Confectionery hits China’s e-commerce sweet spot

Chinese city

Chinese online shoppers are making branded foods the “new wines and spirits”

China has witnessed explosive online sales growth for consumer products in recent years, but the next frontline is teasing taste buds. Food and groceries are center stage in the ongoing battle to sate shifting customer appetites between China’s two largest online marketplace operators, Alibaba and JD.com.

Alibaba’s Tmall has attracted a multitude of gourmet food and confectionery brands to establish flagship online stores, while JD.com has partnered with WalMart to open branded grocery stores selling imported delicacies. Approximately 20% of imported foods are currently sold online in China, and sales for confectionery and snack brands are growing fast – offering the prospect to emulate the success of wines and spirits, the world’s #5 and #1 consumer segments, respectively.

As tastes change in China, sweet-toothed shoppers are seeking new experiences, but confectionery brands should consider three key factors while whetting their appetites.

China’s online consumer landscape is continental in size – and highly fragmented. Local preferences, degree of exposure to niche and premium products and spending power all shape the approach to selling gourmet foods online:

  • Tier 1 and 2 cities, such as Shanghai, Beijing and Guangzhou, have an online shopper penetration rate of 80-85%. Customers are discerning and focused on value, especially for branded foods – and digital marketers should create aspirational experiences that are unavailable elsewhere
  • In tier 3 to tier 6 cities, where consumers have had less access to premium products in stores, online purchasing tastes are developing, and e-commerce penetration ranges from 20-40%. Although buyers tend to be highly price sensitive, strong potential exists across all retailing platforms  
  • Overlaying the regional variations is an unchallenged constant: convenience is the primary motivation for online buying. Time-poor urban Chinese consumers are turning to click-to-order shopping as the nation’s online marketplace shelves stock an impressive variety of global products.

The Chinese taste for chocolate varies with the seasons. In late spring and summer, for example, it is considered too hot to eat chocolate, so the autumn and winter months are the primary sales window.

Gifting accounts for a large percentage of online chocolate purchases, plus personal consumption and sharing with family or friends. The winter months coincide with Christmas, Chinese New Year and Valentine’s Day, during which gifts of chocolate and confectionery are increasingly shared with loved ones, friends and work colleagues.

Overcoming the seasonal sales cycle has proved tricky. However, some brands have tried inventive operational tactics, such as delivering chocolate products with an ice pack to enhance the product quality throughout the year – thereby encouraging sales at non-traditional times of year.

Generating traffic and converting these visitors into purchasers can be costly if not managed efficiently. If gone unchecked, digital marketing spend can become very high, with a low return on investment.

Thoughtful digital marketing tailored to local preferences and supported by accurate, reliable consumer data can create a real competitive advantage:

  • Brands should make optimum use of the product title in Chinese characters, and utilize the hot key search terms to increase the exposure – and sales – of each promotion
  • Adjusting the product title at selected time intervals can help improve traffic to a flagship store
  • For gift items, careful attention should be paid to the packaging to improve the basket size, while tactical use of discount coupons and vouchers can increase the sales conversion rate and basket size 

Optimizing premium brand appeal

As more brands target sweet-toothed Chinese consumers, companies need to optimize on premium brand appeal. One example of this is the Chinese online distributor of premium consumer goods, eSweets, majority-owned by the Swiss Market Expansion Services Providers, DKSH. eSweets, originally founded to import chocolates into China, moved into e-commerce chocolate sales in 2007, and since then has introduced additional premium food products from clients such as Lindt, Storck, Bahlsen, Barilla and Illy Coffee. By deploying a combination of unique assortment strategy and a prestigious shopping experience, eSweets is able to effectively optimize the premium brand appeal to stand apart from the price battling that is a prevalent feature of China’s competitive online confectionary market.

Source: Grocery Wars: Alibaba and JD.com Compete Against Supermarkets, Corner Stores, Caixin