e-commerce in China for Wine Exporters

e-commerce in China for
Wine Exporters
December 2015
Brent Moore, Trade Commissioner, Shanghai
Summer Yan, National Marketing Director,
Torres China
Steve Guy, General Manager, Regulatory
Services, Wine Australia
Five reasons why
Australian companies
need to be selling
online in China
Capitalise on market
growth
Australian products are in
demand
Mature technology
enables buyers and
sellers
Influence and understand
your consumers
Avoid complex regulatory
procedures
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1. 300 Million Chinese online consumers spent A$500 billion in 2014
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2. Mature technology enables both buyers and sellers
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3. Australian products and brands are prized
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4. Influence and understand your consumers (1/2)
HOW MUCH CAN YOU SAY ABOUT
YOUR BRAND AND PRODUCT?
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4. Influence and understand your consumers (2/2)
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Mackie’s of Scotland
Price range
RMB8.8/40g to
RMB 10.8/40g
Number of reviewed
purchases on
YHD.com
Dorito’s (from
Taiwan)
Key marketing
messages
 Selected
potatoes grown
in the UK
Positive reviews:
50%
 Tastes good
 Looks like a
genuine product
Negative
reviews: 50%
 Too
expensive
10
8
6
 Too salty
4
 Award winning
 Good logistics
 Packaging
smaller
than
expected
2,868
 Nine flavours
available for the
Chinese market
Price range
Key marketing
messages
Positive reviews:
75%
Negative
reviews: 25%
RMB6.3/65g to
 Non-GM corn
 Fantastic taste
 A bit too
sweet
RMB 12.8/65g
Number of reviewed
purchases on
YHD.com
15,687
 50 years brand
history
2
0
 Flavour too
strong
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5. Cross-border
Category
Tianji
Zhengzhou
Shanghai
Chongqing
Hangzhou
Ningbo
Cross Border
Tax Rate
Food, Drink
10%
Textile and its products
20%
Leather apparel and accessories
10%
Luggage, Bag, Shoes, Boots
10%
Household medical, health and be
auty equipment
10%
Cosmetics, Wine
50%
Home electronics
20%
Stationary articles
10%
Bicycle, tricycle, baby stroller and
their accessories
20%
Fujian
Guangzhou
Shenzhen
Above rates waived if calculated tax is below
50RMB ($11)
Products must meet China’s import protocols
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How it works: distribution modes
Where?
Held in Australia
Held in China by authorised
agent, distributor or
independent shopfront
Purchased by integrated
marketplace
How?
Shipped ‘duty-free’ through
international postal or courier
system
Sold directly to consumers via
conventional 3PL (Tmall/Taobao
model)
Released to consumers from
bonded ‘cross-border’ warehouse
in seven cities
Distributed from JD or YHD’s own
same delivery network (JD =
3,539 across China)
Comment
Only cost effective for very high
value goods.
Most common model for F&B
items. Duties and CIQ apply.
Duties and CIQ do not apply.
Products must achieve high
turnover. Duties and CIQ may not
apply.
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How it works Marketplaces
Business model
Deposit?
Terms?
In-house
logistics?
Crossborder?
Online Bazaar
NO
Commission on
merchant stores
NO
NO
Online Mall
YES
Commission on
merchant stores
NO
YES
Hypermarket
MAYBE
Commissions
Direct buy
Ex-Australia
YES
YES
Imported goods
direct sales
NO
Direct buy
Consignment or
Ex-Australia
NO
YES
Flash Sales
NO
Short run buy or
consignment
YES
YES
B2B Wholesale
Directory
NO
Listing fee
NO
NO
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1688.COM
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YESMYWINE
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The big picture: online sales of food are small but growing….
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Tips and advice
 Register your IP first
 Plan your marketing collateral and distributor conversations
 Emphasise providence, family, quality





Seek multiple sources of advice
Be prepared for pre-sales
Maximise unit volume and value
Respect packaging and consider the gift giving culture
Build brand and extend
 Manufactured products enjoy better market access
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Reaching the Chinese Consumers
December 3, 2015
Summer Yan
1. This is China…
2. China in a bottle, 2015 highlights
3. Evolution of Imported wine distribution
4. Two roads to Wine Market
5. Who is buying
6. E-commerce
This is China....
