For 12 weeks ending May 18, 2018, consumer spending on FMCG in China grow by 10.0% compared to the same period last year. Hypermarkets, supermarkets, and convenience stores are showing strong signs of recovery. Consumer spending grew by 10% YoY.

For 12 weeks ending May 18, 2018, consumer spending on FMCG in China grew by 10.0% compared to the same period last year, latest Kantar Worldpanel data showed. Modern trade (including hypermarkets, supermarkets, and convenience stores) is showing strong signs of recovery, with a growth of 4.1%, 1.2 points up compared to last year. In terms of regions, the East and West regions enjoyed a healthy growth at 11.0% and 11.3% respectively, whilst growth in the North remaining sluggish.

Kantar Worldpanel China continuously measures household purchases over 100 product categories including cosmetics, food and beverages, and the toiletry/household sector through its 40,000 sample families. Its national urban panel covers 20 provinces and four municipality cities (Beijing, Tianjin, Shanghai, and Chongqing).

The channels within its monitoring scope modern trade (supermarket, hypermarket, convenient stores), traditional trade (grocery, free market, wholesale), e-commerce, overseas shopping, direct sale, work unit/gifting etc. The goods under monitoring are those obtained for in-home consumptions.

Among the top retailers in modern trade, Walmart and Yonghui enjoyed the fastest growth on market share, up by 0.8 and 0.4 points respectively in the 12-week period compared to the same period last year. Both Walmart and Yonghui accelerated their progress on new retail format trial. Walmart deepened its cooperation with Tencent to optimize payment processes while Yonghui Super Species tested a drone delivery service in Guangzhou City, Guangdong Province.

The e-commerce channel grew by 32.0%, with 37.2% of households in urban China purchased FMCG online over the 12-week circle. Recently, RT-Mart together with Hema opened their first middle sized new retail store “HeXiaoMa” (盒小马) in Suzhou City, Jiangsu Province. The simplified Hema format has removed in-shop dining services.

Kantar Worldpanel’s data shows that there is a big potential to develop e-commerce business in lower-tier cities: 35.0% of households in county-level cities and 27.8% of households in counties purchased FMCG online in the latest 12 weeks, which is much lower than the 46.3% online penetration in key cities.

JD.com continued to narrow its gap with Tmall in penetration, with 6.3% of households shopping on JD in the 12 weeks. As e-commerce retailers have developed over the past few years, it’s become harder to gain a massive sales growth through purely price discounts.

Kantar Worldpanel has observed more campaigns to emphasize premiumization and joint online/offline activation during the recent mid-year “618 (June 18) Online Shopping Festival”. This will create new themes to engage consumers and stimulate consumer demands. Please watch this place for future FMCG data and reports.

This post was originally published on Kantar.com.

China’s growth of FMCG sales is weaker in Q1 2018 compared with previous quarters, while new retail accelerates the online and offline integration.

Kantar Worldpanel reports that the fast-moving consumer goods (FMCG) market in the first quarter of 2018 was relatively weak with value growing by just 2.3% in the latest 12 weeks compared to the same period in 2017. China’s GDP grew by 6.8% in the first quarter of 2018, which is consistent with the last two quarters in 2017.

In the full year of 2017, FMCG growth rate reached a three-year high of 4.3%.

Modern trade (including hypermarkets, supermarkets, and convenience stores) grew by only 0.9% in the first quarter of the year in China. Across city tiers, provincial capitals, prefecture-level cities, and county level cities enjoyed faster growth, up by 2.8% collectively. Across regions, the West region has seen the strongest growth, up by 4.6%.

Leading Grocery Share of Modern Trade – National Urban China (%)

Note: Retailers in orange color are from Alibaba camp; retailers in blue are from Tencent camp.

Leading retailers taking sides either with Alibaba or Tencent

Among the top 5 retailers, Sun Art, Vanguard, and Walmart all strengthened their leading position and Yonghui surpassed Carrefour to be the No. 4 retailer in China.

As the only retailer in top 5 that enjoyed double-digit penetration growth, Yonghui’s share rose from 3.2% a year ago to 3.8% in the past 12 weeks in 2018. This performance has further been supported by the opening of 77 new stores in the first quarter of 2018. Yonghui has announced a bold plan to open 100 Yonghui Super Species and 1,000 Yonghui Life stores during 2018, with its O2O APP covering all its retail formats and 50% of overall business.

