Alibaba this week announced a 70 percent rise in its seafood imports in 2015. The world’s biggest e-commerce company by capitalization and transactions, the Chinese firm claims it’s benefiting from rising demand from middle-class consumers.
Its announced results aren’t surprising when you consider how enthusiastically the company has sought out suppliers of seafood abroad to list on its various online sales platforms. Imported seafood offers handsome profit margins, hence Alibaba, (which owns market-leading sites Tmall, Taobao and Tmall International as well as the business-to-business focused Alibaba site) and several smaller competitors (JD.com, Gfresh, Suning, Caichongwang, Womai among many) have been targeting sales of imported food to a Chinese public still skeptical about the honesty and safety of local food supplies.
In fact, a wave of companies entered the food and, especially, seafood side of China’s e-commerce market over the past decade. But it appears increasingly apparent that through its sheer scale and aggressive expansion, Alibaba is going to have a massive influence on how seafood is sold and sourced into the future. The company’s ubiquity across and range of services, and the manner in which it has inserted itself into the all-important youth market, make it a force for sales in seafood – and indeed all product categories.
With plenty of cash from its record-breaking USD 21 billion (EUR 18.5 billion) initial public offering in 2014, Alibaba has been busy buying up competition and potential competition across the online sector. It has invested in online food ordering and delivery sites, the leading micro-blogging site Weibo and emerging portals in areas where online commerce sees potential, like real estate and pharmaceutical sales. It has all its bases covered.
Most importantly perhaps, Alibaba has also invested massively in data. Its location-based technology, cloud computing and mapping services all give the company an incredible edge over the competition in terms of the ability to target potential customers for particular goods, including seafood.
Considering that China continues to block the big global web brands including Facebook, Google and Twitter, the closed nature of the country’s internet gives free rein to Alibaba and the country’s leading search engine, Baidu. This dominance is unlikely to change given the China’s tendency to favor domestic corporate giants, which the government is able to better monitor and, if necessary, command.
In this context, Alibaba’s consumer data-gathering is especially important as sales via smart phones become a bigger part of Chinese commerce. Online sales in China rose by 40 percent between 2013 and 2014, with sales worth CNY 2.4 trillion (USD 368 billion, EUR 325 billion) in 2014. The total is expected to rise to CNY 3.8 trillion (USD 583 billion, EUR 514 billion) in 2016, according to iResearch, a Beijing consultancy tracking the market.
And while the country’s annual overall growth rate will continue to slow, its biggest growth will come from sales made via mobile devices. For the first time, due in large part to the fact that almost 60 percent of China’s 600 million internet users are less than 30 years old (iResearch), mobile sales are expected to eclipse non-mobile sales in 2016.
Foreign suppliers of seafood stand to become big beneficiaries from China’s online commerce boom. This is because quality and credibility are two top criteria for Chinese buyers, according to extensive surveys done by iResearch. However, those surveys also showed that the bulk of online sales on Tmall –which handles more than 60 percent of the consumer-to-business online sales – are for goods from a select handful of countries, among them Australia, Japan, Korea, New Zealand, the United Kingdom and the United States. In other words, Chinese online buyers associate certain countries with quality.
Questions remain, however, regarding the future of cross-border online commerce, which previously had been flagged as the new frontier for China. Here Alibaba has again been ahead of the pack with a site, Tmall International, that allows Chinese consumers to order goods that are dispatched from overseas and handled through specially designated Tmall warehouses, with zero import duties (provided packages are of small quantities for personal use).
This business ran into problems recently due to a Chinese government crackdown on black-market imports delivered through airport and online channels. This may ultimately damage the long-term potential of Tmall International. But it won’t affect bulk sales made through the normal Tmall portal in China.
Many new players have recently entered China’s online sales of seafood, drawn by the perceived profit margins on imported salmon and shrimp. But they are struggling with the costs of doing business, in particular the enormous logistical costs given the relative absence of cold-chain networks outside of China’s largest cities.
With deep-pocketed corporate backing, certain websites will survive. Caichongwang.com is owned by the Tianfu convenience store chain, and Womai is parented by the massive China National Cereals, Oils and Foodstuffs Corp (COFCO) conglomerate and as such there are obvious complementarities. But in terms of reach and research, no one compares to Alibaba and for this reason the firm will drive and influence seafood sales into the future in China.
