Led by Mainland China, how is the industry adapting and adopting new ways of consuming FMCG products?
Mainland China leads the ‘new retail’ growth
As the most established online market globally, Mainland China always offers interesting dynamics and learnings for the rest of the world.
In this market, the share of online growth has been steadily changing over the past three years. A game that traditionally was mostly limited to two main players is rapidly expanding to include a host of new competitors. In 2020, Alibaba contributed 49% of the e-commerce channel’s growth. While still high, this dropped to 35% in 2021.
In the 12 weeks to 25 February 2022, JD.com and online marketplace Pinduoduo continued to grow share at the expense of Alibaba. Pinduoduo now holds the second largest consumer base in the market, with penetration of 29.2%.
Changes were evident in livestreaming, too. Virtually unknown before bursting onto the retailing scene in 2019, livestreaming provides immersive experiences for consumers and personalized recommendations from key opinion leaders (KOL) and other hosts.
Consumers like livestreaming’s convenience, which is also a big part of the appeal of O2O (online to offline) retailing, a phenomenon that boomed during the pandemic. O2O accounts for 7% of all FMCG value and its penetration among consumers remains above 50% for FMCG categories. While consumers turn to livestreaming for categories like makeup and apparel, they use O2O channels for products that are cheaper, handy, and require less emotional involvement. Products that consumers run out of and quickly order for one-hour delivery. As Covid-19’s effect on purchasing behaviour lessened, O2O penetration remained flat and the share of value from O2O slightly declined.
Community group buying’s popularity rose during the earliest months of the pandemic and became so important in the first quarter of 2021 that all major platforms invested heavily in it to stay connected to consumers. But the trend began to wane as its economics came into sharper focus.
The growth of these new online models, means now that the average household uses three different models.
(Most of the previous page is taken from China Shopper Report 2021, Volume 2)
‘New retail’ adoption across the globe
As we’ve already seen, much of the global growth of ecommerce is coming from Asia, whereas penetration is plateauing or falling in Europe, and online is still marginal in Latin America. With this in mind, what is the adoption for these new models like outside Asia?
In Europe, the adoption remains low for FMCG purchasing. In both GB and France, despite the rising popularity of aggregators (delivery apps like Deliveroo, Glovo, Rappi, Grab, etc) for Home Meal Delivery, they aren’t currently being used very often for grocery shopping.
In GB, despite the number of monthly users increasing three-fold over the last two years aggregators account for just 0.3% of total ecommerce grocery sales on average. In France, while 19.5% of households used an aggregator in 2021, most (18.2%) used it for meal delivery, and in fact only 2.2% of household using it for FMCG.
Penetration is similarly low for the other new online models with social commerce and quick commerce sitting at the same level.
Meanwhile, in Latin America, despite online accounting for less than 1% of FMCG sales, the adoption of aggregators for grocery is higher than France across most markets. Chile has the highest penetration in the region at 14.8%, and Argentina, Brazil, Ecuador, and Peru all have a penetration rate over 3%. It’s not just the use of aggregators that’s on the rise in the region. Social media for FMCG has a higher penetration across every market in Latin America than France, with its usage comparable to the Asian markets. 14 million shoppers across the region used WhatsApp to initiate an FMCG purchase in 2021. (The platform is particularly relevant for Beauty where it accounted for over 40% of online spend).