The first quarter of 2018 also witnessed the two Internet giants’ accelerated move into the offline world with various partnerships and acquisitions of key retailers.

The trend has continued into April when Vanguard Group announced its partnership with Tencent/JD. This would mean that the Tencent/JD camp would represent 21.7% share of the modern trade of FMCG. Further acquisitions are also being witnessed beyond the grocery sector, such as Alibaba’s full acquisition of Ele.me, the leading food delivery service, and investment into Easyhome, a home furnishing chain to broaden its offline reach and touch more areas of Chinese consumers’ lives.

E-commerce players trying to reinvent traditional trade

Kantar Worldpanel reported 26% growth in FMCG spends through e-commerce platforms in the first quarter of 2018. Both Tmall and JD.com are neck and neck in the B2C camp, yet YHD (acquired by JD.com in June 2016) experienced a continued loss of shoppers, with penetration falling from 1.5% last year to 0.6% in the latest quarter.

As e-commerce looks for new ways to drive traffic online, the key players are also turning to small format neighborhood stores and grocery stores.

In January, Tmall announced the opening of its first Tmall CVS in Hangzhou, transformed from a mom and pop shop. Alibaba applied big data and modern retail management system to help those traditional stores better optimize product procurement and assortment. JD.com also accelerated its pace in transforming the sector, with the ambitious plan in place to open 1,000 stores every day. Both are trying to extend their physical footprint to tap into lower-tier cities and rural areas where e-commerce penetration is still relatively low.

Check out new retail trend in China here or China’s luxury consumption trends in the new retail era.

This post was originally published on Kantar.com.

Net revenues of JD.com for Q4 2017 were RMB110.2 billion (US$216.9 billion), an increase of 38.7% from Q4 2016. Revenues from services and others for Q4 2017 were RMB10.0 billion (US$1.5 billion), an increase of 54.7% from Q4 2016. Net revenues for the full year of 2017 were RMB362.3 billion (US$55.7 billion), an increase of 40.3% from the full year of 2016. Revenues from services and others increased by 49.9% in 2017.

Gross profit for the fourth quarter of 2017 was RMB14.4 billion (US$2.2 billion), compared to RMB10.8 billion in Q4 2016. Gross profit for the full year of 2017 was RMB50.8 billion (US$7.8 billion), an increase of 43.7% from the full year of 2016. Non-GAAP gross profit4 for the full year of 2017 was RMB50.0 billion (US$7.7 billion), an increase of 44.7% from the full year of 2016.

Net loss from continuing operations attributable to ordinary shareholders for the fourth quarter of 2017 was RMB909.2 million (US$139.7 million), a decrease of 27.9% from RMB1,261.4 million net loss for the same period last year. Non-GAAP net income from continuing operations attributable to ordinary shareholders5 for the fourth quarter of 2017 was RMB449.3 million (US$69.1 million), compared to RMB779.7 million for the same period last year.

Net income from continuing operations attributable to ordinary shareholders for the full year of 2017 was RMB116.8 million (US$18.0 million), compared to a net loss from continuing operations attributable to ordinary shareholders of RMB2.0 billion for the full year of 2016. Non-GAAP net income from continuing operations attributable to ordinary shareholders for the full year of 2017 was RMB5.0 billion (US$0.8 billion), an increase of 140% from the full year of 2016.

Diluted EPS and Non-GAAP Diluted EPS. Diluted net loss per ADS from continuing operations for the fourth quarter of 2017 was RMB0.64 (US$0.10), compared to RMB0.89 for the fourth quarter of 2016. Non-GAAP diluted net income per ADS from continuing operations for the fourth quarter was RMB0.31 (US$0.05), compared to RMB0.54 for the same quarter last year.

Diluted net income per ADS from continuing operations for the full year of 2017 was RMB0.08 (US$0.01), compared to diluted net loss per ADS from continuing operations of RMB1.43 for the full year of 2016. Non-GAAP diluted net income per ADS from continuing operations for the full year of 2017 was RMB3.41 (US$0.52), as compared to RMB1.45 in the full year of 2016.

