Chinese online consumers spending less each purchase, says Fruitday chief

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Chinese online consumers spending less each purchase, says Fruitday chief

E-commerce is bursting with opportunities for the Chinese produce market, but new approaches will be needed for growth to continue. During the Produce Marketing Association (PMA) Fresh Summit in Orlando, Florida on Friday, co-founder Loren Zhao shared some of his insights on how Chinese consumers are making their online purchases.

Unlike the U.S. where Nielsen data shows fruit and vegetables are way down on the list of groceries Americans would buy online, in China fresh produce is a “point of entry” into the world of e-commerce food, according to Zhao.

Speaking during the workshop "How to reach the world's 900 million online shoppers", Zhao told participants his company was generally the first to bring in new produce items into the Chinese market, but more changes were still needed to improve consumers' experiences and the trade's efficiency.

"Most of the packages right now are designed for display in the supermarket or the wholesale market, but they are not designed for e-commerce," Zhao said.

Fruitday co-founder Loren Zhao

Fruitday co-founder Loren Zhao

"First, we don’t want a small package, we want a big package so we can re-pack them to the smaller ones and we don’t need to waste a lot of package.

"And the suppliers and packing houses, they can save the cost of the package and we can get the lower price for the products."

However, while Fruitday would like to receive more fruit in larger packages to reduce food waste, the group is pushing for smaller packaging in some instances when it comes to the end consumer.

A great example is an initiative to reduce the size of New Zealand Zespri kiwifruit packs from 12-piece to 6-piece, which he said increased penetration from 14.4% in June 2015 to 33.4% in June 2016, with a growth rate of 130%.

With the smaller packaging, the period between purchases was reduced from 10 to six days, which he claimed also helped increase sales of other SKUs (stock-keeping units).

These results are in line with an overall trend of more frequent purchases, but smaller amounts spent each time.

"In the beginning the average price of a package was more than 200RMB (US$29.70) the average price has lowered down to 130 (US$19.30).

In contrast to many e-commerce produce providers in other parts of the world, Fruitday prides itself on free delivery, but this also makes it more difficult to reach the markets of China's interior when per-package returns are on the decline.

"But you need to understand the customer doesn’t want to buy too much product, especially the fresh products They cannot eat that," he said, adding the company had built a new distribution warehouse to respond more quickly to customer orders.

"There are some areas in Shanghai where we can deliver to the customers two hours from when they order online. But we cannot expand this to the whole of China.

"That's why so far we just cover Shanghai, Beijing, Guangzhou, the tier 1 cities, and from the big cities warehouses we can cover the nearby cities. The total number is around 100 cities in China."

Even without any expansion into the interior, there is still a lot of room to grow for companies like Fruitday in China's largest cities and along the eastern seaboard.

"In China, when I think fresh produce in e-commerce compared to the traditional channel, e-commerce just accounts for less than 2%," he said.

Another way Zhao would like to increase sales is the use of barcode scanning so that consumers can know more about what they're purchasing - it's a concept the company also trialed with Zespri last year.

"Using our mobile apps you can scan the barcode on every box of Zespri package...they can find out which Zespri kiwifruit is from, which area, which packing house and how many days it shipped to China.

"We use that just to let customers know you can use our mobile apps not just to buy from us, but to scan the information of the other products that you can buy online, and if you use that there’s a very high possibility in the future that you can buy from us.

"We just did that plan with Zespri and we are also talking about that to other providers from all around the world. First of all, they all have the database available, they can trace the products back to the packinghouse and the orchard, but the only problem is are they willing to open that to the end customer?"

He said the initiative with Zespri sparked very positive feedback from customers.

"I can tell you, the customers like to understand, because in China there is a lot of fake Zespri kiwifruit.


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