Relying on Alibaba’s data, Bain identified eight strategic segments of China’s online consumers that collectively account for 80% of FMCG platform users and represent over 90% of gross merchandise volume:

• Rookie White Collars
• Wealthy Middle Class
• Supermoms
• Small-Town Youth
• Gen Z
• Urban Gray Hairs
• Small-Town Mature Crowd
• Urban Blue Collars

Rookie White Collars are educated people in their early 30s who live in tier 1–3 cities. Their careers are advancing. They work in a fast-paced environment and greatly value convenience—hence, they prefer online shopping.

They represent higher per-capita spending on Tmall and Taobao, with annual spending growth of around 20% from 2016 to 2018 according to Bain’s report.

Wealthy Middle Class consists of financially stable consumers, typically in their early 40s in tier 1–3 cities, and primarily work as civil servants or in corporate middle or senior management.

They are less passionate than their younger counterparts when buying the latest new products. They are more rational consumers, they value quality, and a higher proportion of their online purchases are premium products.

Supermoms are women who are pregnant or have children under the age of 12. They live in Tier 1–3cities and are concerned about raising healthy families while taking great care of their own careers—and their own health and beauty.

They are the main shoppers for their families and are willing to pay a premium for convenience. Among all groups, they have the strongest spending power. It is reflected in the number of categories and brands they buy, their shopping frequency and the amount they spend.

Gen Z consists of students or others born after 1995 in tier 1–3 cities. They are digital natives. Unlike their older counterparts, they value trendy items over established brands and are major fans of insurgent brands.

This group represented the fastest per-capita spending growth on Tmall and Taobao FMCG, with per-capita spending growing 30% annually from 2016 to 2018.

Small-Town Youth are consumers in their 20s in tier 4 or smaller cities. They take their cues from big-city youth, eagerly following the latest urban trends. Without the pressure of exorbitant housing prices, they have considerable disposable income at their fingertips.

The slow pace of life also provides them with enough time to enjoy games, video streaming, and other online leisure activities. Their income and free time make them a huge potential force in online shopping.

Urban Gray Hairs are consumers born before 1970 who live in tier 1–3 cities. The majority of them are retired and have substantial pensions. This group could be considered a hidden gold mine for online sellers.

They now spend relatively little online. In fact, their per-capita spending dropped 20%annually from 2016 to 2018.

Small-Town Mature Crowd consumers are older than 35 and live in tier 4 or smaller cities. With their slow pace of life, they typically have an abundance of time to watch videos or news online. They make most of their purchases offline, a preference that allows them to socialize with acquaintances face-to-face.

They registered the lowest per-capita FMCG spending on Tmall and Taobao of any group in 2018.

Urban Blue Collars are less affluent consumers in tier 1–3 cities who are typically engaged in such professions as catering, transportation or retail. They are familiar with the same e-commerce infrastructure and online channels that influence their middle-class counterparts.

Compared with the Rookie White Collars or Wealthy Middle Class groups, they are more concerned about value for their money when shopping online and tend to buy fewer items. Their per-capita spending on Tmall and Taobao is far below that of middle-class shoppers and grew at a relatively slow 5% rate from 2016 to 2018.

Bain also suggested 4 steps on how brands can win:

1. Clearly understand the targeted strategic consumer groups and their preferences in products and content/promotion channels
2. Identify key growth drivers to customize a category- and brand-specific strategy
3. Optimize product portfolios, marketing, and channel strategy—choosing key growth initiatives for reaching and converting targeted consumers
4. Systematically review and continuously improve strategic initiatives

CIW annual subscribers can download the report here.

In 2015, a2 Milk chose JD Worldwide as the first online platform to launch its first-party store in China and introduce its world-famous milk powder products to the Chinese market. China is the top priority market for a2 Milk, and many Chinese parents have become customers of the company’s milk formula, which is designed to be easier for children to digest.

Over the past 4 years, JD has leveraged its unique insights into the Chinese market and consumer preferences to provide a2 Milk with customized marketing solutions, increasing the brand’s recognition among Chinese consumers.

On June 18 this year, the peak day of JD.com’s annual 18-day “6.18” anniversary sales festival, a2 Milk was the top-selling brand on JD Worldwide, and the brand’s platinum baby milk powder was the best-selling product. Sales of a2 products on the day increased 210% compared to the previous year.

Earlier this year, a2 Milk was a participant in JD.com’s “Brand Competitiveness Plan“, a one-month program which is an extension of JD’s previous Super Brand Day program and provides brands with comprehensive marketing solutions to increase sales performance and build up brand recognition.

Marketing solutions offered through this initiative include guidance on marketing campaign timing, choice of promotional channels, and help in identifying the target audience for a campaign. On every day of the one-month long campaign for a2 Milk, JD helped the company identify a group of customers who had indicated interest in a2 products within a specific period of time but had not yet made an order.

Coupons were then sent to these high potential customers. The ROI of coupons during the month of the campaign was 3.6 times higher than the typical average, and fans of the a2 Milk online store on JD Worldwide surpassed 1 million users.

“China is the top growth market for The a2 Milk Company, and JD.com’s expertise in innovative marketing has consistently allowed us to make the most of this exciting opportunity,” said Xiao Li, CEO of a2 Greater China. “Last year, we launched a blockchain partnership with JD, using a QR code on a2 Milk products to show logistics information at every stage of delivery. This is just one of the ways we are working together to give customers more peace of mind and confidence in their purchases.”

“The a2 Milk Company’s premium dairy products are an increasingly popular choice for Chinese parents across the country,” said Chris Cui, Head of JD Worldwide. “As China’s largest retailer, JD has unique capabilities to offer a2 Milk assistance in terms of marketing solutions, logistics and technology, helping a2 continue to grow their market share.”

With a reputation for safety and quality, products from Australia and New Zealand have consistently sold well on JD.com, with health supplements, maternal and baby products, wine, milk and cosmetics among the best-selling categories.

In addition to a2 Milk, popular brands including Swisse, Blackmores, Devondale, Penfolds, and Jacob’s Creek have also seen impressive growth in sales on the JD platform, with sales of Penfolds products increasing by more than 200% YoY during the first 30 minutes on June 18th.

China’s cross-border e-commerce users overview 2019

21 Fast Moving Consumer Goods (FMCG) companies reached over 100 million urban households. P&G and Yili led the race, reaching over 160 million families. Nongfu Spring, Haday, and Dali are fastest growers.

21 FMCG companies reached over 100 million urban households during the 52 weeks ending October 5, 2018, with P&G and Yili being the first to hit the 160 million milestones, according to report from Kantar Worldpanel.

The duo reported 92.4% and 90.9% penetration rates respectively, enjoying the widest consumer base in China. In terms of growth rate, Nongfu Spring, Haday, and Dali are the top three performers, reporting over 5% increase in the total number of buying families year-on-year.

Winning over millennials

Despite China’s aging population, winning the love of millennial consumers (meaning post-80s and post-90s generations in China) is critical for brands to thrive. With more disposable income and need to express their individuality, young consumers offer great opportunities to unlock future growth.

For the companies that grow penetration ahead of the market average, most of them saw noticeable advances in young families. For example, Nongfu Spring managed to grow its shopper base amongst young singles/couples by 30% in the last 12 months through its phenomenal success of Victory vitamin water, which rode on the massive popularity of reality show “Idol Producer”.