Operating cash flow from continuing operations for the twelve months ended December 31, 2017 increased to RMB27.3 billion (US$4.2 billion) from RMB10.0 billion for the twelve months ended December 31, 2016. Free cash flow from continuing operations, which excludes the impact from JD Finance related credit products included in the operating cash flow, for the twelve months ended December 31, 2017 increased to RMB15.7 billion (US$2.4 billion) from RMB13.5 billion for the twelve months ended December 31, 2016.

Annual active customer accounts increased by 29.1% to 292.5 million in the twelve months ended December 31, 2017 from 226.6 million in the twelve months ended December 31, 2016.

In the fourth quarter of 2017, JD.com continued to expand its fashion offering on the JD platform with Bebe, an American contemporary fashion brand, and Cambridge Satchel, an iconic British handbag brand. TOPLIFE, JD.com’s independent online luxury platform which was launched during the quarter, also expanded its range of high-end brand partnerships through agreements with several well-known international luxury brands, including Yves Saint Laurent, Alexander McQueen and Derek Lam. TOPLIFE’s customized inventory facilities, premium delivery service and abundant product selections combine the best of offline luxury shopping with the convenience and precision of online shopping.

JD.com had over 170,000 merchants on its online marketplace, and a total of 157,831 full-time employees as of December 31, 2017.

In December 2017, JD.com launched its second-hand goods business, Paipai, expanding JD.com’s ecosystem into China’s second-hand goods market. Combining advanced technologies such as blockchain-based traceability, AI-enabled automated online product verification and valuation, identity verification and credit rankings alongside JD’s anti-counterfeit controls, JD is well positioned to solve key “pain points” in the second-hand goods market, namely, quality, authenticity and security, providing a trustworthy second-hand goods platform for Chinese consumers.

As of January 31, 2018, JD.com’s joint venture, New Dada, had partnered with 163 Walmart stores and 388 Yonghui stores, among numerous other supermarkets and grocery stores, to provide a premium online fresh grocery shopping experience with one-hour home delivery service. New Dada is the largest crowdsourcing logistics provider and O2O grocery platform in China.

In January 2018, JD.com and Meili Inc. agreed to form a joint venture to explore social-commerce opportunities. The new venture will build and operate a social e-commerce platform leveraging resources on JD’s level-1 Weixin entry point, bringing innovative and interactive social-commerce features to shoppers, and helping small businesses reach a broader consumer base at lower cost.

In February 2018, JD.com and Tencent announced a joint minority investment in Better Life, a leading multi-format regional retailer in southwest China. Combining Tencent’s massive social media traffic, JD’s e-commerce know-how and logistics capabilities, and Better Life’s offline retail chain, the three parties have established a strategic partnership to pursue “Boundaryless Retail Solutions” and to provide customers with integrated online and offline shopping experiences.

Cross-border online shopping trends in China 2018

Spending on fast moving consumer goods (FMCG) in China grows by 4.3% from a year ago, which is 0.7 percentage point higher than that in 2016 and the fastest in three years.

Kantar Worldpanel reports the spending in fast moving consumer goods (FMCG) in 2017 grew by 4.3% year on year, which is 0.7pt faster than 2016. This signals the end of the slowdown China has experienced over the recent years and gives optimism to FMCG manufacturers and retailers looking to expand their footprint and recruit even more shoppers in 2018.

Across all regions, the West and North regions reported a more upbeat trend, up by 6.0% and 4.7% respectively, contributing to the overall growth of China. Modern trade (including hypermarkets, supermarkets, and convenience stores) grew by 2.6%, while last year this channel grew only 1.6%. Leading modern trade retailers strived to introduce new business models as well as O2O (online to offline) initiatives to actively meet the demand of Chinese shoppers in the “New Retail Era”.

Most top players getting stronger

Most of the top retailers in China performed strongly in 2017, thanks to both new store openings and expanding their format portfolio. Sun Art group continued to strengthen its position, growing their share from 8.1% to 8.4% on annual basis, while Yonghui remained the fastest growing player, with 0.3 share point increase year on year.

