The Dramatic Rise of FMCG e-tailing in China, Taiwan & Korea
November 11th or 11/11 is known as Singles' Day in mainland China, the holiday which encourages the unmarried to socialize and celebrate with single friends. Yet it is also China’s biggest online shopping day, with Taobao and Tmall, Alibaba’s two main platforms, topping 35 billion yuan ($5.75 billion) in the 24-hour period, growing by more than 80% over last year and highlighting the growing purchasing power of Chinese consumers, as well as the increasing importance of ‘e-tailing’ (or e-commerce) for the country. Even for the more technology evolved markets including Taiwan and Korea, e-commerce is still experiencing explosive growth and remains a land of opportunity, especially within the FMCG sector. Now with worldwide grocery markets facing a slowdown in growth rates, e-commerce is becoming the new driver for any further growth; therefore in order to understand the opportunity this virtual channel has to offer for Asia, Kantar Worldpanel reviews the development of three evolving markets: mainland China, Taiwan and Korea, sharing insights into their e-commerce development and the possible opportunities for FMCG brands.
Ecommerce for FMCG: small share, huge potential
For FMCG, E-commerce is still in its early days with relatively low market share compared to other key channels. Kantar Worldpanel’s data shows amongst the three markets, Korea’s FMCG e-commerce channel is by far the most developed in terms of share importance, reporting 9% channel value share in 20131, ranking it the third largest modern trade channel in Korea next to hypermarkets and supermarkets, while for mainland China and Taiwan the share stands at just 1.8% and 3.2% respectively. Yet for all three markets the growth had been impressive, boasting double digit growth for several consecutive years.
Growing buyer base has been the key driver for FMCG e-commerce sales
According to Kantar Worldpanel, the key growth driver behind all three markets was the steady increase of new shoppers into the e-tailing world; Korea now has over 50% of households shopping online for FMCG goods, while Taiwan’s penetration surpassed 35% for the first time in 2013. As for mainland China, although total penetration sits at 28%, in first tier cities it is already hitting close to 50%, with second and third tier cities not far behind at 30% and 28% respectively.
At this growth rate, both mainland China and Taiwan’s online penetration are also expected to surpass 50% in less than three years, with further growth anticipated. In 2012 broadband penetration for Korea and Taiwan reached 90%3 and 83%4 respectively. This implies that online shopping for FMCG still has a lot of room to expand its buyer base. For mainland China, broadband penetration is currently only 35%3. With its rapid development and multi-billion dollar plan to expand the country’s online connectivity, as well as the rapid buildup of payment infrastructure and delivery networks, mainland China can expect this level of impressive growth to continue for several years to come.
Fragmented buyer base, shopper focused strategy vital for online success
To take advantage of the growth potential of e-commerce, it will be important to direct marketing resource at those with the greatest potential. At first glance at the buyer profile, Kantar Worldpanel found that for mainland China, young families remain the strongest group. As for Korea and Taiwan, while still skewed towards the younger generation, it is the oldies that are being recruited at a faster pace, especially the over 50s. However, while the groups that drive growth may warrant more attention, data from Kantar Worldpanel indicates that online shoppers are now becoming increasingly fragmented, and this is especially obvious in more e-commerce savvy markets like Korea. The emergence of multiple online malls, marked with their own unique focus is attracting different groups of online shoppers. For example, over 40-50s shop at home-shopping & department store channel, while brand shops have higher portion of 20-30s. So instead of focusing on just one single profile, a shopper focused strategy suited to individual brands will be vital for future online success.
First non-food, now food categories follow suit
The growing online shopping population has also been driven by the increasing availability of categories online. Although non-food categories still attract a larger proportion of buyers (attracting over 80% of internet shoppers with skincare being the leading category in all three markets), more shoppers are ‘clicking’ and ‘tapping’ for food categories. For Taiwan, Health food supplement is the favorite, attracting 34% of internet shoppers. Beverages take the lead in both mainland China and Korea, at 23% and 32% respectively. Some other top rising categories in mainland China include biscuits and infant milk powder.
For Korea, other than packaged food, fresh food including vegetables, fruit, dried produce, fish & seafood, meat, and egg also enjoyed rapid growth. Kantar Worldpanel observed that Korea’s fresh food online penetration reached close to 30% in 2013, with fruit and dried produce leading the growth, thanks to a well-developed cross channel collaboration with hypermarkets, via online order / offline delivery at a specific time chosen by the customer. For the Chinese market, growing online food purchasing is still more focused in top tier cities, while for lower tier cities, sales are still highly focused on personal care items.
Shifting retail landscape - traditional auction sites on the decline and specialized malls on the rise
As more newcomers explore ways to market and establish their online presence, online marketing practice is shifting to a whole new direction. Traditional internet auction sites continue to decline, where sites such as Yahoo and eBay are declining in importance for both Taiwan and Korea, and specialized malls and individual online stores are emerging, and their strength comes from successful integration of online and offline advantages. For example for Taiwan, Fubon Momo, one of the largest growing online retailers for 2013, combined resources from TV shopping to enhance their price advantage, and utilise their vast TV shopping membership to promote their online store. Another example is 7-Eleven’s 7net takeing full advantage of the island’s dense population, providing convenient services such as next day delivery, or pick up at CVS. Meanwhile, Korea is leading the way in online technology innovation - through QR code technology, Homeplus’s virtual store and E-mart’s shadow 3D QR code, they are able to deliver supermarket products to time-poor commuters, increasing their willingness to engage in online shopping. For mainland China, retailers have started to actively engage consumers through both offline and online (O2O) channel to create an integrated shopping experience.
With the rapid populariztion of online connectivity for mainland China, Taiwan and Korea, FMCG companies need to be aware of the increasing importance of online sales. The line between online and offline shopping will continue to blur, and marketers will need to enhance digital capabilities to stay relevant to consumers, including utilisation of social networks, fulfilling orders, building partnerships with online channels, website design etc. to engage shopper attention and provide them with the desired shopping experience in order to drive penetration online. Even without the delivery option, the Internet offers great marketing potential for FMCG companies to form brand awareness and consumer recognition that traditional bricks and mortar stores cannot offer, and it is important for companies to take advantage of this. At the same time, the correct platform and brand communication strategy is crucial. With online shoppers becoming increasingly fragmented and sophisticated, it is vital for marketers to base strategy on brand and product characteristics, and pay attention to select the most appropriate online platform that their brand buyers will visit again and again.
1. 2013 refers to MAT13P9 which covers period 2012/9/10~2013/9/8, and growth rates are calculated by comparing data of same period from previous years.
2. Key cities includes Beijing, Shanghai, Guangzhou and Chengdu
3. Data source: GroupM, “Interaction 2013” report
4. Data source: Taiwan ministry of interior