China’s grocery market competition is good news for seafood exporters

Published on
January 12, 2018

There will be some who’ll challenge some assertions made by online retailer JD.com recently as it launches what it claimed as the country’s “first high-end grocery chain.”

Serving up salmon, lobster and crab, the new 7FRESH grocery chain is JD.com’s venture into a space already serviced by two other big Chinese Internet players, Alibaba and Tencent. 

JD isn't new to the grocery scene, as has been offering fresh food online since 2012 through JD Fresh, which is launched an independent fresh food business unit in January 2016 after building what it claims is “China’s largest nationwide cold-chain logistics network.” Its fresh and frozen seafood and meat products are sourced from more than 2,000 partners, according to JD.com.

But clearly JD saw an opportunity when it introduced 7FRESH last week, saying in its press release that heretofore “the only premium experience was online." In fact, big cities like Beijing have for some years had niche, well-appointed supermarkets serving expats and rich Chinese willing to pay exorbitant prices for imported foodstuffs. Imported beef and seafood are emphasized at outlets of the two chains. These are also big sellers for the Hema Xiansheng stores, operated by the Alibaba online commerce group.

Hopefully, however, the 7FRESH outlets will offer competitive prices in addition to the various gimmicks it promised in its launch, such as driverless shopping trolleys. They likely will, since they’re competing with Super Species, a new chain being rolled out by the Shanghai-based Yonghui supermarket chain, with the assistance of China’s largest internet company (by capitalization), Tencent, which has a five percent stake in Yonghui. 

Like 7FRESH, the Super Species stores also operate “experience” dine-in areas where customers can have their food cooked on-site. Both chains make much of the use of consumer data and technology. Tencent is using its market-leading Weixin microblog and its mobile payments system to collect data on customers, while also promoting Super Species products across Weixin and its other online platforms.

Competition is good for what was long a staid food retailing sector dominated by state-run monopolies. But the new wave of retailers is also good for foreign companies seeking to sell seafood in China. Heretofore, the import sector was dominated by licensed seafood importers, who will now have to compete or collaborate with the likes of Alibaba and JD.com, which have the infrastructure to find and handle imported seafood products. 

However, the future is uncertain for the companies in Beijing and Shanghai that have traditionally dominated the trade and which supply hotels, wet markets, restaurateurs and retailers. They’re being undermined by the new players’ ability to provide price transparency and rapid home delivery to individually-targeted consumers. With each of the aforementioned new supermarket chains offering grocery delivery within 30 minutes within a three-kilometer radius of their stores, seafood-obsessed Chinese now no longer need to make trips to the markets themselves.

Even fast-food chains may be feeling the heat, as both KFC and McDonald’s are launching higher-end brands to target wealthier Chinese urbanites with higher margin food offerings, including seafood. 

All of this means the traditional hierarchy and structure of the import market is being totally unhinged. Traditional retailers in China have been scrambling to react to the arrival of Tencent and Alibaba, which are making the most of their large capitalizations and fresh faces in the marketplace.

By connecting with Tencent, it appears Yonghui has opted to join rather than fight the behemoths. And in an increasingly complex network of relationships, one of China’s two leading online retailers, JD.com also has a 10 percent stake in Yonghui, which it in turn promotes through its JD Daojia service, enabling customers of Yonghui’s regular supermarkets to purchase groceries online.  Similarly, Alibaba, long the king of Chinese e-commerce, has a stake in the Lianhua supermarket chain.  

There is much more yet to run in this story, particularly as supermarkets owned or part-owned by dominant internet-based companies seek to expand their geographic footprint. It is also yet to be seen just how far these firms will push the massive advantages they have in valuable consumer data (which they’ve mined collect data from their proprietary social media platforms, cloud computing services, and mobile payment systems) to target customers. It’s entirely possible that Alibaba, JD, and Tencent will seek to pursue the acquisition or expansion into other food and beverage businesses such as convenience, food, or beverage services. 

One thing is certain – the upheaval in China’s retail market, with the options and alliances being throw up, is an opportunity for seafood companies – as well as consumers. 

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