The company also launched the NFC juice brand 17.5° to cater to younger middle consumers’ aspiration for authenticity and freshness. Similarly, Coca-Cola in China grew its penetration through the smaller pack and new lines such as “Sprite Fiber Plus” to balance young consumers’ needs for both nutrition and indulgence.

Liby, an established player in the home cleaning sector, has actively used sponsorship and film stars to refresh its brand image and won 1.5 million young single/couple families.

Combination of innovation and go-to-market

Almost one new product is launched every three minutes in China in 2017, and consumers in China are facing cluttered shelves with new products trying to grab their attention. However, only 6% of the new launches managed to bring incremental buyers. Brands that succeed in China’s formidably competitive marketplace will have to stand out by offering unique innovation and having go-to-market excellence.

P&G, with its powerful house of brands line, has been leading the FMCG market in terms of penetration for five years in a row. In recent years, P&G has stepped up the innovation pipeline by launching a series of sophisticated and differentiated products, e.g. Whisper Pure Cotton, Always Infinity, Rejoice Micellar Water shampoo as well as Olay and SK II premium range.

In the latest 52-week period, P&G also grew their physical availability, particularly leveraging the strength of social and e-commerce platforms.

Dali, a well-entrenched food conglomerate, reported strong buyer gains in the latest year through its launch of Doubendou, a soy milk product riding on the concept of “natural and GMO bean free”.

Backed up by Dali’s established distribution network to ensure its wide availability and in-store presence, Doubeidou was a blockbuster success and brought 13 million new buyers to Dali Group in the first year after it was launched.

Offline penetration remains paramount

E-commerce has been a game changer in the last 10 years in China, transforming the way brands connect to consumers. In the “New Retail era”, brands will have to adopt a holistic omnichannel view to win consumers at every possible touch point.

Offline stores, especially in lower-tier cities, remain crucial to building trial and engagement through their interactions with millions of shoppers on daily basis. With the expansion in data integration and logistic capabilities, consumers are now able to choose multiple ways to shop and the boundary of online and offline channels are increasingly blurring.

Successful companies in growing shoppers are those who achieved a balanced penetration gain across both online and offline channels. Yili, as a leader in food & beverage, grew its online and offline buyers by 4 and 6 million respectively.

Offline distribution channels brought more shopper growth for companies like Mengniu, Hengan, and Dali. Even for P&G, it managed to add 2.4 million incremental buyers through brick-and-mortar stores. Consequently, the partnership with offline retailers remains essential for brands to keep up the omnichannel footprint.

Read more: Insights of China internet users in lower-tier cities

This post was originally published on Kantar.com.

For 12 weeks ending May 18, 2018, consumer spending on FMCG in China grow by 10.0% compared to the same period last year. Hypermarkets, supermarkets, and convenience stores are showing strong signs of recovery. Consumer spending grew by 10% YoY.

For 12 weeks ending May 18, 2018, consumer spending on FMCG in China grew by 10.0% compared to the same period last year, latest Kantar Worldpanel data showed. Modern trade (including hypermarkets, supermarkets, and convenience stores) is showing strong signs of recovery, with a growth of 4.1%, 1.2 points up compared to last year. In terms of regions, the East and West regions enjoyed a healthy growth at 11.0% and 11.3% respectively, whilst growth in the North remaining sluggish.

Kantar Worldpanel China continuously measures household purchases over 100 product categories including cosmetics, food and beverages, and the toiletry/household sector through its 40,000 sample families. Its national urban panel covers 20 provinces and four municipality cities (Beijing, Tianjin, Shanghai, and Chongqing).

The channels within its monitoring scope modern trade (supermarket, hypermarket, convenient stores), traditional trade (grocery, free market, wholesale), e-commerce, overseas shopping, direct sale, work unit/gifting etc. The goods under monitoring are those obtained for in-home consumptions.

Among the top retailers in modern trade, Walmart and Yonghui enjoyed the fastest growth on market share, up by 0.8 and 0.4 points respectively in the 12-week period compared to the same period last year. Both Walmart and Yonghui accelerated their progress on new retail format trial. Walmart deepened its cooperation with Tencent to optimize payment processes while Yonghui Super Species tested a drone delivery service in Guangzhou City, Guangdong Province.

The e-commerce channel grew by 32.0%, with 37.2% of households in urban China purchased FMCG online over the 12-week circle. Recently, RT-Mart together with Hema opened their first middle sized new retail store “HeXiaoMa” (盒小马) in Suzhou City, Jiangsu Province. The simplified Hema format has removed in-shop dining services.

Kantar Worldpanel’s data shows that there is a big potential to develop e-commerce business in lower-tier cities: 35.0% of households in county-level cities and 27.8% of households in counties purchased FMCG online in the latest 12 weeks, which is much lower than the 46.3% online penetration in key cities.

JD.com continued to narrow its gap with Tmall in penetration, with 6.3% of households shopping on JD in the 12 weeks. As e-commerce retailers have developed over the past few years, it’s become harder to gain a massive sales growth through purely price discounts.

Kantar Worldpanel has observed more campaigns to emphasize premiumization and joint online/offline activation during the recent mid-year “618 (June 18) Online Shopping Festival”. This will create new themes to engage consumers and stimulate consumer demands. Please watch this place for future FMCG data and reports.

This post was originally published on Kantar.com.

China’s growth of FMCG sales is weaker in Q1 2018 compared with previous quarters, while new retail accelerates the online and offline integration.

Kantar Worldpanel reports that the fast-moving consumer goods (FMCG) market in the first quarter of 2018 was relatively weak with value growing by just 2.3% in the latest 12 weeks compared to the same period in 2017. China’s GDP grew by 6.8% in the first quarter of 2018, which is consistent with the last two quarters in 2017.

In the full year of 2017, FMCG growth rate reached a three-year high of 4.3%.

Modern trade (including hypermarkets, supermarkets, and convenience stores) grew by only 0.9% in the first quarter of the year in China. Across city tiers, provincial capitals, prefecture-level cities, and county level cities enjoyed faster growth, up by 2.8% collectively. Across regions, the West region has seen the strongest growth, up by 4.6%.

Leading Grocery Share of Modern Trade – National Urban China (%)

Note: Retailers in orange color are from Alibaba camp; retailers in blue are from Tencent camp.

Leading retailers taking sides either with Alibaba or Tencent

Among the top 5 retailers, Sun Art, Vanguard, and Walmart all strengthened their leading position and Yonghui surpassed Carrefour to be the No. 4 retailer in China.

As the only retailer in top 5 that enjoyed double-digit penetration growth, Yonghui’s share rose from 3.2% a year ago to 3.8% in the past 12 weeks in 2018. This performance has further been supported by the opening of 77 new stores in the first quarter of 2018. Yonghui has announced a bold plan to open 100 Yonghui Super Species and 1,000 Yonghui Life stores during 2018, with its O2O APP covering all its retail formats and 50% of overall business.

The first quarter of 2018 also witnessed the two Internet giants’ accelerated move into the offline world with various partnerships and acquisitions of key retailers.

The trend has continued into April when Vanguard Group announced its partnership with Tencent/JD. This would mean that the Tencent/JD camp would represent 21.7% share of the modern trade of FMCG. Further acquisitions are also being witnessed beyond the grocery sector, such as Alibaba’s full acquisition of Ele.me, the leading food delivery service, and investment into Easyhome, a home furnishing chain to broaden its offline reach and touch more areas of Chinese consumers’ lives.

