China seafood leader sees ‘infinite’ opportunity in domestic e-commerce
The perhaps still opaque and mysterious growth opportunities of the web are clearly no such thing to Dalian-based Zhangzidao Group, which managed to quadruple its online seafood sales in China this year through September, year on year.
Zhangzidao, which saw sales of RMB2.6 billion ($423.4 million) last year and is one of China’s largest seafood companies, is seeing e-commerce grow by far faster than any other segment, Jiu Chang, manager of the overseas enterprise management department, told Undercurrent News.
According to Jiu, China’s online sales for seafood are set increase by 106% this year over last year.
As for Zhangzidao, the increase looks poised to be even stronger, as the company has sold as much online in the past three months as in the whole of last year.
“I cannot predict the future increment because the future for e-commerce is infinite,” executive vice president, Chunlei He, told Undercurrent. “All I can tell you is our sales from July 7 to the present equals the total sales online in 2013.”
July 7 is when Zhangzidao added the e-commerce group Water World (Shanghai) Internet Technology Ltd to its list of 22 other subsidiaries.
That same month, it sold 6,000 Boston lobsters, at 9,000 pounds, in three days during a sales event on Alibaba, the largest e-commerce site in China and by some reports the world.
Since the launch, Water World has grown from 14 employees to 40 as seafood commerce is taking off.
Yet even He — whose 56-year-old company Zhangzidao has more than 4,000 employees and 18 branches — describes e-commerce as irresistible yet tough.
“Online sales are a trend, and we just have to accept that,” He toldUndercurrent.
Delivering products such as live crustaceans — often from the shores of North America 7,100 miles away — to Chinese consumers’ doorsteps is no easy feat.
“Live and fresh sales online are facing the difficulties of logistics, lack of standardization and consumers’ trust,” He said. “We understand it must be a difficult path, but we are ready for it.”
Meanwhile, Alibaba, a key sales platform for Zhangzidao, has quickly grown to have larger sales than both Amazon and Ebay combined, according to media reports, and debuted to US stockholders with the largest IPO ever in September.
The day of the launch, Alibaba founder Jack Ma cited seafood in a Bloomberg interview as an important category for US sourcing.
Zhangzidao’s success is symbolic of such stories cropping up throughout China. Another is gourmet foods supplier Yiguo, which expects to double its sales to $100m this year as seafood keeps pace and becomes a major category.
Gearing up to ‘One million lobsters’ sale
The company is gearing up for China’s annual online shopping bonanza day — Nov. 11 — when it will launch its “One million lobsters” sales event.
Last year, total Tmall sales on Nov. 11 were RMB 35 billion, and customers spent $500 million in the first 20 minutes alone, according to Tech in Asia.
Events such as these — called pre-sales — make up 10% of the company’s overall online sales currently, while ongoing online sales make up 90%.
The company is not only selling through Tmall but also through Jingdong, YHD, Shunfeng and other e-commerce sites. It also is developing its own mobile e-commerce platform by selling on a We Chat shop — a mall-based mobile internet application.
This is a relatively small portion of sales for the company but it has rapidly become a major focus as online sales in China have taken off.
Zhangzidao first heard in March of 2013 that Tmall had a professional buyer in the United States to purchase seafood, and the wheels started turning.
At that point, it had already established its e-commerce subsidiary, but without big hopes. The only reason for the initial launch was because the traditional model had been crushed by online sales, He said.
Then, the company heard that an American agriculture trade agency’s seafood promotion online sold 37,759 order in 12 days, and it started to get more aggressive on its online sales venture.
The company launched its new “live fresh delivery” concept through its e-commerce department in January of this year, and by March, it was selling about 20 orders per day with 100% satisfaction from customers. The latter achievement is particularly important, considering online ratings can make or break a seller. On Tmall, for instance, sellers get kicked off if their ratings slip too low.
Today, It delivers its own live products — both domestic and foreign – from Dalian to its holding facility in Shanghai, then works with both Shungeng and Logistics, as well as Alibaba, on logistical issues. Alibaba logistics subsidiary Cainiao then helps the company with the last kilometer of delivery through the streets of China.
Booming e-commerce industry beckons
For Zhangzidao, backed by $5 billion in assets, the potential of e-commerce far outweighs these risks of negative consumer reviews and logistical hazards, He said.
Total online sales for fresh products — such as meat, vegetables and seafood and live seafood — in China were RMB5.9 billion in 2013, an increase of 138.5% since 2010 and 2013 and 40.7% since 2012, according to He, citing iResearch Group, which specializes in in-depth research on China’s internet industry.
Overall e-commerce now makes up 90% of total business to consumer market in China, according to ATKearney, a global management consulting firm.
Of course, perishables are not quite keeping pace, but whether the space will continue growing is not a question in He’s mind.
“The percentage of people who shop online will become more than ever in the future, especially in the live and fresh business,” he said.
On the flip side of the logistical challenges, He notes that e-commerce offers “huge advantages” to the consumer, such as time and location.
“For the young generation, online shopping has become their life style, and people are getting used to the efficient and quick online shopping without time and location restrictions,” He said.
“There is something we must understand that online sales have given us the chance to face all the consumers directly by optimizing the supply chain. It has changed our business model.”