E-commerce and O2O fueled FMCG’s recovery in China

Kantar Worldpanel, the global market leader in consumer panels, reports that the total spending of the fast moving consumer goods (FMCG) grew by 3.5% in the 12 weeks to June 12^th 2020. Overall the FMCG market continued to recover, following weaker consumer purchasing observed during Q1. Growth in Q2 was attributed to stronger contribution of home care categories (+13.3%), while the personal care sector rebounded with a value growth of 3.8%.  According to the latest official statistics, the Chinese economy returned to growth of 3.2% in Q2 following a record contraction during the COVID-19 lockdown.

Modern trade (including hypermarkets, supermarkets, and convenience stores) fell by 1.4% in the latest 12 weeks compared with last year. Against a backdrop of declining share for modern trade, small/mini supermarkets bucked the trend with a value growth of 10.7%, seeing a significant uplift on both shopper base and frequency, as consumers increasingly favoured proximity formats with essential product ranges and enhanced offers in fresh foods.

E-commerce on the other hand continued its soaring trend with rapid value growth of 46.6% in Q2, reporting an even higher level of acceleration compared with last year. As COVID-19 continued to impact consumers’ visits to brick and mortar stores, e-commerce won consumers’ confidence through the benefits this channel delivers such as safety, convenience and product choice. In Q2 2020, E-commerce counted for 26% of total FMCG spend in China.

Leading Grocery Share of Modern Trade - National Urban China

 © 2020 CTR Market Research                            Source: Kantar Worldpanel China

Top retailer performance in Q2

In the past 12 weeks major retailers were reacting rapidly to the challenges from both the booming E-commerce channel and the COVID-19 pandemic through expansion of their proximity stores, strengthening of their fresh food offer and full utilization of new technologies and omni-channel deployment to enable closer engagement with their shoppers.

 Among the top players, Sun Art maintained its leading position thanks to RT-Mart’s recovery, recording a market share of 7.2%. Despite the lukewarm performance of the total market, RT-mart was able to drive shopping frequency by tapping into Alibaba O2O infrastructure and shopper traffic from Taobao.

 Yonghui maintained a robust growth of 19% in Q2, achieving an historic market share high of 4.9%. Similarly, most regional players showed equally strong performance. Bubugao group achieved remarkable growth of 10.9% in Q2, driven by an enlarged shopper base. To achieve this Bubugao has not only expanded its fresh food range, but has also offered the choice of store collection and home delivery to further attract new shoppers.

O2O continues to grow the market

In Q2 2020, nearly 30% of Chinese urban households purchased through O2O platforms, lower than the penetration rate we saw in Q1 which was the peak of the COVID-19 pandemic in China. As the market in general showed booming demand for home delivery, retailers have intensified their investment in O2O services through self-run platforms, Wechat mini-programs or closer cooperation with Ele.com, Meituan, JD.com and Dmall etc. Hema, RT-mart, Vanguard, Wal-Mart and Yonghui are the leading market players, contributing nearly one quarter of total FMCG O2O sales. It is worth noting that Hema is the only big player which was able to continuously grow shopper visits post COVID-19. In recent months Hema opened its first mini store in Beijing after its one year experiment in Shanghai. By focusing on daily consumption products e.g. fresh and ready-to-eat food, Hema Mini is able to meet the daily needs of neighbourhood shoppers at a higher investment efficiency.

Live-streaming’s surging popularity pushed E-commerce to new highs

 In the latest 12 weeks ending 12^th June 2020, over 70% of Chinese household bought FMCG online. Robust penetration and frequency growth were observed in both upper tier cities and lower tier cities. Alibaba led the market growth, with a significant penetration uplift of 14 ppts versus the same period last year. Pinduoduo was also strong in attracting new buyers. Its penetration reached 13.2% in Q2, up by 7.3 points vs LY, further narrowing the gap with JD.com.

This year’s 18-day 618 Midyear Shopping Spree continued to be a must-win battlefield for e-commerce giants. Different from last year, live streaming played a more crucial role in shopper conversion. After Alibaba’s cooperation with Douyin, JD.com made the move to partner with Kuaishou just before the 618 festival, to further capitalise on the incremental revenue that live streaming can bring as well as tapping more into lower tier cities, where Kuaishou has strong viewership. Streamers range from store clerks, influencers, government officials to company CEOs. Besides heavy promotions that are offered during livestreaming, competitors like Pinduoduo and Suning also boosted live sales by holding super shopping galas with celebrities from hot TV shows.  COVID-19 has significantly accelerated live-streaming eCommerce and it is here to stay.