Sun-Art is in another period of penetration loss
Kantar Worldpanel’s latest figures 12 weeks ending 7th October 2016 in China shows consumer spending on FMCG grew by 2.5% compared to the same period last year, Modern trade grew by 1.1% while eCommerce grew by 60.2% for the same time period.
Within the top 5 retailer groups we now only see Yonghui growing ahead of total modern trade with a 32% growth in spending for the 12 weeks ending 7th October 2016 compared to same time last year. Sun-Art’s group’s growth rate is on par with the total modern trade at 1.1% and we have seen the penetration of Sun-Art group declining since September 2016. Kantar Worldpanel data showed WSL and Bubugao grew rapidly in the South region (WSL share in South grew from 5.4% to 6.2%) while Bubugao’s share grew from 2.7% to 3.2%. They both have grown the number of trips shoppers are making to their stores through successful multi-format strategies which has also resulted in an increase in penetration for WSL. Bubugao has gradually been building up its O2O ecosystem covering ecommerce, online payment, logistics and membership platform. Regional retailers are also putting more competitive pressure on the national players as more and more adopt a multi-format strategy and also start to embrace O2O practice as well as growing through acquisitions to improve their scale.
As eCommerce retailers continuously recruit new shoppers through rounds of promotions under the name of created festivals and activities, we can expect that the double 11 will yet again set a new record high for penetration compared to previous years. Kantar Worldpanel data shows that during the 4 weeks of 2013 double 11 only 7.7% of China’s urban households purchased FMCG products online. However, the during double 11 in 2015, 16% of China urban households participated in this festival. If we extrapolate this trend to 2016, we would expect a penetration of 20%, which means 32 million households will join this festival.