Aug 13, 2013

    China online food sales ride on fear

    CHINESE 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 a Chinese online retail boom driven by a rapidly expanding middle class.

    "I think people are willing to pay a higher premium than in the West,"said Mr Chen Yougang, a partner at consultancy McKinsey.

    "In other markets, like Britain, food e-commerce is about convenience. Here, there's going to be a higher quality and safety premium."

    But convincing some sceptical Chinese consumers on food quality will remain a battle. Shanghai-based Zhang Lei expressed doubt about the credentials of some products being touted as organic.

    "Everyone knows that, in China, organic is not the real thing," said the mother of one.

    Nonetheless, Mr Zhou Wen Quan, a senior analyst at Beijing Orient Agribusiness Consulting, said that total online sales of fresh produce in China could rocket to 40 billion yuan (S$8.2 billion) in five years, from about 11.5 billion yuan this year.

    So far, most food sold on China'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, analysts said.

    "The vegetables are really fresh," said Beijing resident Lei Na, who shops on websites such as "Supermarket food doesn't look that fresh, especially if you get there only in the evening."

    Shunfeng Express, China'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," said Mr Yang Jun, director of sales and marketing.

    With food scandals hitting Chinese shoppers thick and fast, firms are confident that they can overcome hurdles in the market.

    "During the bird-flu outbreak, our chicken sales exploded,"said Mr Steve Liang, founder of Shanghai-based online retailer Fields.