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E-commerce brands dominate
growth and move into grocery
E-commerce drove the healthy 22 percent retail category value rise in the BrandZÔ Top 100 Most Valuable Chinese Brands 2017. Half of the six retail brands in the BrandZÔ China Top 100 ranking are e-commerce leaders: Alibaba, JD.com, and VIP.com, which entered the ranking for the first time this year.
In addition, two of three bricks and mortar brands have strategic partnerships with e-commerce brands. Alibaba has invested in the consumer electronics retailer Suning and JD.com has invested in Yonghui Superstores. The sixth retail brand, consumer electronics retailer Gome, returned to the ranking for the first time since 2013, having strengthened its online business to complement over 1,800 physical stores.
Total retail sales reached $4.8 trillion in 2016, an increase of 10.4 percent, according to China’s National Bureau of Statistics. Online sales rose 26.2 percent to $750 billion. On November 11, 2016, China’s Singles’ Day, a major shopping event, Alibaba alone reported sales of $17.1 billion in a 24-hour period, a 24 percent year-on-year increase.
Having developed their businesses around hardlines, e-commerce leaders Alibaba and JD.com battled for share of grocery and everyday consumables, as consumers increased their online purchasing for those categories. On Singles’ Day, 49 percent of families purchased groceries online compared with 30 percent in 2013, according to Kantar Worldpanel. JD.com bought the online grocer Yihaodian from Walmart to strengthen its competiveness against Alibaba’s Tmall site.
Newcomer VIP.com, which began operations in 2008, does not compete in grocery and focuses primarily on apparel, although the brand has expanded its offering to include home goods, cosmetics, wellness, baby products, and other categories. VIP.com has been especially effective with flash sales, discounting brand products for limited time periods. VIP.com increased its active customer base 56 percent year-on-year through September 2016. Vipshop, owner of VIP.com, acquired Beifu, a payment company, to lower transaction processing costs and accumulate customer data.
In addition, VIP.com launched several content marketing programs such as shopping consultation, which reflect the ongoing integration of e-commerce and social media in China. JD.com collaborates with WeChat, the social media app of Tencent, China’s largest Internet portal. Alibaba has created an ecosystem in which purchasing is only one aspect of consumer involvement with its sites.
In an analysis by Kantar Retail, manufacturers selected JD.com, Alibaba’s Tmall, and VIP.com as the e-commerce retailers most likely to be China’s “Power eTailers” in the next three years. VIP.com rose from Number 6 in the Kantar Retail study to Number 3 in one year, based on the brand’s effective flash sales, creative marketing, and insight about women shoppers.
Some of the factors driving e-commerce growth, like the desire for convenience, also influenced the fortunes of bricks and mortar retail formats. Convenience stores and other small formats gained in marketshare, while supermarkets and hypermarkets declined, according to Kantar Worldpanel. Meanwhile, e-commerce leaders like Alibaba’s Tmall and JD.com partnered with convenience store brands to develop seamless online and offline (O2O) customer engagement.