The e-commerce channel in China is buoyant – one only has to witness the recent IPO of Alibaba in the US to see that – but smaller online retailers are launching to sell targeted ranges of branded food to Chinese consumers.
Wei Pai was launched in Chongqing in southwest China last month, selling south-western Chinese snacks and seasonings to local consumers. The municipality is huge, with more than 28m people according to census data.
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While food is a major sector on all B2C platforms, growing competition is forcing e-commerce operators to be specified and diversified. In August, Wal-Mart-backed Yihaodian opened a division in Ningbo in Zhejiang province, to sell Ningbo local food. Meanwhile, Beijing-based Tuo Tuo, a division of Nasdaq-listed Nine Towns, labels itself as “an online supermarket of organic food”.
A timely example of the size and scale of the competition in China came on 11 November, also known in the online retail sector as Singles’ Day, a shopping event created by Alibaba. Chinese consumers spent CNY57.1bn (US$9.3bn) on Alibaba’s Tmall, China’s largest B2C platform that day – almost 2.5 times higher than the sales on Black Friday in the US in 2013. Tmall rival Yihaodian also reported stunning sales growth on the day – nine times higher than its average daily sales.
Li Chanchan, CEO of Wei Pai, says it is important to differentiate your sales offering in China’s competitive online food marketplace.
“Big B2C platforms like Tmall have gained the most customers, and we as a start-up platform would certainly be doomed if we competed against it in the same business model. So we have to be different to find our own market,” Li tells just-food.
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By GlobalDataWei Pai is hoping to gain an edge in through a focus on food from China’s south-west. Food from that part of the country is distinctive in being rich and spicy. Popular Wei Pai products include spicy anchovies, spicy beef and spicy duck neck.
A Chongqing native, Li believes there is a national market for such food. “Our research showed that south-western Chinese food has a large fan base in almost every city in China, especially among young people, because they are attracted to the unique, rich often spicy taste from the region,” Li says. Her goal is to reach CNY40m (US$6.5m) in sales by the end of 2015.
She has a solid basis for this optimism. Wei Pai has received, and still has, strong support from the Chongqing local government. It is the only officially recommended food B2C platform by the Chongqing Food Industry Association, which also helped the site with promotions and gaining the trust of food manufacturers, which is vital for a B2C site.
Thirty-three manufacturers have granted Wei Pai exclusive right to be their online distributor for selling their products to individual consumers and other B2C platforms.
“I think manufacturers have realised that they won’t lose anything by working with us,” Li insists. Her suppliers sell products to Wei Pai at a wholesale price, and Wei Pai sells them online. “Manufacturers don’t have to worry about marketing and branding, and there is no additional fees charged for them to be presented at Wei Pai.”
Wang Bin, general manager at Chonqqing-based Mi Wei Food, is grateful for Wei Pai, which has helped his company launch an online-exclusive spicy beef brand Busy Uncle, targeting younger consumers across China. Busy Uncle uses a funny, stylish cartoon figure as its brand ambassador and is a useful addition to Wei Pai, although it is not exclusive to the platform – it is also selling on major B2C platforms including Tmall.
“The majority of online consumers are young people, and they like a funny, sexy brand, so that’s the reason for creating Busy Uncle. Since launched in October, our sales are growing fast. In the future we will add more categories under the brand, such as nuts and sweets with a south-western taste,” he said, adding on the Singles’ Day sales of Busy Uncle were several times higher than average days.
Such success stories will be important for Wei Pai, as some suppliers are still cautious about using online B2C services, because of potential onward sales to C2C platforms over which manufacturers have little if any control. One is Si Qi Xiang (SQX) Food in Sichuan province, which also sells spicy beef at Wei Pai.
“We found some C2C stores selling our products that are close to expiration date, and we also worry there are counterfeit products. We feel that we have little control over quality online,” said a SQX sales manager who declined to give his name. While doing business with Wei Pai has helped grow sales, the SQX manager says it’s still too early to make any conclusions
Wei Pai’s Li admits that it is hard to regulate C2C stores buying from her platform but adds: “We regularly inspect B2C platforms to see if they are hurting our suppliers’ benefits either by lowering prices or selling bad quality products.” However, that is a service reserved only for Wei Pai’s exclusive suppliers.
Looking ahead, Wei Pai will diversify away from only selling local foods. Li also wants to sell imported foods to consumers in China’s south-west.
“We have rich resources online and offline, so we better use them,” she says. Also, to better appeal to China’s smart device-addicted youth, Wei Pai plans to launch an app for smartphones by early 2015.
Li has had to draw on her extensive experience in B2C marketing in Shanghai, as most of the local food companies are small-and-medium sized, some family owned. They are often not tech savvy, and when Li reached out to them talking about the platform, some even called her a fraud.
Certainly there is a more open market for such services in inland China, with e-commerce being weaker in less developed south-western China compared to the eastern coastal regions. On the other hand, local food manufacturers have a weak appreciation of the benefits of B2C, making forging business deals harder.