China‘s Macroeconomic
factors influencing
consumption
Urbanization is a key driver for consumption patterns,
including wine consumption
926
TRENDLINE FORECASTS
Sources of urban population increase
Millions of people
243
37
27
572
• Migration will drive
47
103
254
City expansion
Organic growth
New cities
• By 2025, existing
118
Migration
0
0
0
0
47
50
254
254
1990
2005
572
Existing population
Source:
McKinsey Global Institute
almost 70 percent
of urban population
growth from 2005
to 2025
2025
migrants (103
million) and new
future migrants
(243 million) will
represent almost 40
percent of the total
urban population
The emerging middle class will represent >40% of urban
population and 60% of urban consumption in top cities
Number of urban households
Million; annual household income in Year 2000 real RMB
Share of total consumption pool*
Billion RMB, Per cent
400
13
Global (>200k)
Affluent
(100-200k)
350
300
250
16
Upper aspirants
(40-100k)
200
60
150
100
Lower aspirants
(25-40k)
50
Poor (<25k)
0
2005
2015
2025
* Based on 138 cities sample, representing ~60% of urban GDP, 45% of urban population
Source: McKinsey Global Institute
4
7
2025
Urbanization is concentrated around 11 major city clusters
Hubs
Economic regions
Regional hubs
Number of cities in the region
Beijing / Tianjin
28
Shenyang / Dalian
22
Qingdao / Jinan
35
Xian
8
Zhengzhou
23
Dalian
Tianjin
Qingdao
Huang River Xian
Shanghai
58
Chengdu / Chongqing
31
Wuhan
27
Changsha
20
Xiamen / Fuzhou
14
Guangzhou / Shenzhen
23
Source: McKinsey Global Institute
Shenyang
Beijing
YangtzeChengdu
River
`
Jinan
Zhengzhou
Chongqing
Changsha
Fuzhou
Guangzhou
Xun River
Shanghai
Wuhan
Xiamen
Shenzhen
China in a bottle
2015 Highlights
2015 Imports of Bottled Wine
sorted by Jan-Oct. 2015 9L cases
2014
Country/Regi
on
1France
2Australia
3Spain
4Chile
Volume 9L
cases
11,211,357
3,225,908
3,155,429
3,162,810
5Italy
1,730,012
6United States
7S. Africa
8Portugal
9Argentina
10Germany
11Moldavia
12New Zealand
Total
1,135,377
453,951
315,521
361,717
346,744
103,430
172,258
25,939,840
2015
Market
Share
43%
12%
12%
12%
7%
4%
2%
1%
1%
1%
0%
1%
Volume 9L
cases
15,097,272
5,069,822
4,818,481
4,467,689
2,084,794
918,123
826,654
509,799
463,500
368,752
174,717
160,885
35,745,477
2014 vs 2015
Market
Share
Market
Share
diff.%
2014
9L cases
diff.%
42%
-0.99%
35%
14%
1.75%
57%
13%
1.32%
53%
12%
0.31%
41%
6%
-0.84%
21%
3%
-1.81%
-19%
2%
0.56%
82%
1%
0.21%
62%
1%
-0.10%
28%
1%
-0.31%
6%
0%
0.09%
69%
0%
-0.21%
-7%
38%
Value(US$)
501,396,023
195,222,234
80,778,975
102,529,234
68,250,513
53,533,607
16,914,610
11,162,150
13,758,404
16,301,185
3,458,329
18,200,982
1,110,528,239
2015
Market
Share
Value(US$)
2014 vs 2015
Market
Share
Market
Share
diff.%
Value
diff.%
45%
684,645,220
46%
0%
37%
18%
352,597,527
23%
6%
81%
7%
89,362,225
6%
-1%
11%
9%
140,425,697
9%
0%
37%
6%
68,600,946
5%
-2%
1%
5%
41,447,233
3%
-2%
-23%
2%
31,778,630
2%
1%
88%
1%
12,557,763
1%
0%
13%
1%
16,739,090
1%
0%
22%
1%
14,752,798
1%
0%
-9%
0%
4,525,478
0%
0%
31%
2%
15,090,489
1%
-1%
-17%
1,504,171,043
35%
Bottled wine imports history
40
35
30
26.8
In millions of 9L cases
25
20
16.2
15
10.1
10
5
29.5
1
1.1
2.2
Year
1996
Year
2005
Year
2006
4.7
6.4
0
Source: China Customs
Year
2007
Year
2008
Year
2009
Year
2010
Year
2011
Year
2012
Year
2015
Bottled wine imports milestones
1996 First boom of wine after Government promoting it as an alternative to traditional
“bai jiu” spirit. Imports reached 1M 9L cases and the market collapsed afterwards.
2005 The second boom of wine starts after 10 years, duties being reduced after
China’s WTO accession in 2002
2006 China surpasses for the first time Hong Kong market size and hundreds of new
companies get into wine business.
2015 Record of imports with almost 40M cases… with the Evolution of Imported
wine distribution
Australian wine imports increase, Exchange rate? TWE? Immigration?
Evolution of
Imported Wine Distribution
Traditional Distribution vs SOEs Wine Divisions
With the urbanization in China, many State Owned Enterprises (SOEs) like
COFCO decided to import wine themselves in order to reduce costs
The amount of wine imported in the last 3-4 years has been
enormous, and they are starting distribution, obviously taking space from
traditional distributors.
Traditional Distribution vs Trade Operators
•
With the ease of import licenses, China market is now also facing the surge
of thousands of new importers. Amongst them many are retailers
(METRO/MAKRO) but also Hotel groups (SHANGRI-LA Hotels&Resorts) or
just local restaurants, wine shops/bars from the neighborhood!.
