Chinese online retail war to hit meat industry
As part of the deal, Tencent will promote the Super Species retail brand for fresh food and meat but will also use data services for targeted marketing of potential meat buyers. Best known for its Twitter-style microblogging platform Weixin, also known as Wechat – it also has dozens of other online businesses – Hong Kong-listed Tencent is more valuable than Facebook in terms of market capitalisation.
Billboards at the Super Species store in Beijing this week advertised steaks, cheese and wine. Inside, customers queued at the store’s Beef Box stall to select chilled steaks from Australia and Canada which are cooked and eaten on site and purchased for home use. Customers at the store are encouraged to get coupons sent to their Weixin/Wechat accounts by photographing QR codes onsite.
The ultimate goal behind Super Species is to introduce consumers to the company’s online offerings, according to Lin Chuangyan, the Yonghui executive heading up the Super Species operation. He suggested the store’s use of smart codes, social media and online grocery shopping is where the alliance with Tencent comes in handy.
Crucially, customers must pay with mobile payment systems such as the WePay and Tencent Pay service offered by Tencent, allowing the firm to collect valuable sales data. Aside from clicking on QR codes in store to get discount vouchers, Super Species customers can also join a Super Species member service open to Weixin users, with news, recipes and special offers updated daily. Recipes on Weixin advise on how to cook Super Species steaks at home, for instance.
Traditional retailers in China have been scrambling to react to the arrival of Tencent and Alibaba which are using their massive data advantage (both firms collect data from social media platforms, cloud computing services and mobile payment systems which is then used to target customers) and Yonghui appears to have opted to join rather than fight the behemoths.
Tencent, which is Asia’s most valuable firm by capitalisation, has been facing off against rival Alibaba in the high-end meat and foods market. Alibaba, long the king of Chinese e-commerce, has built its own Hema Xiansheng chain to sell high-margin imported meats and foods (it also has a stake in the Lianhua supermarket chain).
Super Species outlets are typically 700-800 square metres in size and located within Yonghui’s larger Bravo YH supermarket stores – these also stock imported meats - which are typically 12,000 square metres in size. Meat and fresh foods are an attractive target for Chinese retailers given Yonghui Superstores declares in its latest annual earnings report that margins on meat and other fresh foods averaged 12.8% in 2015 and 13.3% in 2016.
In an increasingly complex network of relationships, one of China’s two leading online retailers, JD.com, has a 10% stake in Yonghui which it in turn promotes through its JD Daojia service, enabling users to purchase and take delivery of groceries from supermarkets.
Yonghui has concentrated the Super Species concept in southern China, with the first store opening in Fuzhou in January 2017. Yonghui opens the stores in residential areas, and plans to open up 100 per year.
This is a radical departure from the hypermarket approach taken by Yonghui to date. But it’s a similar approach to that of Hema Xiansheng, the supermarket chain launched in 2016 with 20 stores (most of them in Shanghai) offering fresh foods and meats.
Hema stores also serve as logistics centres where online customers’ orders are fulfilled and dispatched. There is a regional dimension to the Alibaba-Tencent battle: Hong Kong-based retailer Dairy Farm Group, part of the Jardine Matheson conglomerate, has a 20% stake in Yonghui while both Alibaba and Tencent have been seeking to expand their payment services around Asia where Chinese tourists have become a major spending force.