Armed by its new Super Species format (supermarket + fine dining) and YH Life (neighborhood store + O2O delivery), Yonghui went from strength to strength, overtaking Carrefour and becoming the fourth largest retailer on the Chinese mainland in the last quarter of 2017. Amongst the regional players, Bubugao Better Life, Wumart and SPAR continued to outperform their peers through aggressive regional expansions and their embracing of new retail initiatives. International retailers as a group further weakened in 2017, with share reduced from 11.1% in 2016 to 10.3% in 2017.

Last year, tech giants Alibaba and Tencent were moving from the online world to the offline world by putting their investment into the heated retail battle between supermarkets. By end of 2017, the Tencent/JD camp (including Yonghui, Carrefour, BuBuGao, and Walmart) reported 12.8% share, higher than 11.1% recorded by Alibaba camp (Sun Art and Balian). Both giants are embarking on the active transformation of the Chinese retail infrastructure in a number of different ways.

60% of urban families buy FMCG online

Kantar Worldpanel reported a strong growth of 29% in FMCG spend by e-commerce year on year. In 2017 60% of China urban families purchased FMCG online, 5.4 percentage points higher than the previous year. In Key cities, almost 70% of households purchase FMCG online. Furthermore, higher frequency also contributed to the growth as online shopping becomes more of a routine in consumers’ lives, fuelled by the rapid growth of mobile e-commerce. In 2017, shoppers purchased FMCG from e-commerce on average 7 times a year.

What is in store for 2018?

1. Further integration between online and offline

The China retail market will see more equity investments from e-commerce & tech giants such as Alibaba, Tencent, and JD. The integration is set to help accelerate the recovery of modern trade, by directing consumer traffic back to the brick and mortar stores and utilizing the distribution network to deliver to consumers in a faster and more cost-efficient manner. The integration will also see offline stores carrying the best-selling merchandise from e-commerce platforms, as is evident from RT-mart’s recent listing of best-selling items from Tmall, as well as the optimization of assortment in grocery stores empowered by Tmall and JD.

2. Fresh food as super entry point and growth engine

According to Kantar Retail’s analysis, e-commerce’s expansion roadmap should follow this logic:

1) Start from categories of a low degree of standardization and the low proportion of fulfillment cost against total product sales (such as long tail products sold by massive numbers of small third-party online sellers). This was marked by the birth of Taobao.com, also now the expansion direction of JD.com;

2) Enter categories of a high degree of standardization and preference for authentic products as well as a low proportion of fulfillment cost against total product sales (such as digital gadgets, home appliances, cosmetics, parenting and infant products). This was marked by the birth of Tmall, JD.com, and Suning.com;

3) Expand to categories of a high degree of standardization as well as a high proportion of fulfillment cost against total product sales (such as packaged foods, especially high frequency purchasing items like drinks, which require efficient logistics system). This was where Yihaodian began its business and where Tmall and JD.com are both fighting for;

4) The last categories are those of low degree of standardization as well as a high proportion of fulfillment cost against total product sales, which means fresh groceries. At this phase, the logistics infrastructure and consumers’ demands are mature.

Kantar Worldpanel reports that the spend in fresh food in the latest 52 weeks ending November 2017 grew by 38% in e-commerce channels, as more fresh food specialists are expanding their logistic capability and assortment to attract more online shoppers. Given its high frequency and essential role in the grocery basket, fresh food is a key destination category for both brick & mortar retailer and e-commerce giants. As Hema aggressively expanded its franchise nationally and JD launched its 7 Fresh formats, more traditional retailers are following suit to fight for the most resilient consumer demand. The battle will intensify in 2018, as more focus is put on fresh to fight for a bigger slice of pie.

3. Innovative store formats to be deployed and expanded

The pure big-box format in China struggled to grow amongst younger middle-class shoppers as the result of an increase in the more appealing hybrid concept formats. While the Hema model will be increasingly duplicated, unmanned stores are the new favorites with investors although scalability and profitability remain questionable. Dmall APP + physical store network will expand to more retailers, helping them to capitalize existing store assets through tech empowerment.

4. Regional players will seek more alliance

At regional or provincial level, the FMCG market remained fragmented and this indicates more room for cross-provincial expansion and acquisition. With its investment in Zhongbai and Hongqi, Yonghui was able to expand its presence into adjacent provinces where local market leaders dominate. SPAR, on the other hand, developed more franchises in Hebei and Yunnan over the past two years, as well continuing its organic expansion within its existing partners’ territories. In China, the West and North regions see more opportunities for further consolidation.

