Do I have the right resource in place?
  • How can I partner with customers on new initiatives / market entries / sub-channel expansion / convenience and personalisation?
  • Which customers / markets present the biggest opportunities for my brand?
  • Is my company adopting a multichannel approach? Does this include mobile?

Lisa Byfield-Green leads IGD’s online and digital research, providing insight and analysis of retail trends and new developments within the consumer goods industry.

You might also be interested in Profitero’s recent White Paper “Competing in China’s eCommerce Market: 5 Crucial Steps to Success for Today’s Foreign-Based Retailers and Brands” where we address the critical questions that businesses need to explore in order to successfully execute their Chinese eCommerce strategy.

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