• Also new private corporations with no wine interest create their
own wine division (i.e.: Huawei, Lenovo, Wa Haha).
As a result market is fragmenting… and fast!
Different type of distribution leagues
Don’t expect one importer only to play in all of them…
HORECA
RETAIL
DIRECT SALES
IMMIGRATION WINE
MULTI CHANNEL
NATION-WIDE
PRIVATE LABELS
INTERNET
KTVs
SOEs
ONE REGION
GCC
AIRLINES
Two Roads to
the Wine Market
Which road shall I take?
ROAD No. 1
Traditional
ROAD No. 2
OR
Non-Traditional
Private pockets
Non-private pockets
Visible
OR
Horeca, retail, mainly primary cities
Brand Building
On display, events, promotion
Invisible
Direct Sales, passed over as
gifts, night-market, secondary cities
OR
“Liver Building”
The so called “internal
consumption”, banquets, from
the vine to the liver… ganbei!
Estimated market size by channel
ROAD No. 1
65 %
ROAD No. 2
35%
4 years ago was the opposite…
Source: TORRES CHINA’s estimation
2012-2015, Changing China
The changing china as the "new normal", with low corporate spending and increasing
individual spending out of China.
2015 most companies sold biggest amount of wine volume ever but mainly of wines
retailing between RMB 60-100, while before the revenue was not only coming from
those entry-level wines but many high-end fine wines.
Shift in price level has been accompanied by a gradual shift in channels, where retail
(both off-line and on-line) has gained market share over on-trade and direct sales.
Also end consumers are buying wine with their own income. Not like before, when
buyer of wine and consumer of wine were not the same person...
A "normal" wine market, where people pay and choose wine according to their wine
knowledge and disposable income rather than being based on wine ignorance and
kick-backs from inflated prices.
Who is buying?
“Buyer for Others“ vs Traditional Consumer
•
Individual/Friends&
Family pockets.
•
Buying at retail
outlets or through
Internet.
•
Consuming in the
On-Trade and night
market, and more
and more at home.
Traditional
Consumer,
60-70%
Source: TORRES CHINA’s estimation
"Buyer for
others",
30-40% of
total
volume
consumed
•
State Owned
Enterprises
(SOEs) internal
consumption
(banqueting) and
gifting.
•
Corporate buyers
(private firms),
mainly for gifting.
•
Entertainment
budgets of above
in the On-Trade
and night market.
Reasons for buying fine wines
Chinese buyers
An enjoyable and intellectual drink
A statement of taste, status, fashion …
An investable/speculative asset
Business entertainment and gifting
Old world buyers
.
E-Commerce
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Urbanization, where time to be spent
Typical shanghai subway!
Driving in Australia
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Online VS offline
Size of sales:
Online VS Supermarket
Annual
Sales Value
increase
Online
Super
market
Source: Nielsen Survey Oct. 2014
Online VS offline
Source: Nielsen Survey Oct. 2014
Consumer survey, for wine, in the next 2-3 years 77% consumers prefer
buying wine online while 65% consumers prefer offline
Online VS offline
Consumers prefer online:
Consumers prefer offline:
•
•
Worry about fake online
•
More access to offline
shops: supermarket,
specialized wine shop,
high end shops
•
Breakage risk
•
Cost of product+deliver fee
is similar to buy from
offline shop.
•
•
•
Big discount, esp. online
festivals: Double 11,
Double 12
More choices
products/brands/price
range
Delivery service
Pay online or upon delivery
Who are the online players?
Category 1: Online wine platform- PC&APP
• JD.COM:
 owners shop
 JD import directly
• Amazon.cn:
 Owners shop,
 Direct from overseas like other luxury goods brands, workable?
• TMALL:
 Many brand shops
 “Vineyard Direct?” What’s this?
Robert Mondavi
VATS
TMALL
Category 1: Online wine platform- Smart Phone
WEI BUY
 Event news
 Wine education
 Shopping
 Micro distribution
Category 1: Online wine platform- Smart Phone
WEI DIAN
 Anyone can open shop even you have
1 bottle of wine at home to sell
 Sell through friends circle
 No shop open fee like Tao bao, Shop
number now reach 450,000.
Category 2: Individual Online Wine players
Best sample: Yes My Wine, Jiuxian.com
-
They operate by themselves, make traffic, do promotion
They do own logistics
They import part of wines
They select famous market brands to attract buyers
Yes My Wine, Double 11 sales on Nov. 11, 2015
Are you able to do online wine biz?
1. How you operate the online shop?
Open shop in online platform and be your own player like YMW? $$ ready?
2. How to create traffic?
3. How to do logistics?
4. Direct from vineyards, means no duty and tax?
Steve Guy
General Manager, Regulatory Services
Wine Australia
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Questions?
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