Amazon to bring fresh grocery to Shanghai doorsteps
China’s fast- growing online grocery business now has a new heavyweight player, as Amazon.com Inc, the largest online retailer in the US, announced last week it would enter the fresh produce field, which analysts expect will generate more than 100 billion yuan ($16 billion) in revenue in the coming years.
By cooperating with a set of partners that are specialized in fresh grocery e-commerce, Amazon is now offering more than 600 fresh groceries of fruit, vegetables, meat, eggs, seafood and cakes to Chinese customers.
Amazon’s latest move is encouraged by the bright future of the online grocery market in China.
Figures from consulting firm analysys.cn show China’s e-commerce fresh grocery market expanded 69 times to 29 billion yuan in 2014 from a mere 420 million yuan in 2010, and the market potential is expected to surge to 54.4 billion yuan in 2015.
According to forecasts from the China E-commerce Research Center, in the next five years, the industry will grow at an annual rate of 100 percent, and double to more than 100 billion yuan, accounting for about 15 percent of the total fresh grocery market by then.
Amazon’s trial in China’s online fresh grocery market can be traced back to May 2014, when it invested $20 million into a local grocery e-commerce platform yummy77.com.
“Chinese people have a unique passion for eating, and their strict requirements for fresh raw materials are also second to none,” said Shi Jianjun, vice-president of Amazon China. “Amazon strives to be the go-to place for customers to shop highquality authentic selection and that applies in fresh area, where we see increasing customers’ demands. High quality fresh grocery delivery service ensures a better customer experience for such requirements.”
Market insiders expect Amazon to bring its sophisticated experience in the online retailing market to the highly competitive grocery market in China.
“In spite of being a latecomer, Amazon is still a strong player because it has rich experience in distribution logistics and efficient supply chain, something most Chinese players lack,” said Li Chengdong, an independent e-commerce strategy analyst.
As early as 2007, the online bookseller-turned-retailing behemoth made a foray into the fresh grocery market in the US. It established AmazonFresh on Mercer Island, Seattle, to offer online grocery delivery, and then expanded to a number of areas in Seattle, Los Angeles area, San Francisco, San Diego area, New York City, and Philadelphia.
In China, the online grocery business developed fast too. Since 2012, many bigname e-commerce players have launched fresh grocery platforms, including leading express delivery company Shunfeng Express, and major Chinese e-commerce operators of Alibaba, Yihaodian, JD.com and others.
However, the industry is still waiting for a dominant player, Liu Jiangfeng, founder and CEO of Dmall, was quoted as saying by Southern Metropolis Daily.
In spite of the rosy outlook, the cruel fact is that almost no company has actually made a profit from selling fruit or vegetables, according to Li, who believed lowering logistical costs is of great importance to these companies.
“Fresh products are heavy, big and expensive to transport and storage, and the average loss for these online operators could reach 10 percent, and can be as high as 50 percent if it is fruit,” said Li.
The key to cost cutting is quality control. There are some companies doing well in cost control, but generally speaking, the high cost of the fresh grocery e-commerce market is yet to be solved.