5. Social commerce will drive content-based shopping

The rise of WeChat, not just as a messaging app, but as a place where people shop online, is one to watch in 2018. In 2017, the WeChat channel achieved a staggering 52% growth and accounted for 1.4% of FMCG spending according to Kantar Worldpanel.

Though still relatively small, it represents a promising growth engine as Tencent began a serious push to open up its platform for developers to build e-commerce stores and a wide range of online services. As WeChat’s wallet allows users to seamlessly make an in-app purchase and social networking allows users to influence each other’s buying decisions, social commerce is also expected to facilitate sales conversion for all stores.

Cross-border online shopping trends in China 2018

This article was originally published on Kantar.com

Chinese urban consumers’ spending in fast moving consumer goods (FMCG) in the third quarter of 2017 grew by 3.6% from a year ago, indicating a clear recovery.

Kantar Worldpanel reports the Chinese urban consumers’ spending in fast moving consumer goods (FMCG) in Q3 2017 grew by 3.6% on 12-month basis, indicating a clear recovery for the industry.

Offline channel grew by 2.2%, which is slower than the total trade. However, modern trade (including hypermarkets, supermarkets, and convenience stores) did report higher growth at 2.9%, suggesting consumers are returning to brick and mortar stores as they create better shopping experiences through technology innovation.

Four key cities (Beijing, Shanghai, Guangzhou, and Chengdu) and provincial capitals grew slightly faster, up 3.7%. Across all regions, the West and South markets reported a more upbeat trend, up by 6.0% and 4.2% respectively.

Sales rebound in offline

Leading Grocery Share of Modern Trade – National Urban China (%)

Local retailers continued to outgrow their global counterparts during Q3. The Sun Art group lifted its share by 0.4 percentage point over the same period last year, driven by successfully growing the size of shopper’s baskets. Yonghui and BuBuGao kept growing by opening more new stores. Within the first half of 2017, Yonghui opened 64 stores and BuBuGao opened 22 stores. It largely helps to strengthen their position, and both of them gained 0.2 percentage point share during this quarter.

Amongst international retailers, Walmart and Carrefour started to see meaningful share recovery. Although they are still closing non-performing stores, they are proactively reformatting their existing stores to be more competitive and appealing to shoppers.

They are introducing new stores which are 30% to 50% smaller than the old ones to make their merchandises more accessible while reducing the sales area for durable goods. In June, Carrefour opened its first Easy Carrefour store in Wuxi and this is the first time the retailer introduced the smaller format store outside its home base in Shanghai. More recently it launched its own digital wallet “Carrefour Pay” together with Union Pay to facilitate more mobile payments in store.

Apart from that, in order to seek growth in the new retail era, most of the top 10 retailers adopted a more aggressive O2O (Offline and Online) strategy, by providing an integrated shopping experience with multi-channel offers.

For example, Yonghui works with JD.com’s platform to deliver its fresh produce and essential grocery items to consumers within one hour. They also introduced their own APP Yonghui Life in selected cities to expose to consumers directly.

More Chinese E-commerce players moving offline

Kantar Worldpanel reported a robust 24.3% growth in FMCG spend through E-commerce channel in this quarter. Now e-commerce accounts for 7.4% of FMCG spend in the latest 52 weeks ending September 8, which is 1.7 points higher than the same period last year.

China’s Online Retail Trends of Devices Sales in Q3 2017

This article was originally published on Kantar.com.

The spending growth of China’s FMCG market showed to 2.9% in 2016 from 3.5% in 2015, according to Kantar Worldpanel. The growth of hypermarkets, supermarkets, and convenience stores slowed to a growth rate of just 0.7% in 2016。

However, counties in China grew by 5% YoY and the west region expanded its sales by 6.6% in 2016.

Local Chinese retailers continued to outperform international retailers in China in 2016. Sun Art increased its share from 7.5% to 7.8% while Yonghui remained the fastest growing player in 2016.

53.5% of China urban families purchased FMCG online. Kantar Worldpanel reported a staggering 54% growth in FMCG spending through e-commerce channel. China online retail sales grew by over 26% in 2016.