E-commerce players trying to reinvent traditional trade

Kantar Worldpanel reported 26% growth in FMCG spends through e-commerce platforms in the first quarter of 2018. Both Tmall and JD.com are neck and neck in the B2C camp, yet YHD (acquired by JD.com in June 2016) experienced a continued loss of shoppers, with penetration falling from 1.5% last year to 0.6% in the latest quarter.

As e-commerce looks for new ways to drive traffic online, the key players are also turning to small format neighborhood stores and grocery stores.

In January, Tmall announced the opening of its first Tmall CVS in Hangzhou, transformed from a mom and pop shop. Alibaba applied big data and modern retail management system to help those traditional stores better optimize product procurement and assortment. JD.com also accelerated its pace in transforming the sector, with the ambitious plan in place to open 1,000 stores every day. Both are trying to extend their physical footprint to tap into lower-tier cities and rural areas where e-commerce penetration is still relatively low.

Check out new retail trend in China here or China’s luxury consumption trends in the new retail era.

This post was originally published on Kantar.com.

By the end of 2018, the global media investment industry is set to be worth over US$550 billion, according to GroupM. With this number growing and fast-moving consumer goods (FMCG) brands making up a quarter of that spend, understanding the impact of advertising is crucial.

Media investment vs sales

Kantar Worldpanel’s recent report Changing Media Success Measures showed that the short-term impact of any successful media campaign should be an uplift in sales. From our studies concentrating on the impact of media investment, we can see that, during a campaign, the average impact of advertising campaigns is 4.5% of the total sales of the FMCG brand during this period of time.

Or in other words, without the influence of the campaign, the sales of the brand during this period would have been 4.5% lower. (All effects are controlled by the presence of promotions, as well as the underlying equity or loyalty associated with each brand analyzed.)

Globally, only 8% of our researched ad campaigns had contributed more than 7.5% of total sales of their brands during campaigns.

How about the benchmarks in China? Kantar Worldpanel’s Consumer Mix Modelling has found that from 2016 till 2017, campaigns of FMCG brands have contributed an average of 4.0% of sales for their brands, lower than the global average. In 2017, the ratio was only 3.8%.

Category matters

The contribution to sales provides key benchmarks—particularly at the sector level, where we see the biggest differences. With an average uplift 20% higher than the global benchmark, beauty, and personal care, and homecare brand campaigns are the most responsive to advertising. Food and drink brands, on the other hand, see an average uplift of 3.8%—14% lower than the global figure.

When looking at media campaigns, considering your sector benchmark is key.

New vs existing shoppers

Advertising’s effectiveness should be measured not just by financials, but on how many new shoppers it has brought into the brand.

Two campaigns that generate the same level of sales might appear identical, but when we look through the shopper lens we can understand its true success. By knowing how many new shoppers a brand campaign has attracted, we can see advertising’s long-term impact.

From the shoppers who have been influenced by a campaign, more than one in three (37%) are new*. New shoppers attracted to the brand because of its advertising are likely to be lighter buyers initially. They may be testing the brand against a competitor they usually buy or entering a category for the first time. Therefore, the long-term gain comes in the opportunity to keep them in the brand.

Alongside attracting the all-important new shoppers, media spending also benefits a brands penetration through stopping existing ones from leaving. We see on average over a quarter of shoppers not leaving a brand due to the ad campaign that person has seen.

This means that in total 64% of shoppers are having a positive impact on brand penetration when we combine the new with those not leaving.

The third element we capture is existing shoppers increasing their spend, with 36% of people during a campaign behaving this way.

In China, new shoppers’ proportion is higher than the global average (42% vs 37%), while not-leaving consumers (25% vs 27%) and buying-more consumers (33% vs 36%) are both lower than global benchmark. It means that keep recruiting new shoppers are especially important in China.

The mix of new versus retained shoppers is particularly important when we look at the differences between big and small brands, which have an almost identical sales uplift coming from media. Our data shows that big brands tend to get a much higher proportion of their media sales from existing shoppers buying more, whilst smaller brands benefit more from attracting new shoppers.

When benchmarking the success of a campaign, as well as considering the sector you play in, it’s important to think about the size of your brand.

Find out top-selling Taobao brands in 2017 here.

This post was originally published on Kantar.com.

When China’s FMCG growth returns, it doesn’t automatically happen to every brand. Here are six key factors.

Kantar Worldpanel has reported that spending in fast moving consumer goods (FMCG) grew by 4.3% in 2017 from a year ago, which is 0.7 percentage point higher than that in 2016 and the fastest in three years. This signals the end of the FMCG slowdown China has experienced over the recent years. However, the recovery won’t automatically happen to every brand in the market. The key to sales growth is attracting more buyers to your brand—deepening penetration, getting more households in a particular market to buy. Kantar Worldpanel has validated this fact by looking at the correlation between sale changes and different consumer measures for more than 8,000 brands in 19 markets, including China.

To attract buyers to your brand, start by gaining insight into consumer desires and behavior and launch related products. For example, in China today, brands would benefit from introducing premium products that fit with long-term trends that value health, quality, and me-time.

In addition, brands looking to attract buyers should be talking to a wide range of consumers as often as possible in various ways, including: creative media advertising and marketing; presence in physical stores with as many products on shelf as possible; and promotions to get better exposure in store and expand consumption (without discounting too heavily).

But even for brands that do most things right, attracting buyers is a never-ending task, as within any given year at least half of the consumers you won last year will leave and most of all your buyers will only buy one time.

To help brands meet this challenge, we reviewed our extensive brand data, across categories and countries, and identified six key factors that together influence a brand’s ability to grow its buyer base: availability, innovation, price, assortment, promotion, and equity. Here are the details:

1. AVAILABILITY

Globally, the biggest differentiator between a growing brand and a declining brand is distribution. This is also true in China. E-commerce has enabled many brands to reach audiences beyond key cities, but for most brands, it does not replace the benefits derived from expanding presence in physical stores. Food and beverage is still overwhelming bought offline and has strong impulse element in brand and often category choice.

China is a huge country with the fastest growth happening in the western and central regions, meaning many areas that might have been considered too difficult to reach or not profitable now offer potential to widen a brand’s shopper base.

2. INNOVATION

Brands constantly launch new variants in order to try and attract new shoppers. In practice, though, we do not see a strong correlation overall between the percent of sales gained from new products and whether the brand is growing or not.

This makes sense when we dive deeper into the data. In China’s fast-moving consumer goods (FMCG) market over the last three years, 43% of the new SKUs launched from the top brands came from either a new pack size or pack type. Small changes to the current line-up do not result in significant incremental growth, as they do not offer anything new enough to enter into the consideration set of more buyers.

The most reliable way to innovate and gain incremental sales is through offering a more premium product. This is especially true in the snacking and beauty categories, as shown when shoppers are willing to pay more for imported brands and better quality ingredients.

Dairy is also a category with a lot of incremental innovation as a result of trading up consumers through offering new products promising greater health benefits and exciting flavors. These include organic lines, such as ChangQing yogurt from Yili and Mengniu’s TLS yogurt, which operates at a price premium and won fans with its durian fruit flavor.

3. PRICE

Chinese consumers are trading up their products across most categories in FMCG. In China, brands losing penetration tend to be 20% cheaper than average, showing that success is driven by tapping into the premiumization trend. Brands offering products that feed into wider macro trends in the Chinese middle class are more able to command a price premium.

