How far will China's online food market thrive?

E-commerce platforms have recorded massive surges in fresh food sales.

China’s online food market, already thriving from the consumer demand shifting to online platforms due to lockdowns, is expected to flourish well after the lockdowns ease and the pandemic subsides, analysts revealed.

According to a report from The Economist Intelligence Unit (EIU), fresh food delivery flourished in Q1, as consumers shifted their spending online, with orders surging on platforms such as Alibaba’s Hema Fresh and e-commerce platform DingDong Maicai.

In Shanghai, company revenue from online fresh products more than doubled 167% YoY to $1.24b (RMB8.8b) in Q1, whilst the number of active users rose 127.5%, according to the Shanghai Municipal Commission of Commerce.

Grocery and food delivery were the only two options for Chinese consumers to get their food, Fitch Solutions noted, and this fared well for JD’s online platform. One of China’s main e-commerce players, it reported a surge in sales of vegetables on its platform by a whopping 450% YoY during the period from January 24 to February 2. Pork sales skyrocketed hundredfold over the same period, whilst eggs and other meats soared 400%. Rice and flour sales rose 540% and 470% respectively over this period.

Fitch expects growth in the food and drink spending segment post-lockdown as the economic reality of the lockdown will feed through to consumers making them more price conscious and more focused on the essential spend segments.

Beyond the city, live streaming has become increasingly popular for farmers who are looking to sell their produce, and government officials have actively participated. Central authorities issued a plan in March to improve internet infrastructure and e-commerce, and central and western provinces, such as Guizhou and Hunan, are likely to be the biggest beneficiaries.

“Developing online platforms aligns with the central government’s policy of alleviating poverty and nurturing the rural economy,” EIU said.

Broadly, live streaming has been gaining popularity in China as retailers explore alternative sales channels. Trade website Linkshop reported that a single live-stream session can bring as much attention to a brand as six months of foot traffic.

Knight Frank Singapore noted that that pundits in China, inspired by Alibaba, are now touting digitainment as the future of e-commerce.

“Brands that can entertain and interact effectively with their customers online through entertaining and witty banter, livestream comments and information-sharing, are perceived to be more authentic and in tune with their followers as compared to those which use digital platforms purely for commercial transactions,” they said in a report.