14 Chinese companies from China and Hong Kong made it to Deloitte’s top 250 retailer list.

Also read: China cross-border e-commerce insights 2016/2017

Deloitte’s annual Global Powers of Retailing report identifies the 250 largest retailers around the world. JD.com ranks on top of all Chinese companies in the Top 250 retailers list.

14 Chinese companies including China and Hong Kong who made it to the top 250 list include:

• JD.com, 36
• Suning Commerce Group Co., Ltd., 46
• A.S. Watson Group, 51
• China Resources Vanguard Co., Ltd., 54
• Gome Home Appliance Group, 69
• Dairy Farm International Holdings Limited, 85
• Shanghai Bailian Group Co., Ltd., 121
• Chow Tai Fook Jewellery Group Limited, 128
• Belle International Holdings Limited, 145
• Yonghui Superstores Co., Ltd., 146
• Vipshop Holdings Limited, 157
• Chongqing Department Store Co., Ltd., 192
• Dashang Co., Ltd., 195
• Nonggongshang Supermarket (Group) Co. Ltd., 214

Retailers based in China and Hong Kong generated the strongest growth in the region with combined revenue up 12.9% in FY2015 although they posted a slight growth of 0.7% net profit margin.

Vipshop (1), JD.com (2), Yonghui Superstores (13), and Suning (48) are among the top 50 fastest-growing retailers for FY2010-2015. JD.com (2), Suning (5), Vipshop (8), Dangdang (47) were also in the top 50 e-retailers for FY2015.

In 2016, the national online retail sales of goods and services in China was 5,155.6 billion yuan, increased by 26.2% YoY.

Also read: What are consumers buying for Chinese New Year 2017?

Kantar Worldpanel reports 5.7% value growth for China’s FMCG market for the latest 52 weeks up to Sep 5th 2014 which remains low in comparison to historic levels. FMCG growth recovered to 6.9% in Q3 2014, higher than both Q2 (4.7%) and Q1 (4.6%).

Small and less developed cities maintained fast growth at 9.7% for 2014 Q3 while key cities returned to positive value growth at 1.6%. According to Kantar, consumer trading up to more premium products is the key reason for this rebound. While this trend is present across all city tiers, it’s most noticeable in county level cities.

FMCG international retailers continue to lose share to local retailers. At national level, international retailers showed declines in penetration with stagnant shopper spending. And are losing share to local retailers across all four regions, with performance especially marked in the north. Conversely, local retailers maintained penetration levels while increasing shopper spending.

Retailers competing in the east face challenging circumstances with the region showing the highest level of consolidation. The top 10 retailers combined share accounts for 63.1% of modern trade in comparison to the nationwide top 10 share of 41.2% according to Kantar report.

Yonghui continued its strong performance with its national value share growing from 2.3% to 2.7% over the past 3 months. This was primarily driven by its fast expansion in the north, with a 0.6% share increase in Q3. Yonghui also demonstrated an impressive value share level of 5.4% in the west region; already making it the third largest player and only marginal lower than the second player, Vanguard group with 5.5%.

Steady penetration growth remains the driving force for e-commerce in FMCG, as the channel attracts more shoppers as a result of price, product choice and convenience. Kantar Worldpanel reports that 34% of Chinese urban families now shop online in the year. With the historical debut of Alibaba in NYSE in September, it is expected that more investment will be made on building infrastructure of the logistic network to make e-commerce more accessible to consumers across all life stages and locations in China.

E-commerce today is clearly no longer a preserve for younger consumers. Kantar Worldpanel observed that online shopping penetration is now growing strongly amongst older families where 26% shopped online in the latest year – an increase of 49% compared to 2 years ago.

According to Kantar Worldpanel, older consumers tend to buy more; household cleaning products, liquid milk, nutrient supplement, kitchen products and pet food from e-commerce retailers. Online retailers will need to ensure that user interfaces are friendly and easy to navigate with suitable support and assurance for those consumers who move from offline channels to online channels. At the same time, brand owners should also embrace the new reality, learning to communicate with consumers throughout the path to online purchase.

Also read: China Top 5 Group Buying Websites in Different Tier Cities