One megatrend is health and wellness, and it is expressed in the fast growth of organic and imported food, but also in related habits, such as gym membership and use of fitness apps. Another theme is the desire for small indulgences, where shoppers are looking for high-quality treats.

4. ASSORTMENT

Having more products on the shelf is a strong way of predicting whether a brand is growing or not. For example, 22% of the fastest growing brands in China increased their range size, while only 3% of the worst performing did. Although innovation of new flavors and pack sizes does not necessarily lead to brand growth, they can help if you are able to use these offerings to expand the space you have on the shelf.

Growing brands are launching SKUs that are more attractive to retailers, to consumers, or to both. While sales share for these innovations is not any greater, these sales are incremental to the brand portfolio, rather than simply substitute sales in the existing range.

5. PROMOTION

Applying price discounts or providing extra volume does not lead to long-term brand growth; however, they are an unavoidable part of managing an FMCG brand. Everyone buys on promotion and 46% of all FMCG volume in China is sold on the deal. The key to getting the best out of promotions is to seek to make them incremental to your brand and also the category. One way to do that is through larger packs and bundles, as these load up shoppers and have the effect of increasing their consumption rates. All categories have some expandability; however, big winners are snacks, ambient dairy, and soft drinks.

One caution for designing your promotional plan: Avoid very large discounts (ideally those over 30%) as these can have a negative impact on category sales value, and also can be detrimental for the retailer when going above 45% off the average price.

6. EQUITY

Mental availability—awareness and consideration—still correlate well with brand growth. Increasingly, e-commerce is shortening the path-to-purchase, as the wealth of product information that can be accessed online enables consumers to go from being unaware to being ready to purchase, sometimes in a single sitting. This does not mean that old ways of advertising are obsolete, as many FMCG categories are still purchased offline. And while there is a higher chance of switching to more premium and imported brands, the larger offline players still have strong online sales share.

Continue to read: How does Tencent’s QQ influence the young?

This post was originally published on Kantar.com

Spending on fast moving consumer goods (FMCG) in China grows by 4.3% from a year ago, which is 0.7 percentage point higher than that in 2016 and the fastest in three years.

Kantar Worldpanel reports the spending in fast moving consumer goods (FMCG) in 2017 grew by 4.3% year on year, which is 0.7pt faster than 2016. This signals the end of the slowdown China has experienced over the recent years and gives optimism to FMCG manufacturers and retailers looking to expand their footprint and recruit even more shoppers in 2018.

Across all regions, the West and North regions reported a more upbeat trend, up by 6.0% and 4.7% respectively, contributing to the overall growth of China. Modern trade (including hypermarkets, supermarkets, and convenience stores) grew by 2.6%, while last year this channel grew only 1.6%. Leading modern trade retailers strived to introduce new business models as well as O2O (online to offline) initiatives to actively meet the demand of Chinese shoppers in the “New Retail Era”.

Most top players getting stronger

Most of the top retailers in China performed strongly in 2017, thanks to both new store openings and expanding their format portfolio. Sun Art group continued to strengthen its position, growing their share from 8.1% to 8.4% on annual basis, while Yonghui remained the fastest growing player, with 0.3 share point increase year on year.

Armed by its new Super Species format (supermarket + fine dining) and YH Life (neighborhood store + O2O delivery), Yonghui went from strength to strength, overtaking Carrefour and becoming the fourth largest retailer on the Chinese mainland in the last quarter of 2017. Amongst the regional players, Bubugao Better Life, Wumart and SPAR continued to outperform their peers through aggressive regional expansions and their embracing of new retail initiatives. International retailers as a group further weakened in 2017, with share reduced from 11.1% in 2016 to 10.3% in 2017.

Last year, tech giants Alibaba and Tencent were moving from the online world to the offline world by putting their investment into the heated retail battle between supermarkets. By end of 2017, the Tencent/JD camp (including Yonghui, Carrefour, BuBuGao, and Walmart) reported 12.8% share, higher than 11.1% recorded by Alibaba camp (Sun Art and Balian). Both giants are embarking on the active transformation of the Chinese retail infrastructure in a number of different ways.

60% of urban families buy FMCG online

Kantar Worldpanel reported a strong growth of 29% in FMCG spend by e-commerce year on year. In 2017 60% of China urban families purchased FMCG online, 5.4 percentage points higher than the previous year. In Key cities, almost 70% of households purchase FMCG online. Furthermore, higher frequency also contributed to the growth as online shopping becomes more of a routine in consumers’ lives, fuelled by the rapid growth of mobile e-commerce. In 2017, shoppers purchased FMCG from e-commerce on average 7 times a year.

What is in store for 2018?

1. Further integration between online and offline

The China retail market will see more equity investments from e-commerce & tech giants such as Alibaba, Tencent, and JD. The integration is set to help accelerate the recovery of modern trade, by directing consumer traffic back to the brick and mortar stores and utilizing the distribution network to deliver to consumers in a faster and more cost-efficient manner. The integration will also see offline stores carrying the best-selling merchandise from e-commerce platforms, as is evident from RT-mart’s recent listing of best-selling items from Tmall, as well as the optimization of assortment in grocery stores empowered by Tmall and JD.

2. Fresh food as super entry point and growth engine

According to Kantar Retail’s analysis, e-commerce’s expansion roadmap should follow this logic:

1) Start from categories of a low degree of standardization and the low proportion of fulfillment cost against total product sales (such as long tail products sold by massive numbers of small third-party online sellers). This was marked by the birth of Taobao.com, also now the expansion direction of JD.com;

2) Enter categories of a high degree of standardization and preference for authentic products as well as a low proportion of fulfillment cost against total product sales (such as digital gadgets, home appliances, cosmetics, parenting and infant products). This was marked by the birth of Tmall, JD.com, and Suning.com;

3) Expand to categories of a high degree of standardization as well as a high proportion of fulfillment cost against total product sales (such as packaged foods, especially high frequency purchasing items like drinks, which require efficient logistics system). This was where Yihaodian began its business and where Tmall and JD.com are both fighting for;

4) The last categories are those of low degree of standardization as well as a high proportion of fulfillment cost against total product sales, which means fresh groceries. At this phase, the logistics infrastructure and consumers’ demands are mature.

Kantar Worldpanel reports that the spend in fresh food in the latest 52 weeks ending November 2017 grew by 38% in e-commerce channels, as more fresh food specialists are expanding their logistic capability and assortment to attract more online shoppers. Given its high frequency and essential role in the grocery basket, fresh food is a key destination category for both brick & mortar retailer and e-commerce giants. As Hema aggressively expanded its franchise nationally and JD launched its 7 Fresh formats, more traditional retailers are following suit to fight for the most resilient consumer demand. The battle will intensify in 2018, as more focus is put on fresh to fight for a bigger slice of pie.

3. Innovative store formats to be deployed and expanded

The pure big-box format in China struggled to grow amongst younger middle-class shoppers as the result of an increase in the more appealing hybrid concept formats. While the Hema model will be increasingly duplicated, unmanned stores are the new favorites with investors although scalability and profitability remain questionable. Dmall APP + physical store network will expand to more retailers, helping them to capitalize existing store assets through tech empowerment.

