As channels fragment and consumers gain more say, manufacturers are shifting from managing channels to managing people—where people are, channels follow. Throughout 2019, channels evolved and innovated at an accelerated pace, with online and offline integration becoming tighter. Among them, social e-commerce, represented by community group buying and livestream selling, grew rapidly and became a channel FMCG companies rushed to enter. Additionally, offline channels also offer many new dividends worth seizing, such as juice products and small-pack baked goods that can be sold in fruit specialty stores. In summary, channel integration means seizing the market at the point closest to consumers to meet their faster demands.
-01- Social E-commerce Rapidly Expands "No social, no e-commerce." According to the "2019 China Social E-commerce Industry Development Report," China's social e-commerce market size will exceed 2 trillion yuan, a year-on-year increase of 63.2%. By 2020, the number of users and market size of China's social e-commerce will increase from 422 million users and 2,060.58 billion yuan this year to 773 million users and 3,000 billion yuan. In August 2018, group-buying social e-commerce platform Pinduoduo went public in the U.S.; in May 2019, distribution-based social e-commerce platform Yunji achieved a U.S. IPO; meanwhile, content-based social e-commerce platform Xiaohongshu became an incremental market for food companies to tap; community group buying saw "one superpower and multiple strong players," and livestream selling was gaining momentum; even social e-commerce service providers Youzan and Weimob successively entered the capital market... More social e-commerce platforms bring rapid traffic fission, becoming a new industrial model at the forefront. Zhong Xue Gao, which became popular in recent years, treats "social e-commerce" platforms like Xiaohongshu as strategic partners for market expansion. Now, searching "Zhong Xue Gao" on Xiaohongshu yields nearly 5,000 notes, and behind these notes is the achievement of selling 7 million ice cream sticks within one year of launch. Yunji, through its global curated sourcing model, established supply and marketing cooperation with Danone's Early Life Nutrition division, adding the first safety lock for mothers' peace of mind. From this, it can be concluded that those who understand new channels first will be rewarded.
-02- Community Group Buying: "One Superpower, Multiple Strong Players" In 2019, after fierce competition, community group buying stabilized, with leading brands surviving and growing, forming the three giants represented by Xingsheng Youxuan, New Shihuihui, and New Shixianghui. Xingsheng Youxuan initially relied on Furong Xingsheng's national chain franchise stores, focusing on prefecture-level cities, counties, and even township markets, and established the "211 logistics delivery model" to enhance user experience, becoming a unicorn enterprise. In 2019, Xingsheng Youxuan is expected to achieve over 10 billion yuan in annual GMV, with a valuation exceeding $1 billion. In August 2019, Shihuihui merged with "Niwo Nin" and was renamed "New Shihuihui," pursuing ultimate freshness and creating "one city, one flavor." Shihuihui launched the small store plan, providing support in unified storefronts, decoration, and funding to help entrepreneurial group leaders realize their life value. Shixianghui entered the family consumption scenario through fresh produce categories, using mothers as "group leaders" as distribution nodes, conducting online community operations and front-end sales. After merging with TOP5 Squirrel Pinning, "New Shixianghui" was born. In addition to the three giants, regional leading chain supermarket Aike Youxuan focuses on localized business, relying on directly-operated physical community stores, fully leveraging the value of store managers and staff to reduce costs, and rapidly rose in 2019 as a dark horse in the industry. Meanwhile, JD.com joined forces with multiple industry leaders to establish the JD Community Group Buying Alliance. In less than a month, it developed over 290 partners, covering 224 cities, achieving good market response and scale advantages, becoming another backbone force expected to change the existing landscape.
-03- Livestream Selling Becomes an Era Trend 268.4 billion yuan is the final scorecard for this year's Double 11. Taobao Live contributed 20 billion yuan in sales, with 10 live streams breaking 100 million, not to mention the contributions of Viya and Li Jiaqi. There is no denying that livestream selling is effective, but in essence, it must return to the product itself. Looking at the products recommended by first-tier "stars" like Viya and Li Jiaqi, they undoubtedly have great advantages in price, quality, and other aspects. Consumers' preferences for categories and needs also differ greatly from traditional channels. In the food industry, the five major categories of snack foods, baked goods, dairy products, convenience foods, and beverages have become regulars in livestream selling, with manufacturers more focused on volume sales and brand building. Of course, the product is the core of everything; companies that want to embrace the dividends of livestream selling must put the product in the most important position. Not only do manufacturers need to have a clear positioning for their brands, but they also need to understand the anchor's product selection process and main preferences. In the future, as long as terminal delivery and supply period service issues are resolved, the online and offline "people, goods, and scenes" will be fully connected. At that time, returning offline, terminal service will be key to winning the market. As more anchors begin to focus on private domain traffic, this industry is bound to give birth to more new gameplay, and behind it may lie business opportunities for each of us.
