China 2016: THOUGHT LEADERSHIP | DIGITAL
TIME FOR FMCG BRANDS TO PRIORITIZE THEIR DIGITAL STRATEGY
Kantar Worldpanel China Jason.Yu@ctrchina.cn
FMCG BRANDS MUST RESPOND QUICKLY AS THE BALANCE OF SALES POWER SHIFTS TO ONLINE
While FMCG bricks and mortar stores experienced tepid performance last year, the opposite was true in China’s robust e-commerce landscape. Here, online sales rose 34 percent in 2014 as e-commerce retailers expanded penetration and online shoppers dramatically increased their purchasing frequency. The pure-play online retail outlets continue to dominate the market, but large omnichannel retailers are now beginning to emerge. Brands must respond to the rise of e-commerce channels – and fast.
China’s online retail world is being shaped by digital consumers’ distinct preferences and habits. Our study found that shoppers who bought products online, where they would have otherwise purchased in store, generated approximately 40 percent of e-commerce sales growth. This means that approximately 60 percent of sales growth was organic and the result of new purchases that shoppers would not have made without the digital option.
Online, Chinese shoppers exhibit the same lack of loyalty as they do in physical stores. The more they shop, the more places they go to, both o ine and online. However, certain behavioral di erences exist between the two channels:
Chinese shoppers buy a relatively limited number of FMCG product categories online but in a more focused way. The top 10 categories represent 77 percent of online sales, but only 43 percent of o ine sales. Another interesting finding is that for certain products such as skincare or infant formula, Chinese consumers will shop across a variety of physical stores but they tend to exhibit more purchasing loyalty to their preferred online outlets.
Among the most common traits of online shoppers – and one opening up significant opportunities – is their interest in taking advantage of promotions and imports. Promotions result in only 14 percent of physical store sales. That rate is more than doubled online, where 38 percent of sales take place during the most popular promotional offerings.
Online shoppers are also more willing – or simply more able – to purchase products from overseas: imports account for only 10 percent of purchases offine, but 40 percent online.
Some brands are building their strategic partnership with the likes of Tmall and JD.com as a way to sell their blockbuster products via the digital channel. We have also observed brands increasingly using their hero SKUs to attract new consumers. For example, leading make up brand Maybelline used its Pure Mineral BB Cream to attract 800,000 new consumers in 2014 through its online channel alone, according to Kantar Worldpanel. Chinese brands are relatively more aggressive in their online activity. Pechoin, a skin care brand with a history dating back to the 1930s, has really focused on building its profile in the digital space. It’s perhaps a lesson to others that Pechoin was the only brand in its category to exceed sales of RMB 100 million (U.S. $16 million) on Singles Day, according to its website.
Clearly, as consumers and competitors alike become increasingly digital, FMCG brands must invest to understand how to use China’s booming e-commerce market to reach and recruit new customers. Implementing an e ective digital strategy must be the brand’s priority.