Clothing and electronic products have set off China’s e-commerce era. But the fact is the majority of retail spending goes to the purchase of fast moving consumer goods (FMCG), not clothing or electronics.
For instance, an average family would spend over 1,000 yuan or even several thousand yuan on grocery products. FMCG alone accounts for nearly 40 percent of the retail market.
The online market of this product segment was not feasible in the past because the marketing costs and logistics expenses were too high compared with the low unit price and low order value of such items.
It’s time-consuming to pack all these small goods, not to mention the extra costs for storage and delivery of fresh foods.
But things have changed.
Fearing the loss of business to e-commerce players, supermarket operators have moved aggressively into online platforms in recent years.
At the same time, the new model of crowdsourcing logistics platform has made low-cost delivery of FMCG possible.
Crowdsourcing logistics is a form of sharing economy. Most delivery men are average people who have received basic training. They would get a certain percent of each order for their delivery service.
Residents of first-tier Chinese cities can now easily place an order for fresh food online, and products ordered will get delivered to their home within one hour. The delivery fee for each order is 5 yuan, and is waived for orders of over 100 yuan.
Under the new model, supermarkets and courier companies can generate more income, and online shopping sites can increase advertising revenue. It also provides convenience for consumers. It’s thus a win-win situation.
FMCG is expected to offer massive growth opportunity for online shopping in the future.
This article appeared in the Hong Kong Economic Journal on June 28
Translation by Julie Zhu
[Chinese version 中文版]
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