4. Regional players will seek more alliance

At regional or provincial level, the FMCG market remained fragmented and this indicates more room for cross-provincial expansion and acquisition. With its investment in Zhongbai and Hongqi, Yonghui was able to expand its presence into adjacent provinces where local market leaders dominate. SPAR, on the other hand, developed more franchises in Hebei and Yunnan over the past two years, as well continuing its organic expansion within its existing partners’ territories. In China, the West and North regions see more opportunities for further consolidation.

5. Social commerce will drive content-based shopping

The rise of WeChat, not just as a messaging app, but as a place where people shop online, is one to watch in 2018. In 2017, the WeChat channel achieved a staggering 52% growth and accounted for 1.4% of FMCG spending according to Kantar Worldpanel.

Though still relatively small, it represents a promising growth engine as Tencent began a serious push to open up its platform for developers to build e-commerce stores and a wide range of online services. As WeChat’s wallet allows users to seamlessly make an in-app purchase and social networking allows users to influence each other’s buying decisions, social commerce is also expected to facilitate sales conversion for all stores.

Cross-border online shopping trends in China 2018

This article was originally published on Kantar.com

P&G, Yili, and Mengniu each attracted more than 150 million families during this period. Those three companies reported 92.8%, 89.6%, and 88.1% penetration respectively. In terms of buyer growth rate, Nongfu Spring (9.4%), Haday (5.3%) and Yili (5.1%) are the top three performers.

Related: Over 10K FMCG brands sales 2x on JD; FMCG sales up 7%

Read the latest news on China FMCG market.

Kantar study shows that even in the New Retail era driven by disruptive technology and business models, the largest brands in China attract the most buyers and the fastest growing ones are finding more buyers than the competition.

Out of the 21 companies reaching 100 million Chinese families, 12 of them are Chinese companies, who on average recruit new buyers faster. Yet in urban China, only P&G managed to reach more than 90% of the Chinese families, indicating there is still substantial room for other ambitious players to grow their buyer base.

In order to be successful, manufacturers will have to explore the most effective ways in which to tap into new opportunities and introduce new products that fulfill the needs and wants of Chinese consumers. Companies are increasingly required to adopt an integrated approach to the offline and online world to grow new shoppers.

Winning the trading up game in lower-tier cities

Lower-tier cities in China are benefitting from a shift of investment in infrastructure and employment. Higher birth rates and changes in lifestyle will help accelerate the pace of trading up and provide many opportunities for brand growth.

Manufacturers are keen to capture this consumer spending wave with targeted marketing activities helping consumers in the lower tiers to broaden their brand repertoires. Ambrosial, the premium ambient yogurt brand under Yili, rode the category’s premiumization wave with strong above-the-line advertising and sponsorship of top-rated reality TV shows.

It relied heavily on digital marketing to engage shoppers on multiple touchpoints to strengthen consumers’ consideration. The brand added 12 million new families in the lower tier cities during the 52 weeks to October 2017.

Libai, another local giant, strove to build consumers’ acceptance of liquid laundry detergent in lower-tier cities, with the sponsorship of popular TV programmes and engagement on social media resulting in more than 3.1 million new families in the lower cities buying Libai liquid detergent products.

Create new occasions to drive demand

In those highly competitive categories, successful companies are creating new purchase and usage occasions resulting in better brand recognition and more buyers. Nongfu Spring managed to establish new usage occasions such as cooking and tea making for its water product which has led to an increase in demand. Kantar Worldpanel data indicated its 2 liters bottled water attracted over 2 million new families over the past year.

Haday group, China’s seasoning specialist, stayed in touch with consumers’ appetites across different regions. The company demonstrated different consumption occasions through innovative means for its soy sauce and oyster sauce products for different cuisines and inspired connections between the brand and the occasion.

Over the past year, Haday soy sauce and oyster sauce added 4.3 million and 6 million new buyers respectively.

Maximize penetration through the omnichannel deployment

Brands in 2017 are focusing more on winning consumers at each of the critical touchpoints, empowered by insights and technology. Over the past year, more than 58% of the Chinese urban families bought FMCG from the e-commerce channel and most of them started to buy big brands through e-commerce platforms.

The mainstream e-commerce players are often now chosen as the first channel for new product launches, hence becoming increasingly critical in winning the trial.

According to Kantar Worldpanel, P&G attracted 20 million consumers to buy its products online, well ahead of competitors. Nongfu, Hengan, and Colgate are top performers in the buyer growth rate in the e-commerce channel.

8 Strategic segments of China’s online consumers

This article was originally published on Kantar.com

In 2025, e-commerce will represent 10% of all FMCG spend. China and US will lead in volume growth while China and Korea will be fastest growing markets.

Sales of fast-moving consumer goods through e-commerce platforms grew by 30% in the 12 months to March 2017, equivalent to 4.6% of all FMCG sales globally during this period, according to the report “The Future of E-commerce in FMCG” recently published by Kantar Worldpanel.

Whilst the e-commerce channel is growing, the FMCG market as a whole is sluggish, increasing just 1.3% during the same period. E-commerce now contributes to a record 36% of global FMCG growth and will continue to outpace growth in offline FMCG retail. “Our projections show that in 2025, online FMCG will be a US$170 billion business and hold a 10% market share,” says Stéphane Roger, Global Shopper and Retail Director at Kantar Worldpanel.

Whilst the e-commerce channel is growing, the FMCG market as a whole is sluggish, increasing just 1.3% during the same period. E-commerce now contributes to a record 36% of global FMCG growth and will continue to outpace growth in offline FMCG retail. Our projections show that in 2025, online FMCG will be a US$170 billion-dollar business and hold a 10% market share.

In China, e-commerce channel evolved rapidly and in the latest year, approximately 60% of urban families shopped in e-commerce channel. According to Jason Yu, General Manager of Kantar Worldpanel Greater China, e-commerce giants gradually moved offline and started to transform the entire retail infrastructure. This helps to provide consumers with a better shopping experience and enable brands to achieve incremental growth.

In terms of absolute value growth, the top six contributors are all leading power economies, led by China and the United States. The other top performing countries are South Korea, the UK, Japan, and France. Last year, value increased by 52% in China, 41% in South Korea, 8% in the UK, 7% in France and 5% in Japan and in the US.

Kantar Worldpanel projections show that by 2025, online FMCG will be a USD 170 billion-dollar business, and hold a 10% total market share.

South Korea and China will continue to lead the way and Asia in general remains at the cutting edge of online adoption. The big global uplift will come from the USA, predicted to rise from a 1.5% e-commerce share in 2017 to 8% in 2025. This can be attributed to the successful rollout of click and collect, delivery and subscription models, and the acceleration of disruptive models.

This article was originally published on Kantar.com

Chinese urban consumers’ spending in fast moving consumer goods (FMCG) in the third quarter of 2017 grew by 3.6% from a year ago, indicating a clear recovery.

Kantar Worldpanel reports the Chinese urban consumers’ spending in fast moving consumer goods (FMCG) in Q3 2017 grew by 3.6% on 12-month basis, indicating a clear recovery for the industry.

Offline channel grew by 2.2%, which is slower than the total trade. However, modern trade (including hypermarkets, supermarkets, and convenience stores) did report higher growth at 2.9%, suggesting consumers are returning to brick and mortar stores as they create better shopping experiences through technology innovation.

Four key cities (Beijing, Shanghai, Guangzhou, and Chengdu) and provincial capitals grew slightly faster, up 3.7%. Across all regions, the West and South markets reported a more upbeat trend, up by 6.0% and 4.2% respectively.

