Alibaba eyes rich fresh pro­duce har­vest

China Daily (Hong Kong) - - BUSINESS - By HE WEI in Shang­hai hewei@chi­

Alibaba Group Hold­ing Ltd is bet­ting big on the fresh pro­duce mar­ket by up­ping the ante in a ma­jor fresh food e-com­merce plat­form.

Tmall, Alibaba’s busi­nessto-cus­tomer unit, an­nounced on Thurs­day it in­vested $300 mil­lion in, a full­cat­e­gory fresh food site, to fa­cil­i­tate the ex­pan­sion of its cold-chain sys­tems na­tion­wide.

This is Alibaba’s fourth ma­jor in­vest­ment in the on­line re­tailer, fol­low­ing an undis­closed amount of Se­ries C fund­ing to­gether with global pri­vate eq­uity firm KKR in 2016.

Yiguo de­liv­ers per­ish­able goods, such as fruit, veg­eta­bles, meat and fish to more than 200 cities in China, of­fer­ing most of its cus­tomers same day or se­cond-day home de­liv­ery.

Apart from its indige­nous site and app, Yiguo also co­op­er­ates with Tmall Su­per­mar­ket — a unit sell­ing mostly fast-mov­ing con­sumer goods — by car­ry­ing out daily op­er­a­tions of its fresh pro­duce of­fer­ings.

The fi­nan­cial back­ing will “push Tmall’s abil­ity in lo­cal sourc­ing, pro­cure­ment, sup­ply chain man­age­ment and de­liv­ery to a new height”, said Jing Jie, vice-pres­i­dent of Alibaba, in a state­ment.

Yiguo said it will use the funds to ex­pand the sub­sidiary’s in­fra­struc­ture so that it can process the 500,000 daily or­ders ex­pected by the end of this year, and up to 5 mil­lion or­ders by 2020.

The on­line gro­cery mar­ket is among the few niches that are set to en­joy ex­po­nen­tial growth in China’s al­ready gi­gan­tic e-com­merce land­scape.

The seg­ment could achieve a mar­ket vol­ume of 678 mil­lion yuan ($99.7 mil­lion) by the end of this year, nearly 10 times the value of the sec­tor back in 2013, said Matthew Crabbe, Asia-Pa­cific re­search di­rec­tor at re­search firm Min­tel.

While on­line re­tail cur­rently ac­counts for 3.1 per­cent of mil­lion China’s to­tal gro­cery mar­ket, re­search firm IDG fore­cast the num­ber will jump to 6.6 per­cent in just three years, driven by young and wealth­ier shop­pers.

“Alibaba’s Tmall and are two ma­jor play­ers in the Chi­nese on­line gro­cery mar­ket, although their strength lies in com­bin­ing on­line mar­ket­places with bricks-and-mor­tar stores as well as their ef­fi­cient distri­bu­tion net­works,” said Shirley Zhu, a Sin­ga­pore-based Asia pro­gram di­rec­tor at IGD.

But the e-com­merce gi­ants will find it hard to crack the largest cat­e­gory — fresh food — due to the high costs of cold-chain de­liv­ery and the low ship­ping fees cus­tomers are pre­pared to pay, ac­cord­ing to re­search by Gold­man Sachs in March.

To ad­dress that, both Alibaba and JD have fin­ished build­ing their key na­tion­wide “ful­fill­ment cen­ters” — ware­houses from which the distri­bu­tion of goods is co­or­di­nated — al­low­ing peo­ple in more than 200 cities to en­joy same or next-day de­liv­ery for gro­ceries or­dered on­line.

They are also test­ing dif­fer­ent busi­ness mod­els for sell­ing per­ish­able food on­line. For in­stance, JD in­vested in re­tail chain Yonghui to boost its on­line-to-off­line de­ploy­ment, while Alibaba chan­neled re­sources to build the Hema Xian­sheng store, fea­tur­ing fresh pro­duce of­fer­ings that are ac­ces­si­ble both in-store and through a mo­bile app.

num­ber of or­ders that Yiguo is ex­pected to han­dle by 2020 value of on­line gro­cery mar­ket by the end of this year


Em­ploy­ees of pack­age fruit in Shang­hai.

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