Supermarkets fighting losing battle with China's e-commerce

Want China Times, Staff Reporter 2014-03-17

A dying mode of grocery shopping. (Photo/CNS)

The growing popularity of e-commerce has now taken up competition even with traditional supermarkets, whose annual gross margins have posted annualized declines in China, according to the Party-run Beijing Youth Daily.

A woman surnamed Sun said her trips to the supermarket have decreased after becoming used to placing orders online for commodities, such as home appliances, clothing, books and food products, according to the report. The change in buying behavior, with fruits and daily necessities making their way to homes through e-commerce websites, has impacted the traditional physical retailer significantly. According to the semi-annual financial reports of public retail firms in 2013, at least 80% reported that they had incurred growing management costs and decreasing gross margins.

Official data show that the foreign supermarket in China has been in a crisis since 2012. The world's largest retailers — Wal-Mart, Carrefour and Tesco — slowed down expansion in the mainland market by 27% in 2013, with all of them closing some of their respective branches. Wal-Mart shut down five, Carrefour two, and Tesco five.

Refrigerated and frozen products are being pushed to boost sales of traditional supermarkets and attract customers and because of their high gross margin. Frozen products are also more difficult and expensive to keep chilled during shipping.

Beijing-based Wumart Stores said sales of its refrigerated and frozen products registered two-digit percentage growth in 2013. In addition, a Wal-Mart executive pointed out that the retailer has established new distribution centers to attract new customers.

This has not stopped e-commerce companies from eyeing the frozen and fresh food sector. Another senior analyst is of the view that the revenue generated from fresh foods could touch 40% on average for e-commerce companies, with seafood and frozen meat reporting the highest revenue, followed by fruit.

China's internet giant Alibaba said its sales for fresh and agricultural products surged by 195% in 2013, with fruit, seafood and vegetables posting the largest growth.