Brands must respond to consumer trends to ape Chinese e-sales success

By RJ Whitehead

- Last updated on GMT

© iStock
© iStock
Korea and China have set the pace for e-commerce to disrupt FMCG retail in Asia-Pacific, leaving online sales in other market lagging behind.

Yet the Far East's embrace of internet retail can serve as a “beacon of hope​” for many other Asian markets to stimulate new and growing demand, according to Nielsen’s Laura McCullough.

A FMCG specialist in emerging markets, she believes that what works in one Asian region will not necessarily work in all: while online grocery shopping has been adopted by many markets, in others the uptake is much slower. 

Consumers in the Philippines, the Pacific, Indonesia and Thailand still greatly prefer shopping in physical stores, and traditional channels will be preferred in those countries for the short to medium term. 

Meanwhile the big Far East online economies have been finding success, suggesting that a rapid increase in connected consumers across wider Asia will lead to an explosion of e-commerce in the coming years. 

This new “innovative disruption​” in particular can create new value networks, and companies that embrace these early will prosper immensely.

In India, internet penetration will grow from 26% of consumers in 2015 to 67% in 2020. In Thailand, it will jump to 69% from 41% over the same period. 

The proliferation of smart phones and e-commerce options in many markets is creating a new retail environment in Asia, one where consumers have unparalleled access to new products, services and experiences​,” said McCullough. 

Venture capitalists and technology companies like aCommerce are key industry enablers, while players such as RedMart in Singapore and Flipkart in India are driving the trial and usage of e-commerce. Alibaba’s majority acquisition of Lazada and Amazon’s growing footprint across the region signals a race for e-commerce domination​.” 

There are similarities between South Korea and China in how e-commerce has evolved for FMCG categories. 

Though their value is typically smaller than in other e-commerce segments, sales of food products illustrate the growth potential of Asia’s big two markets. 

Korean online beverage and frozen food sales account for just 12% and 9% of the category respectively, though growth has been strong—at 13% and 17% last year. 

In China, crispy snack foods and carbonated soft drinks make only 5% and 2% of online sales, but are showing strong growth at 57% and 54% over the last quarter, compared to a year ago. 

Fresh food is often seen as the last bastion of online conversion. In Korea, its share of online market value grew up to 28% in 2016. A recent Nielsen survey revealed that four in 10 Chinese and Korean respondents have purchased fresh groceries online, compared to 21% of consumers globally and 11% in Southeast Asia.  

To tempt consumers, retailers have been innovating and altering their fresh offerings to overcome a reluctance to purchase these online, through schemes such as money-back guarantees, free delivery and promotional offers. 

Yet concerns over freshness and inability to physically touch produce are still often barriers, though it appears this can be overcome. 

Half of Asia-Pacific consumers surveyed by Nielsen stated that they would be willing to purchase fresh food online if full refunds or vouchers were given for produce that did not meet expectations. 

Online channels are seeing formal market routes being replaced by informal channels such as consumer-to-consumer, such as the sale of infant milk through online marketplaces and social platforms like WeChat. 

This means manufacturers and traditional retailers are unable to control the brand positioning, and this can impact on quality, pricing and the point-of-purchase experience, McCullough says. 

Corporates are also looking for direct-to-consumer opportunities by creating their own online stores or using marketplaces. The retail environment is evolving rapidly away from traditional approaches to micro-marketing and logistics. 

Companies must understand the evolution of their brand sales across all retail formats and markets, and bring best practices from offline to online and vice versa to enhance the channel experience. 

While the digital shelf may appear on face value to offer an unlimited assortment of opportunities, the reality is people will only scroll or click through to a limited selection​,” said McCullough.  

Successful offline brands are not guaranteed to be successful online. Companies must ensure they have strong activation tactics to drive trial of new products overcoming automatic shopping baskets based on prior purchases.  They need to be receptive to the diverse needs of consumers in Asia be it online or offline​.”

The most agile will respond quickly and effectively to changing consumer demand to benefit from the region’s dynamic retail landscape.

Related topics: Markets, China, Supply chain, Korea - Taiwan

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