Sales rebound in offline

Leading Grocery Share of Modern Trade – National Urban China (%)

Local retailers continued to outgrow their global counterparts during Q3. The Sun Art group lifted its share by 0.4 percentage point over the same period last year, driven by successfully growing the size of shopper’s baskets. Yonghui and BuBuGao kept growing by opening more new stores. Within the first half of 2017, Yonghui opened 64 stores and BuBuGao opened 22 stores. It largely helps to strengthen their position, and both of them gained 0.2 percentage point share during this quarter.

Amongst international retailers, Walmart and Carrefour started to see meaningful share recovery. Although they are still closing non-performing stores, they are proactively reformatting their existing stores to be more competitive and appealing to shoppers.

They are introducing new stores which are 30% to 50% smaller than the old ones to make their merchandises more accessible while reducing the sales area for durable goods. In June, Carrefour opened its first Easy Carrefour store in Wuxi and this is the first time the retailer introduced the smaller format store outside its home base in Shanghai. More recently it launched its own digital wallet “Carrefour Pay” together with Union Pay to facilitate more mobile payments in store.

Apart from that, in order to seek growth in the new retail era, most of the top 10 retailers adopted a more aggressive O2O (Offline and Online) strategy, by providing an integrated shopping experience with multi-channel offers.

For example, Yonghui works with JD.com’s platform to deliver its fresh produce and essential grocery items to consumers within one hour. They also introduced their own APP Yonghui Life in selected cities to expose to consumers directly.

More Chinese E-commerce players moving offline

Kantar Worldpanel reported a robust 24.3% growth in FMCG spend through E-commerce channel in this quarter. Now e-commerce accounts for 7.4% of FMCG spend in the latest 52 weeks ending September 8, which is 1.7 points higher than the same period last year.

China’s Online Retail Trends of Devices Sales in Q3 2017

This article was originally published on Kantar.com.

The emergence of new retail formats substantially impacts the traditional physical retail industry, with modern consumer behavior also experiencing drastic changes. In the face of dramatic changes in the world today, how can entrepreneurs adapt to the new needs of the increasingly sophisticated and discerning consumers today?

How can we target the Chinese market, as well as designing a performing and balanced multi-channel strategy? Nielson compiled “China’s New Retail Whitepaper” using online retail sales data analysis coupled with consumer insights study, to answer these questions.

Nielson China’s general manager Wei Shao mentioned: “In the early days of the e-commerce markets, purchase methods of online shoppers are very simple, firstly, search followed by comparing products, buying them, and lastly leaving feedback. However, in today’s new retail environment, the trend that we can observe are marketing contacts, sources of information, rapidly increasing channels”.

Internet shoppers tend to be richer, younger, and highly educated

Nearly 58% of Internet consumers’ household income in China is above 10,000 yuan, but only 21% of offline consumers meet this level of income. More than half of online consumers (64%) are aged between 18-35 years, but only around 45% of offline consumers fall in this range. In addition, 77% of China online shoppers have a bachelor’s degree or above – significantly higher than 41% of offline shoppers.

Online and offline consumers have different mentalities 

China’s online shoppers value ‘quality products’ and ‘special discounts’ and care about whether the goods are affordable while offline consumers value service and experience. Nearly 24% of consumers mentioned they like online ‘leisure shopping’. Nearly 24% of consumers like online ‘casual shopping’, while 11% said they would buy special offer items during holiday seasons through online platforms.

Nearly 24% of consumers mentioned they like online ‘leisure shopping’. Nearly 24% of consumers like online ‘casual shopping’, while 11% said they would buy special offer items during holiday seasons through online platforms.

Most online shoppers (44%) will often visit more than 3 electronics business platforms, while offline shoppers are generally fixed to 2 physical retail stores (51%). Even if electronics business continues to grow, online shopping is still unable to give up the physical channels. Online and offline consumers are looking at different requirements. As a result, while online retailers are developing strategies, they pay attention to clear product differentiation, and offline retailers focus on the difference between service and experience, to avoid falling into price competition.

Online and offline Chinese consumers are looking at different requirements. As a result, while online retailers are developing strategies, they pay attention to clear product differentiation, and offline retailers focus on the difference between service and experience, to avoid falling into price competition.

More than 51% of the respondents will buy niche products online, while only 30% of consumers will go to the store to buy niche products.

Enhancing The Effectiveness of Marketing Channels 

Retailers need to find the most effective combination of ads to accurately target consumers. According to Nielson Promotion Effectiveness Report, about 76% of the promotional activities are unbalanced. Most consumers will be in 3 exposure points to complete a purchase – and to advertisers, the most effective online contact number is 5.4.

Master the festive and rural markets’ huge business opportunities 

Chinese consumers are more likely to be impressed by discounts and are extremely sensitive to promotional news. According to Nielson’s retail audits and online retail monitoring, it can be observed that last year’s New Year’s Day holiday and “Double 11” shopping festival along with FMCG sales growth, led to the growth of the whole channel.

In addition, in recent years the government announced the investment of 140 billion yuan to provide 98% of the rural areas with broadband by 2020, and electronics business giants Alibaba, Jingdong, Suning cloud business are actively developing the rural market, promoting the electronics business trend. For the online retail market, the purchasing power of the rural market will continue to act as another important growth engine.

Rethinking Positioning of The Physical Stores

According to Nielsen’s latest retail monitoring data and the Chinese consumer confidence survey, despite online FMCG driving the overall sales growth by 29%, the offline sales channel still accounts for 74% of the country’s FMCG sales.

At least in the near future, physical stores will not disappear. However, they will convert roles, and follow the vigorous development of the electronics business, and changes in modern consumer behavior.

The Chinese Ministry of Commerce (MOFCOM) views the fast-moving consumer goods (FMCG) market and industry in China with increasing optimism going into the second half of 2017. On the backs of China’s ongoing supply side reforms, MOFCOM sees an upswing in innovation and internal market development. 2016 saw a rapid increase in the number of FMCG enterprises as well as a significant increase in sales figures. New, big-data driven solutions began to enter the market, but major challenges remain for the FMCG industry.

STATE OF THE INDUSTRY

At the end of 2016, there were some 18.1 million businesses within the FMCG sector, an increase of 5.2% from 2015; of these, 2.45 million were corporate entities, which was an increase of 28%, a shift MOFCOM believes reflects increasing sophistication on the part of FMCG enterprises. Total sales of FMCG reached 29.65 trillion yuan (US$ 4.36 trillion), an increase of 10.4% from 2015.

Profits among mid- and large-sized enterprises remained stable, growing 3.8% to reach 165 billion yuan (US$ 24.2 billion). While the ROI for mid- and large-sized enterprises fell slightly to 3.64%, gross profit ratio increased slightly to 9.72%. There may be the beginnings of a reduction in corporate debt in this

Profits among mid- and large-sized enterprises remained stable, growing 3.8% to reach 165 billion yuan (US$ 24.2 billion). While the ROI for mid- and large-sized enterprises fell slightly to 3.64%, gross profit ratio increased slightly to 9.72%. There may be the beginnings of a reduction in corporate debt in this

Profits among mid- and large-sized enterprises remained stable, growing 3.8% to reach 165 billion yuan (US$24.2 billion). While the ROI for mid- and large-sized enterprises fell slightly to 3.64%, gross profit ratio increased slightly to 9.72%. There may be the beginnings of a reduction in corporate debt in this sector, but the evidence is still lacking; at the end of 2016, the debt-to-capital ratio of these mid- and large-sized enterprises fell to 72.3% from 2015’s 72.8%.

