“The China Wine Market Offers Great Potential But Is Complex In Nature”
China’s booming e-commerce market continues to attract an ever-increasing number of retailers, all with eyes on tapping demand from the country’s middle class for everything from apparel to automobiles. Noting a tightening of the purse-strings among consumers as China’s red-hot economic growth rate cools, companies hoping to take advantage of the rising interest in wine in China have been some of the more interesting to watch in recent months, with some adopting popular online sales models in an attempt to actually get individuals to buy. Joining YesMyWine.com, which has established itself as one of the largest B2C wine and spirits e-commerce sites in China since its launch in November 2008, earlier this year the Beijing startup Moooton (木桶网) launched a consumer-facing site adopting several features adapted from “flash sites,” and this March, YesMyWine and Wine Enthusiast announced plans to team up on a two-phase project that includes a digital Chinese-language magazine and a wine accessories website.
Now, it appears that the latest retailer to throw its weight behind the Chinese wine e-commerce market is Walmart, via the Chinese online sales giant Yihaodian (1号店) — of which Walmart owns a controlling stake. Launched in July 2008, Yihaodian sells nearly 200,000 products, everything from groceries to electronics and apparel, and has grown rapidly to become one of the country’s largest B2C online retailers. Currently, the company has over 5,000 employees as well as logistics facilities in Beijing, Shanghai, Guangzhou, Wuhan and Chengdu, and delivery stations in 34 cities across the country. This February, Walmart upped its investment in Yihaodian, with Neil Ashe, President and CEO of Walmart Global eCommerce, noting at the time that the investment “shows Walmart’s belief in retail in China as a growth industry.”
To start off its planned expansion into the wine market, this week Yihaodian signed DDMA China market research & consulting to advise the company on wine and beverage sales across all China markets. Though the site already has a red wine section, it only stocks a small percentage of what can be found on larger platforms like YesMyWine. According to a company release, DDMA is currently in “advanced negotiations with several leading wine producers” from the US, New Zealand and France, and expects to begin launching sales of the first batch of wineries on Yihaodian by August of this year. As Sam Mulligan, Director of DDMA China, said in a statement, ”While the China Wine Market is growing rapidly, consumer tastes and needs are also changing. Our on-going market research with Chinese wine consumers has identified clear opportunities in the China wine and beverage market for Yihaodian. We will combine our vast experience in wine and beverage market research and operations in China with our extensive China online shopping knowledge to offer Chinese wine consumers a highly relevant and compelling offer through Yihaodian.”
We’ll be curious to see which wines Yihaodian eventually stocks, as the Chinese wine e-commerce market — like its apparel market — tends to be increasingly crowded, with little product diversity and a market requirement for serious discounts. Though a growing number of wine e-commerce sites are looking to attract China’s wealthier drinkers, with some — like Signature French Wines in Hong Kong — specializing in higher-end Burgundy — more mass-market platforms could find their profits hit by the propensity among China’s middle class to hunt for a deal and demand perks and low prices.
No matter what, Yihaodian will have to work hard to establish itself as a trusted name in the wine sector in the months ahead if it’s to make inroads in the difficult and complex market. As Tech in Asia notes this week, as many as 900,000 Yihaodian users may have been affected by a recent data leak, “revealing names, usernames and passwords, mobile numbers, order history, and email addresses.”