-04- Food Delivery Channels Become Key for Food Companies China's food delivery industry transaction volume continues to expand, expected to exceed 600 billion yuan in 2019; however, the penetration rate of food delivery in China is less than 15%, leaving room for sustainable growth in the future, with second- and third-tier cities and township markets becoming new breakthrough points. Facing broad development prospects, food delivery channels have not only become a goldmine for offline food stores but have also attracted many industrialized packaged foods. Currently, in food delivery channels, condiments, frozen foods, and beverages are the main categories. In 2019, considering the changes in young people's dining and shopping habits, Fuling Zhacai increased its efforts to develop new channels such as food delivery and group meals, promoting 22g zhacai products, setting task requirements for distributors to connect with emerging channels, and creating new consumption scenarios through cooperation with marathons under the slogan "Sports Salt Replenishment Partner." Additionally, Hubang Chili Sauce, known as the "No. 1 Internet Celebrity Chili Sauce," took the lead in the chili sauce industry by launching the "one meal, one box" specification for food delivery platforms, and cooperated with well-known food and beverage brands and mainstream celebrities to enhance brand value. To date, Hubang Chili Sauce has covered the whole country, with over 30,000 brand merchants cooperating with major food delivery platforms such as Ele.me and Meituan. On November 20, 2019, Hubang Chili Sauce received tens of millions of yuan in Series A financing.
-05- Convenience Store Channels Flourish, Giving Rise to Small Pack Baked Goods In recent years, chain convenience stores have not only maintained high numbers but have also advanced in intelligence and standardization; meanwhile, community-based convenience store channels such as fruit stores, bakeries, and specialty stores have advanced rapidly, with good growth trends in new first-tier cities and second- and third-tier regions. In 2019, many baking and snack food companies launched innovative fixed-weight products in addition to bulk products, developing new scenarios, creating new brands, and breaking through the blockade of bulk channels. In 2019, companies previously known for bulk products began launching fixed-weight products, such as Youchen's golden shredded pork pine cakes, fruit cookies, and pork floss sticks; Haizhizui launched small fixed-weight products like Xiaopingyuan and Zujibang; some cake and bread companies also launched "one-person" products to meet the consumption needs of one person finishing at once, driving sales growth of small fixed-weight products in convenience store channels. According to statistics, to date, the sales growth rate of small fixed-weight baked goods has been significantly higher than that of bulk and other large fixed-weight products. This is partly because they highly match the lifestyle of modern consumer groups, and partly because the entry of various brands has given rise to new consumption forces in the market. In the future, the market space for small fixed-weight products will continue to expand, showing more consumption vitality in new channel terminals.
-06- Hypermarket Miniaturization Most domestic retail enterprises started with a single hypermarket format and gradually grew to a certain scale. When future market space development is limited, everyone is trying to find new breakthroughs. For retail enterprises, small formats are an opportunity. Small format stores have risen rapidly due to controllable costs, diverse strategies, and quick transformation, occupying streets, traffic arteries, commercial areas, and residential communities, in stark contrast to the sluggishness of traditional hypermarkets and supermarkets. Therefore, turning to small formats is actually following market trends. In 2019, hypermarket miniaturization and the sinking of small formats into communities were sought after by major retailers. It is understood that many retail enterprises are already laying out small formats: Hema opened mini stores, Yonghui is vigorously laying out mini stores, Wumart focuses on Duodian convenience stores, Walmart also launched Huixuan supermarkets, and China Resources Vanguard took the lead in the track with small format brands V>nGO convenience stores and Tesco Express. Industry insiders point out that traditional retail formats can no longer meet the increasingly diverse needs of consumers. High-end consumers have higher requirements for purchasing high-end products, and the market demand for premium supermarkets is gradually growing. In the future, small format stores will continuously meet the different consumption needs of different people and scenarios.
-07- Gas Station Channels Achieve Cross-Industry Integration With the increasing number of private cars, the number of gas stations is also growing, becoming places where car owners briefly rest and replenish energy during long trips, providing convenient conditions for the expansion of gas station convenience stores. For a long time, gas station convenience stores have been one of the important sales channels for industrialized packaged foods, especially functional beverages, which help drivers replenish energy during long-distance driving and occupy an important position in gas station convenience stores. Recently, as the 2020 Spring Festival approaches, Dongpeng Special Drink has targeted the gas station channel and large circulation channels, creating impressive thousand-box displays, exposing the theme activity "Chinese Red Energy Peng, Bring Dongpeng to Relatives and Friends," attracting consumers' attention and successfully creating a strong festive atmosphere. However, as the national gas station giants, PetroChina and Sinopec are not satisfied with existing achievements and have taken steps toward cross-industry integration. On September 3, Sinopec Easy Joy joined hands with Lian Coffee, the creator of the internet coffee category, to launch the new brand "Easy Joy Coffee." The first batch of Easy Joy Coffee stores opened simultaneously at 9 Sinopec gas stations in Suzhou, launching three series of products with different positioning: 92# (black and white coffee), 95# (fashionable special drinks), and 98# (premium series), perfectly integrating with the gas station scene, highlighting the advantage of freshly ground coffee, and practicing a new retail model centered on car owners' in-store consumption and home consumption with the gas station as the center of the living circle.
