Big potential for commerce in lower tier cities
Kantar Worldpanel’s latest figures for 12 weeks ending 18th May 2018 shows consumer spending on FMCG in China grew by 10.0% compared to the same period last year. Modern trade (including hypermarkets, supermarkets, and convenience stores) is showing signs of recovery, with 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.
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 latest 12 weeks compared to the same period last year. Both Walmart and Yonghui accelerated pace on new retail exploration. Walmart deepened its cooperation with Tencent to optimize payment processes and Yonghui Super Species tested an unmanned aerial vehicle delivery service in Guangzhou.
The eCommerce channel grew by 32.0%, with 37.2% of households in urban China purchased FMCG online over the last 12 weeks. Recently, RT-Mart together with Hema opened their first middle sized new retail store “HeXiaoMa” which is a simplified Hema offer in Suzhou. Kantar Worldpanel’s data shows that there is a big potential to develop ecommerce 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 that 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 past 12 weeks. As the ecommerce retailers have developed over the past few years, it’s become harder to gain a high quantity of sales purely through price promotions alone. Kantar Worldpanel expects that more campaigns to emphasize premiumization and joint online/offline activation for 618 Online Shopping Festival, will stimulate consumer demands.