China online food retailing booms after safety scares
Consumers shaken by series of contamination scandals turn to the internet to buy safe produce with Cofco one of the biggest players
Mainland consumers are responding to a powerful new marketing tactic that plays to a widespread fear of food contamination - the promise of safe groceries sold online.
Pledging produce direct from the farm, vendors have found food is becoming one of the fastest-growing segments of internet retailing as they cash in on scares from cadmium-tainted rice to recycled cooking oil.
The trend is adding momentum to an online retail boom driven by a rapidly expanding middle class, with companies such as Cofco and Shunfeng Express betting that a decent slice of a 1.3 billion population will pay for the peace of mind they say their services offer.
"People are willing to pay a higher premium than in the West. In other markets, like the UK, food e-commerce is about convenience. Here, there's going to be a higher quality and safety premium," said Chen Yougang, a partner at consultancy McKinsey.
But convincing some sceptical consumers about food quality will remain a battle. Shanghai-based Zhang Lei expressed doubt on the credentials of some products being touted as organic.
"Everyone knows in China organic is not the real thing," said Zhang, a mother of one.
Nonetheless, total online sales of fresh produce on the mainland could rocket to 40 billion yuan (HK$50.7 billion) in five years from about 11.5 billion yuan this year, said Zhou Wenquan, a senior analyst at Beijing Orient Agribusiness Consulting.
Research firm Euromonitor predicts growth will comfortably beat that in major overseas markets. It expects the mainland market to grow by about 8 per cent by 2017 from 664 million tonnes this year, compared with growth in the United States of about 5 per cent from 77 million tonnes.
So far, most food sold on the mainland's largest online shopping sites - such as Yihaodian, majority owned by Walmart, and Jingdong Mall - has been packaged items or fruit with a relatively long shelf-life.
But a wave of new businesses is focusing on fresh and premium produce.
"The vegetables are really fresh," said Beijing resident Lei Na, who shops on websites such as Womai.com owned by Cofco, the country's top food processor and trader.
"Supermarket food doesn't look that fresh, especially if you only get there in the evening."
Shunfeng Express, the mainland's largest delivery company, launched Shunfeng First Choice last year, offering a range of food to about 500,000 consumers.
"We go directly to the farms to pick the produce, and then using our own logistics, deliver straight to the consumer. So from the tree to the consumer's dining table, we'll remove all the sectors in between," said Yang Jun, director of sales and marketing.