Supermarkets fighting losing battle with e-commerce in China

Supermarkets fighting losing battle with e-commerce in China
Staff Reporter
2014-03-17
The growing popularity of e-commerce in China has now taken business away even from traditional supermarkets, whose annual gross margins have posted annualized declines, according to the Beijing Youth Daily.A woman surnamed Sun said her trips to the supermarket have decreased since she has become used to placing orders online for everything from home appliances to clothing, books and food, according to the report. The change in buying behavior, with fruit and daily necessities making their way to homes through e-commerce websites, has impacted traditional retailers significantly. According to the semi-annual financial reports of public retail firms in 2013, at least 80% reported that they had incurred growing management costs and decreasing gross margins.
Official data show that foreign-invested supermarkets in China have been in a crisis since 2012. The world’s largest retailers — Walmart, Carrefour and Tesco — slowed down expansion in the mainland market by 27% in 2013, with all of them closing some of their respective branches. Walmart shut down five, Carrefour two, and Tesco five.
Refrigerated and frozen foods are being pushed to boost sales of traditional supermarkets and attract customers and because of their high gross margin. Frozen products are also more difficult and expensive to keep chilled during shipping.
Beijing-based Wumart Stores said sales of its refrigerated and frozen products registered two-digit percentage growth in 2013. In addition, a Walmart executive pointed out that the retailer has established new distribution centers to attract new customers.
This has not stopped e-commerce companies from eyeing the frozen and fresh food sector. Another senior analyst is of the view that the revenue generated from fresh foods could touch 40% on average for e-commerce companies, with seafood and frozen meat reporting the highest revenue, followed by fruit.
Chinese internet giant Alibaba said its sales for fresh produce surged by 195% in 2013, with fruit, seafood and vegetables posting the largest growth.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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