Within the FMCG sector, the online retail market remained a bright spot, with consumption rapidly expanding even as quality and safety within the market increases. Online sales hit 5.16 trillion yuan (US$ 759 billion), an increase of 26.2% from 2015; online FMCG sales were 4.19 trillion yuan (US$ 616 billion), an increase of 25.6%.

The market for physical retailers showed some signs of warming up in 2016, especially in convenience and local stores, malls, and supermarkets. However, there were signs of an increasing divergence within the physical retail sector between department and specialty stores (which showed sales growth of 1.3% and 3.1% respectively) and supermarkets and malls (with the growth of 6.7% and 7.4% respectively).

The market for physical retailers showed some signs of warming up in 2016, especially in convenience and local stores, malls, and supermarkets. However, there were signs of an increasing divergence within the physical retail sector between department and specialty stores (which showed sales growth of 1.3% and 3.1% respectively) and supermarkets and malls (with the growth of 6.7% and 7.4% respectively).

The market for physical retailers showed some signs of warming up in 2016, especially in convenience and local stores, malls, and supermarkets. However, there were signs of an increasing divergence within the physical retail sector between department and specialty stores (which showed sales growth of 1.3% and 3.1% respectively) and supermarkets and malls (with the growth of 6.7% and 7.4% respectively).

The market for physical retailers showed some signs of warming up in 2016, especially in convenience and local stores, malls, and supermarkets. However, there were signs of an increasing divergence within the physical retail sector between department and specialty stores (which showed sales growth of 1.3% and 3.1% respectively) and supermarkets and malls (with the growth of 6.7% and 7.4% respectively).

CHALLENGES

There are also major challenges ahead for China’s FMCG industry. Retail floor space in 2015 was 53.8% larger than in 2011 but was concentrated in Eastern China, cities, and department stores and supermarkets. This has led to an “unbalanced network” problem in which Western and rural China are underserved, as well as a “last mile” problem in which there are far fewer local and convenience stores than in the similar Japanese and Taiwanese markets (54 per million people in China vs. 425 in Taiwan).

Additionally, increasing costs have placed pressure on profit margins within the industry. While purchasing costs grew at a rate lower than sales growth (2.0% vs. 2.7%), labor costs grew at 4%, much faster than sales growth. Rent costs, meanwhile, have virtually doubled since 2011. Additional cost pressure comes from logistics, which consumes some 14.9% of GDP and a similar proportion of costs within the FMCG industry.

Rent costs, meanwhile, have virtually doubled since 2011. Additional cost pressure comes from logistics, which consumes some 14.9% of GDP and a similar proportion of costs within the FMCG industry; this figure has fallen recently, but is still approximately twice the ratio found in developed markets (USA, Japan, Germany).

Big data, while offering a way forward for FMCG retailers, is as yet still in its infancy; data gathering is still limited by the lack of POS (card) transaction data and prevalence of a cash economy, though online payment apps promise to change this lack. The use and analysis of existing data are still in its infancy. Quality, safety, and fairness, especially within online markets, is still a point of concern; fraud, false advertising, and lack of accountability are still commonplace.

Consumer association data (which must be regarded as incomplete) shows a 2.3% increase in complaints and a whopping 65.4% increase in complaints directed at online retailers. Similarly, data safety is an issue; some 51% of online accounts have suffered from data links leading to spam and telemarketing, while losses to ID theft and fraud reached 91.5 billion Yuan (US$ 13.5 billion).

Quality, safety, and fairness, especially within online markets, is still a point of concern; fraud, false advertising, and lack of accountability are still commonplace. Consumer association data (which must be regarded as incomplete) shows a 2.3% increase in complaints and a whopping 65.4% increase in complaints directed at online retailers. Similarly, data safety is an issue; some 51% of online accounts have suffered from data links leading to spam and telemarketing, while losses to ID theft and fraud reached 91.5 billion yuan (US$ 13.5 billion).

PROSPECTS

Looking towards industry prospects, MOFCOM sees a new round of change in the FMCG sector. In addition to major activity and growth within the online retail markets, there is increasing integration of on- and offline sales and payment methods, and online payment software has increased in efficiency, security, and versatility. These trends have allowed for better integration of sales channels and increasing digitalization on the part of physical retailers.

Big data and cloud computing applications are becoming more commonplace, providing better targeted marketing and more convenient payment. This will, in MOFCOM’s view, make it easier for enterprises to position themselves, their brands, and their products within a competitive market.

Consumer spending habits are undergoing major changes. In addition to the normal slow increase in consumer spending, there have been significant improvements in consumer sentiment surveys from mid-2016 on. Consumer expectations, as regards purchases, have shifted towards health and quality of life rather than fulfilling basic needs. Consumer spending increasingly rewards healthy or green goods, high-quality durables, smart goods, and luxuries, and is increasingly conducted online.

CONCLUSION

Despite the challenges, the advent of big data-driven strategy and planning, the shift to online retail, and the integration of physical retail with “wired” methods of payment and sales channels are driving major changes in business models for FMCG enterprises. These changes, as well as changes in the economic climate, regulatory environment, and environmental sustainability will continue to transform this industry in China.

How to satisfy Chinese consumers’ demand in digital retail era

The spending growth of China’s FMCG market showed to 2.9% in 2016 from 3.5% in 2015, according to Kantar Worldpanel. The growth of hypermarkets, supermarkets, and convenience stores slowed to a growth rate of just 0.7% in 2016。

However, counties in China grew by 5% YoY and the west region expanded its sales by 6.6% in 2016.

Local Chinese retailers continued to outperform international retailers in China in 2016. Sun Art increased its share from 7.5% to 7.8% while Yonghui remained the fastest growing player in 2016.

53.5% of China urban families purchased FMCG online. Kantar Worldpanel reported a staggering 54% growth in FMCG spending through e-commerce channel. China online retail sales grew by over 26% in 2016.

14 Chinese companies from China and Hong Kong made it to Deloitte’s top 250 retailer list.

Also read: China cross-border e-commerce insights 2016/2017

China FMCG online B2B market, targeting traditional trade retail stores, will grow to 330 billion yuan (US$48 bn) in 2018 from 40 billion yuan in 2016 according to Kantar Retail.

The five major FMCG B2B players in China include Huimin.cn, JD.com Xintonglu, Jinghuobao, Lingshoutong and ZhangHeTianXia.

Most brand manufacturers in China have focused their business on modern trade and e-commerce; but, traditional trade is still the biggest channel of China’s retail market. Traditional trade provides a place for residents to socialize since most customers are regular and familiar with each other in the community.

Highly fragmented FMCG traditional trade comprises nearly 7 million local stores across all city tiers.

Nearly 55% of the manufacturers has more than 200 distributors to operate traditional trade.

FMCG B2B companies in China grow rapidly with capital support. However, the industry is still at its beginning:

The top e-commerce platforms in China are JD, Tmall, and YHD in 2016 according to Kantar Retail.