-08- B2B Channels Enter the "Deep Water Zone" In 2019, FMCG B2B entered the "deep water zone" of rational development. The head pattern of B2B platforms represented by Alibaba Retail Link, JD New Channel, and Suning Xiaodian began to emerge, with other platforms either being merged and integrated or focusing on deep cultivation in a certain regional market. As of the end of August 2019, Retail Link covered 1.3 million small stores, with over 700 brand owners and distributors onboard, and listed 6,000 Tmall Xiaodian stores. In 2019, JD New Channel fully launched upgrades for multi-scenario offline stores such as tobacco and liquor stores, mother and baby stores, and restaurants, and will lay out 10,000 "six unified" stores in multiple scenarios by 2020. In 2019, the number of Suning Xiaodian stores exceeded 5,000. On the basis of traditional convenience stores, it uses "Life Help" as a carrier to enrich value-added services such as express delivery, lottery, real estate, and finance. It not only launched "Suning Vegetable Market" with "order today, pick up tomorrow, ensuring fresh products," but also added dining areas, central kitchens, and light meal and beverage bars to meet users' refined consumption demands. When online traffic is in short supply, offline scenarios become hot commodities, and various capitals are rushing to sink into lower-tier markets, opening the second half of the retail game. It can be seen that B2B channels represented by JD New Channel, Alibaba Retail Link, and Suning Xiaodian are accelerating the digital transformation of stores and reasonably building a comprehensive model of "to store + to home."
-09- Artificial Intelligence Boosts the Further Development of Unmanned Retail Currently, the unmanned retail market mainly includes three forms. Among them, the self-service vending machine market started early and is relatively mature, with higher feasibility for intelligent technology transformation and application, while open shelves and unmanned convenience stores experienced rapid explosion and quickly returned to calm. The first half of intelligent unmanned retail was a "point war" of staking territory, while the key in the second half lies in refined operations based on one's own needs and positioning. In recent years, FMCG giants such as Wahaha, Jinmailang, Want Want, Uni-President, and Nongfu Spring have increased investment in vending machines; retail giants such as Lawson, Suning, Retail Link, and Eternal Asia are also accelerating their layout. This shows that in the field of unmanned retail, vending machines have always been a hot commodity. In 2019, Nongfu Spring upgraded its "underground parking lot vending machines" on a large scale to "Nongfu Spring Sesame Stores," focusing on family plan consumption, directly connecting "store-car-family" through a membership system, and seizing the opportunity to buy within the last 10 meters of consumers. After experiencing upgrades in channels, management, and other aspects, and combining with big data technology, unmanned retail has become an ecosystem with its own traffic. To meet the preferences and needs of the new generation of consumers, companies will inevitably be interested in using unmanned retail formats to enhance their product brand, sales, and traffic. Behind the development of unmanned retail is the reliance on achievements in artificial intelligence-related fields to improve efficiency, ultimately benefiting enterprises.
-10- Online and Offline Channel Integration, Snack Brands Accelerate Expansion E-commerce and snack specialty stores are important sales channels for snack products. Whether it is Lai Yifen and Bestore, which started offline, or Three Squirrels and Be & Cheery, which went public with the help of online internet dividends, all are focusing on the integrated layout of online and offline. Three Squirrels, which occupies the top spot in snack sales, plans to open 150 "feeding stores" in 2019 and plans to open 10,000 "squirrel small stores" in 5 years. Not only expanding its own channels, Three Squirrels is also actively cooperating with Suning Xiaodian and Alibaba Retail Link to vigorously lay out offline. Be & Cheery follows in the footsteps of Three Squirrels, entering Haoxiangni's offline channels, opening a "Snack Premium" offline store in Hangzhou this year, and accelerating the expansion of convenience stores and KA channels through third-party platforms. At the same time, after 12 years of fierce market competition, Bestore, with more than 2,000 offline stores, over 37 million members, and annual sales exceeding 8 billion yuan, is also accelerating its online and offline layout, seeking an omni-channel marketing model of "e-commerce platform + self-operated APP + offline experience stores + entering offline stores."
With the advent of the mobile internet era, consistency of online and offline experience has become the new normal. Offline stores are developing towards diversification and personalization, and interactive experience stores and retro concept stores will become mainstream.
Source: Tangyan Jiu Zhou Kan
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