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A bite of the world - China's online feeding frenzy

06/25/2015| 10:38:48 AM|

The tentacles of China's online retailers grow longer and more pervasive every day, reaching around the world to bring gourmet to dinner tables of China.

The tentacles of China's online retailers grow longer and more pervasive every day, reaching around the world to grab everything from Boston lobster to Norwegian salmon and dragging it home to grace dinner tables of China.

Online retailers JD.com and Alibaba's Tmall.com are locked in battle to sign up overseas merchants and department stores for their newest marketplaces selling nothing but imported products. The competition between Alibaba and JD.com to ship goods directly from overseas to the customer's doorstep in China has expanded from luxury clothing to baby formula and cosmetics. The latest catches are fresh meat and seafood.

These new offerings require sophisticated logistics. Meat and seafood have to be shipped and delivered at low temperature. Any delay can compromise freshness or even cause these posh delicacies to spoil.

In April, JD.com set up a site exclusively selling products from countries like France, Republic of Korea, New Zealand and the United States. On Thursday, the company signed a deal to sell Canadian fresh food and beverages.

JD's arch-rival Alibaba embarked on a global campaign more than a year ago to lure international brands into opening stores on Tmall to sell directly to Chinese consumers, with meat and seafood riding the crest of a wave of fresh, imported produce.

Walmart-backed online grocery store yihaodian.com sells everything from Thai durian and Mexican avocadoes to red shrimp from Argentina.

A VERY BIG PIE

Overseas retailers also want a piece of China's vast e-commerce pie. Amazon has warehouses in the Shanghai free trade zone (FTZ) and a store on Tmall in addition to a Chinese site of its own.

American wholesaler Costco has a shop on Tmall, while eBay has teamed up with JD.com to sell imported products. Japan's Rakuten online store has a Chinese-language version and offers payment options with Chinese bank cards and Alibaba's Alipay, China's most widely used online payment service.

"Foreign companies now understand the habits of Chinese consumers are different. Working with a local online retailer lets them sell their products more rapidly, cheaper and, without having to establish a large presence in China, they save a lot of costs," said Canadian Ambassador to China Guy Saint-Jacques, who was there to see the deal with JD.com signed on Thursday.

"We see the future in China's e-commerce," said Arden Schneckenburger of Canada Beef. Canadian beef exported to China is currently sold to restaurants, food services, and stores. "But," said Schneckenburger, "I would say e-commerce will, in the future, take more sales in China."

China's cross-border consumption grew tenfold in the past four years to 20 billion U.S. dollars in 2014, according to a research by eMarketer. Chinese consumers spent 440 billion U.S. dollars online last year, and online sales are expected to hit 1 trillion in 2019, according to research firm Forrester.

China's middle class, on track to soon outnumber the entire population of the United States, have a great appetite for what they perceive as quality products from the United States, Europe and Japan.

FREE TRADE LUNCH

China has also sought to expand sales of imported food, including fresh meat and seafood in new FTZs in Shanghai, Tianjin, Fujian and Guangdong. Stores selling imported products have been set up in Shanghai and Tianjin FTZs, and it turns out seafood is the most popular item, usually snapped up soon after stores open. The Shanghai FTZ promised last week to expedite customs clearance for products to be sold in the zone.

"China's FTZs are a good vehicle for more trade," said Saint-Jacques. "But the challenge when you put in place a new system is to get companies to learn about it and become convinced of its advantages."

Many foreign firms are not aware of these advantages, so there should be a sustained educational effort to help companies understand how they might benefit, said Saint-Jacques.

China knows the potential for cross-border e-commerce to resuscitate foreign trade and has not hesitated to serve up a banquet of juicy policies promising tax rebates, faster customs clearance and cuts in tariffs of a number of imported products.

In 2014, China's e-commerce raked in 4.2 trillion yuan (690 billion U.S. dollars), a third more than in 2013. This compares with a 2.3-percent growth in all trade that same year, way below the 7.5-percent target. The first five months this year have seen a foreign trade decline of 7.8 percent.

The Ministry of Commerce reckons goods flowing in and out of China via online sales will hit 6.5 trillion yuan next year, and will eventually account for 20 percent of the country's total foreign trade.

CATCHING CRABS

Fresh foods bring a new range of problems for China's army of regulators. Watchdogs are concerned that imported fresh food, if not properly checked, could bring with it food safety problems.

In 2013, Tmall tried to sell crabs from Germany, but the planned sale was pulled by regulators after shoppers had placed orders, with health and environmental risks cited as the reason for the withdrawal.

Carol Fung, a JD.com vice president, told Xinhua that a new deal with the government will reduce such risks. Stronger controls of imported food sold on JD.com and greater transparency in provenance and regulation are guaranteed.

Just as with other products, Alibaba, JD et al have to deal with counterfeit food. An importer of Canadian farm produce told Xinhua recently that as the company prepared to open online about a year ago, they were surprised to find other merchants already selling "identical but questionable products".

The importer declined to say where the alleged fakes were sold, but brought the evidence to the attention of the retailers concerned. "Many 'imported' products sold online in China are actually not imported at all and their quality standards do not necessarily tally with those of the 'exporting' countries," the importer said.

"Many of these fake food products were sold by merchants at well regarded online marketplaces, but those who run these sites simply look the other way," the importer said. "It hurts the consumer and it hurts us."

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TAGS: JD.com | Alibaba | gourmet | Tmall
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