How Chinese dairies are milking the opportunities offered by e-commerce

By RJ Whitehead

- Last updated on GMT

How Chinese dairies are milking the opportunities offered by e-commerce

Related tags Dairy products Milk China

E-commerce is now the main entry point for dairy imports into China, having achieved a two-thirds share of the entire consumer market for dairy imports in 2016.

The channel’s popularity has been boosted by the comparatively low price of dairy products, coupled with the convenience of getting them delivered to the doorstep, to the point that just 34% of imported dairy products are now not sold in this manner.

According to CCM, a market intelligence firm, newly announced higher taxes on dairy imports are not likely to change buyer behaviour significantly as demand for quality foreign dairy products in China is relatively inelastic from their cost. 

This trend towards online sales has been leading to greater co-operation between China’s dairy industry and its e-commerce giants. One example of this has been the announcement that China’s second-biggest dairy producer, Mengniu, will operate closely with Alibaba. 

With Mengniu achieving its profits mainly through the sale of liquid milk and ice cream products, the tie-up will focus on using Alibaba’s delivery platform to ensure quick and reliable sales of fresh products. Moreover, the companies want to share their data for effective and precise marketing activities. 

No stranger to the importance of data, Mengniu has been working to establish a professional data team over the last four years to conduct data mining, modelling and analysis. Up to now, it has amassed a large amount of information about the dairy market. Meanwhile, Alibaba has comprehensive data about a variety of sectors. 

Similarly, Yili struck a co-operation agreement with JD Daojia, a platform designed to deliver fresh fruit and vegetables to customers within two hours of them placing their orders. This deal aims to facilitate deliveries of Yili fresh yoghurt and frozen foods through JD Daojia’s strong cold chain logistics service, enabling the dairy to conduct business in a way which has not been possible up to now.

Alibaba even has its own offline supermarkets in China, selling food and dairy products. These in turn have fulfilment centres that deal with online orders and can deliver products within 30 minutes.

According to research by Goldman Sachs, online supermarkets, omnichannel sales and lower-tier cities have been taking Chinese e-commerce growth to the next level, to the point that the online retail market could be worth about US$1.7tr by 2020—double it’s current value.

What’s more, the channel skips over middlemen and retailers, by allowing manufacturers to sell directly to their end-consumers. For companies, this means that marketing and promotion online and on e-commerce platforms has become a key task they must conduct in order to place their products and brands in the right light.

The Chinese government announced recently that it would delay until the end of 2018 tougher cross-border e-commerce regulations that would increase both the taxes and regulations on products sold through this medium. With the delay, the government aims to give retailers more time to prepare for the changes ahead.

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