Five reasons why China's leading grocery retailers will pull further ahead than the competition

Based on a report on the region’s top ten leading retailers, IGD predicts growth of 10.4% for them, compared to 5.8% for the overall China market.

Said Shirley Zhu, programme director at IGD Asia, “The future of grocery shopping is being reinvented in China, where the boundaries between ecommerce, supermarket and restaurants are blurring. ​

“Facing rapid changes, the leading retailers are stepping up their efforts to build omni-channel capability, enhance in-store experiences and create differentiation. ​

“All these measures will help retailers understand and serve their shoppers better, gain a stronger foothold in the market and tap into a larger customer base in the future.”​

Among Zhu’s revelations: Online giants Alibaba and JD.com will be among the top five largest grocery retailers and enjoy the strongest growth from online and offline.

Meanwhile, retailers with nationwide networks such as Walmart, Sun Art, Yonghui, CRV and Carrefour will reap rewards from ongoing expansion, partnerships with e-commerce players, improved efficiencies and investment in small formats.

And regional players NGS, Wumart and Bailian will continue their transformation starting with segmenting and targeting shoppers better.

IGD identified the five key growth-drivers for the top ten leading retailers that keep them ahead in a dynamic market.

1. Online and offline integration​

Digitally-savvy consumers today are demanding fast, simple and convenient methods of shopping. This has been addressed by the acceleration of online and offline integration, accentuated by partnerships between retailers and supply chain partners.

Ecommerce players such as JD.com and Alibaba are making use of big data capabilities to grow further, while bricks and mortar retailers in China recognise the importance of online-to-offline as a means of adapting to the needs of consumers, offering greater personalisation and more convenient access to stores through multiple channels.

Walmart’s strategic partnership with JD.com integrates their platforms, supply chains and resources in China. This has enabled over 160 Walmart stores to offer one-hour delivery services and also pickup points in-store.

Another is Bailian’s RISO, is an experiential store concept integrating food retail, foodservice and recreation. It also has a mobile app that allows customers to order products, and receive them within an hour if they live within 3km.

2. In-store foodservice​

Retailers in China have also been blending retail with foodservice, to significant impact. Some of them allow shoppers to choose live seafood, have it cooked in front of them and to eat it in a comfortable dining area in-store.

“The option to shop for groceries and dine in one place plays an important role in driving new customers to the store. Foodservice also increases the number of customer touchpoints, which in turn continues to help engage returning customers,” ​Zhu explained.

Alibaba’s Hema Fresh online to offline supermarket has a strong focus on foodservice. It has about 40 stores in major cities across China and is targeting 2,000 stores in the next three to five years.

3. New store formats​

Retailers in China are also seeking better ways to accommodate shoppers and to maximise space. With shopper preference moving towards online and mobile channels, smaller formats can more easily target specific customer segments.

New small formats can also be more cost-effective in testing demand when entering a new city.

“We are seeing many different retailers rolling out new small formats across China. From hypermarket to online operators, these new stores vary in size and purpose, but play an important role in offering something different to what they have already,” ​shared Zhu.

Auchan Minute is an 18 sq. m un-staffed convenience format. The store carries 500 SKUs, mainly focusing on grab and go items. It currently has 178 stores but 1,200 stores are targeted by the end of 2018. Auchan also plans to export the format to other countries.

Shanghai-based retailer Nong Gong Shang has transformed about 70 of its stores into NGS Outlets, with lower prices and fresh produce. The stores open at 6.30am to attract the morning crowd looking for fresh vegetables.

4. Digitising loyalty schemes​

Additionally, digital loyalty programmes should not be overlooked. They are simple for members to access, easy for retailers to update, and appealing to today’s consumers.

“With the data and analytics, retailers can better understand their customers, identify opportunities to improve on assortment and promotions, ultimately driving sales,”​ added Zhu.

Walmart and JD.com have offered a discounted bundled membership for Sam’s Club and JD Plus, through which members can get more value from both retailers, online and offline.

5. Rethinking private label​

Previously, many private brands aimed to be alternatives to main brands. The latest wave of investment in private labels is different, with retailers not trying to win purely on price but building trusted consumer brands as a competitive advantage.

Zhu said that as retailers successfully build recognised private labels, they will likely extend these brands into more categories.

“Fresh food categories are a good starting point. Fruit and vegetables, fish and meat are typical categories that are led by retailers, rather than brands. They are now packaged nicely under the retailers’ own brands, ready to be picked for in-store purchase or online orders,”​ Zhu shared.

One such example is Jia You Xian, Carrefour’s private label for fresh categories, sourcing directly from farms and ensuring sustainability and traceability. It plans to offer more imported produce through Socomo, Carrefour’s subsidiary specialised in fresh foods.