Top 10 e-commerce platforms in 2016 based on comments from more than 200 participants from FMCG manufacturers are:

1. JD
2. Tmall
3. YHD
4. vip.com
5. Amazon
6. Suning
7. Jumei
8. Xiaohongshu
9. sfbest.com
10. Feiniu

The top roles of of e-commerce according to Kantar survey:

1. Additional sales channel
2. Brand building
3. Stronger communication with consumer/shoppers
4. Penetrating lower-tier cities or markets
5. Additional profit
6. An efficient way to enter new brands / new products into the China market

22 fast moving consumer goods (FMCG) companies reached over 100 million urban Chinese households during the 52 weeks ending October 7, 2016 according to Kantar Worldpanel.

P&G led the 22 FMCG companies reaching 93.4% or 154 million urban families, followed by Yili (88.2%) and Mengniu group (88.1%).

Top 22 FMCG Companies in China (million households)

39 million urban families bought products from those 22 companies via e-commerce channel. P&G attracted 15 million urban families online and led the way. Mengniu, Yili and Orion are the companies with the most rapid growth in e-commerce in buyer terms. Amongst all players, Colgate saw the biggest e-commerce only buyer base, with 1.1 million families purchasing its products exclusively online according to Kantar.

Online and convenience stores in China are enjoying strong momentum while supermarket growth continuously slowed and hypermarket sales even declined according to Kantar Worldpanel.

Chinese shoppers’ online purchase have expanded to wider range of categories and more imported goods. Imported FMCG items are four times more likely to be purchased online than in physical stores according to the report by Kantar.

The online sales of FMCG goods in China grew by 36.5% in 2015 from a year ago. In 2013, 40% of online sales growth comes from switching from offline channels. It jumped to 47% in 2015.

Among China’s top 10 convenience retailers, only FamilyMart and 7-Eleven have a national footprint across Tier-1 cities, with the others still maintaining a regional focus.

Growth of the number of China’s top convenience retail outlets 2013-2015

93.3% of urban Chinese families have bought or received imported FMCG goods in the 12 months ending June, 2016 according to Kantar.

Consumption of imported goods also grew 18% in the 12-month period than in 2015 in China, 6 times faster than the market average. Imported goods online sales grew by 60% from a year ago, while gift channel accounts for almost one third of the import food Chinese consumers bought/got.

According to Kantar Worldpanel, this was not only driven by imported milk, but also categories such as coffee (+32%), instant noodles (+29%), snack (+26%), etc.,

said Jason Yu, General Manager of Kantar Worldpanel China.

China DSP market is estimated to reach RMB 23.5 billion (USD 3.47 billion) in 2016 according to iiMedia Research. And, mobile DSP market is to reach RMB 13 billion (USD 1.92 billion).

China DSP market is estimated to reach RMB 47.19 billion (USD 6.97 billion) in 2018 according to iiMedia Research. And, mobile DSP market is to reach RMB 33.56 billion (USD 4.96 billion) in 2018.

The top three categories of DSP advertisers are from e-commerce (19.1%), gaming (17.4%), and finance (12.9%).

Advertisers from Beijing, Shanghai, Guangzhou, Shenzhen, and Hangzhou account for over 70% of total mobile DSP advertisers. 46.2% mobile DSP advertisers are for branding; 35.1% performance based; and, 18.7% are local advertisers.

By mobile DSP ad spend, the top category is automotive (15.5%), followed by e-commerce (14.3%), gaming (12.6%) and FMCG (12.1%). The top category with the most DSP ads placement is gaming (19.5%), followed by social networking (17.3%), news (14.3%), video (12.6%), women (10.1%), finance (9.2%) and automotive (8.1%).

China online FMCG has grown by 47% in a 12-month period ended in June 2016 according to Kantar Worldpanel.

E-commerce share of total FMCG sales reached 4.4% globally and 4.2% in China with 47% growth rate. In 2025, online FMCG will grow to become a US$36 billion business with a market share of 15% according to Kantar.

In China, 50% of FMCG’s online sales is beauty, which had an increase of 8.1% in sales after one year.

Chinese urban consumers’ spending in fast moving consumer goods (FMCG) in the third quarter of this year grew by 3.6% from a year ago, according to Kantar Worldpanel. It is lower than 4.6% in second quarter, but still the second fastest growth since the second quarter of 2015.

Lower tier cities still grew faster than higher tier cities, especially county level cities (4.7%) and counties (4.2%). The combined share of international retailers dropped to 11.6% in third quarter from 12.1% in a year ago. Walmart, the leading international retailer in China, is embracing the omni-channel strategy by increasing its shareholding of JD to 10.8% in mid-October and the opening of a global purchase flagship store on JD.com. Walmart’s offline share declined 0.1 of one percentage point to 4.7% in third quarter 2016 compared to the same time last year due to strong competition from local leaders Sun-Art Group and Yonghui.

Kantar Worldpanel reported 4.7% growth rate in China’s fast-moving consumer goods (FMCG) market for the last 52 weeks ended September 11th 2015. The overall market in the third quarter increased by only 2.7% in sales volume which decreased to a record low in recent three years.First-tier and second-tier cities grew by only 0.7% compared the previous quarter this year in transactions while small and less developed cities maintained a high growth rate of 6.5% in FMCG sales. Traditional shopping malls, supermarkets and convenience stores in key cities tended to pace at rush of booming online shopping market.

International retailers continued to lose competitiveness in Chinese FMCG retail market. Market share of international retailers in the third quarter of 2015 was only 13.5%, one percentage point down compared to Q3 2014. Compared with fast expansion to small and less-developed cities by local retailers, international merchants were losing advantages in brand and fame especially in large cities due to high pricing. The penetration rate of international retailers in China dropped to 29.6% in Q3 according to Kantar Worldpanel.

Contrast to the sluggish of offline retail market, Chinese online FMCG market continue to maintain a high growth rate. The total transaction value online has reached over 60 billion (US$9.46 billion) this year. However, online sales of FMCG products only made up 3% to 4% of the total online retail market. In 2015, nearly 40% of families purchased FMCG products through online stores, representing 6 percentage points higher compared with the same period last year.

E-commerce in China was expected to reach US$672.01 billion in 2015, accounting for over 40% of global e-commerce retail sales according to eMarketer.

Also read: China E-commerce Market to Reach US$3.8 Trillion in 2018

Chinese online shoppers prefer to take advantage of the occasional promotions to buy imported goods; and, they also prefer imported goods at promotions, accounting for 65% of online FMCG (fast-moving consumer goods) sales according to Bain & Company and Kantar Worldpanel research.

Online shoppers are very interested in imported goods and goods on sales, which is one of the biggest features of China online shopping. About 38% of online sales come from big online activities such as Double 11 and Double 12. Alibaba revenues reached 57.1 billion yuan (US$8.98 billion) on Double 11 2014, which set a record  in history of online shopping. Imported products are also very popular on the internet, which accounts for about 40% of total online sales while offline only for about 10%.

China FMCG market grew by 5.4% in 2014; the growth three years ago was 11.8%. However, online FMCG sales grew by 34% in 2014. 60% of online retail sales came from newly created demand while 40% as replacement of offline sales.

The variety of FMCG goods Chinese consumers buy online are limited. Skin care products, baby formula milk powder and baby diapers, health-related, and easy delivered goods sell best online. Top ten popular online FMCG  sales categories account for 77% of the total online sales while the offline only 43%.

Chinese consumers are likely to purchase overseas goods and luxury or upscale goods although sometimes that prices online are much higher than those offline. For example, the average price of toothbrushes online is 102% higher than that of offline, as well as beer and hair conditioner.

Also read: China E-commerce Market to Reach US$3.8 Trillion in 2018