Mar 2, 2020|
In-Depth Report: When E-Commerce is Extended to Restaurants and Farms
by Yuchuan Wang
This past Chinese New Year has been unprecedented for Chinese people. Greatly impacted by the novel coronavirus (COVID-19) outbreak, people have been forced to stay at home to avoid infection. Markets, shopping malls and restaurants are all temporarily closed, while a surge in online orders – especially for fresh and instant food – has been seen across the country.
According to JD’s data, over 50,000 tons of fresh food were sold between January 20th and February 13th. Sales of meat and egg products increased by over 300% compared with the same period last year, while sales of frozen food and vegetables increased by 264% and 216%, respectively. From February 13th to the 17th, JD supplied 5 million bags of instant noodles to Chinese consumers. How could all these things happen?
When restaurants meet JD Fresh
Research from China’s National Bureau of Statistics shows that in 2019, 15.5% of the country’s restaurant revenues came from the Chinese New Year peak season, while 93% of China’s restaurants are currently temporarily closed due to the impact of COVID-19. But, it’s not only the restaurants that are suffering from the losses. Employees in the restaurant industry have also been forced to leave their positions.
Jindingxuan is a well-known Beijing restaurant chain opened 23 years ago, where Wei Han, a store manager, has served for 16 years. He didn’t go back to his hometown in Henan province during this past Chinese New Year holiday because he was expecting a busy holiday season like usual. Yet, the busy time didn’t occur, and instead, he received a notification about the temporary closing of his branch in Yizhuang, in the southeast of Beijing.
General manager at Jingdingxuan in Beijing, Mang Li says, “Many of our guests cancelled their reservations for the New Year’s Eve dinner. We have so far closed 18 of our 31 stores, and in our most popular Ditan branch, guest flow is less than 10% of what it used to be.”
While the flow to offline stores is disappointing, sales for ready-to-cook instant dishes is skyrocketing online. To help traditional restaurant enterprises get through this period, JD launched the “catering retail alliance” to enable enterprises to offer healthy and delicious packaged ready-to-cook or instant dishes across China through JD’s nationwide logistics network so that consumers can taste the original flavor from famous restaurants in their own kitchens. JD is also providing access to its C2M tools that provide big data analysis and insights to guide merchants to prepare and respond to specific demand by diverse communities, age groups, and even packaging preferences.
According to JD’s data, sales of Jindingxuan’s ready-to-cook products during the epidemic increased nearly 300% in February compared with a month earlier. “We used to supply our ready-to-cook products to JD’s warehouses twice or three times a month. We are now delivering at least three times a week,” said Bing Qiu, Director of Marketing Department at Jindingxuan. “Although we have tried ready-to-cook food and e-commerce in the past, we did not regard it as the focus of our business. Impacted by the virus, our offerings have expanded by 50% to more than 30 categories.”
The same is happening to other industry players. From February 1 to February 17, sales of CP’s ready-to-cook products on JD increased 664% on a yearly basis. And the sales of the whole month of February are expected to exceed that of last November when Singles Day (November 11th) sales was held. February orders for Xiaonanguo (a Shanghai classic chain restaurant)’s noodle product “Noodles Mixed with Scallion, Oil and Soy Sauce” were more than double the usual amount.
Affected by the epidemic, more and more restaurants have realized the importance of e-commerce and omnichannel. To date, over 200 partners have reached out to JD to join the alliance. Sales of related products have increased 450% from January 20th to February 18th compared with the same period last year.
JD not only opened doors of omnichannel to restaurants, but also created job openings for restaurant employees. After staying home for a week in his rented apartment in Beijing, Wei Han received some heartening news. JD.com launched a “talent sharing” plan, and Jindingxuan joined immediately. Under the plan, JD’s supermarket chain 7FRESH would hire short-term staff from restaurants, hotels, cinemas and other temporarily closed retail establishments.
Wei Han now is responsible for handling online orders at one of 7FRESH’s stores in Beijing. “This is different than what I used to do, but I am happy since I can still work and pay my bills,” said Han.
“It is JD’s responsibility to work with partners and help them and their employees get through this hard time,” said, Chunhua Cao, head of human resources at 7FRESH. More than 100 short-term employees like Wei Han are already working in 7FRESH.
Unsalable？No such thing!
The agricultural industry also faces significant challenges.
While the epidemic has awakened pent up demand for online shopping across the country, many farmers and agricultural enterprises face the dilemma of not being able to get their crops to end consumers.
“Strawberries were sold at RMB 30/kg before the Chinese New Year holiday. After the outbreak, we lowered the price to RMB 6/kg but we still lacked sales channels. My strawberries were nearly left to rot in the field,” said Qingmei Duan, a strawberry grower with over 10 years of fruit farming experience in Liaoning province in northeast China.
Dandong, where she is based and a border city to North Korea, is the largest strawberry production and export base in China, with an annual yield of over 200,000 tons. While the epidemic developed and increasingly strict protective measures were implemented, Duan’s dealers from other provinces were unable to come this year. At the same time, many local markets were closed due to the virus. “Offline channels, which used to account for 80% of my strawberry sales, were suddenly cut off,” she disclosed.
In addition to strawberries in Liaoning province, many other products including mangos from Hainan, apples from Shaanxi, oranges from Sichuan and flowers from Yunnan were struggling to find sales channels.
“Since the outbreak, there have been transportation restrictions across China, putting pressure on the delivery of agricultural products,” said Yishen Tang, head of JD Fresh. “The extended holiday intended to curb the spread of the virus also makes it difficult for dealers to purchase from farmers who have limited manpower. At the same time, many of the local sales channels such as markets have been temporarily closed. This complicated situation has led to nationwide fresh produce potentially becoming unsellable.”
According to iResearch, a market research and consulting company in China, traditional markets accounted for 56.1% of China’s fresh food sales channels in 2018, while e-commerce only takes a small bite with 4.1%.
As one of the pioneers in fresh food e-commerce that operates a global supply chain and nationwide cold chain network, to address this pressing issue, JD launched the “National Fresh Produce Green Channel” on February 10th, leveraging its strengths in supply chain, logistics, operations, marketing and more. Open to both existing and potential partners of JD, the initiative provides 25 supportive policies to merchants, including fast enrollment, extra traffic, discounts or fee-free use of the platform among a host of other benefits to bring fresh produce directly from farm to table.
So far, JD has received thousands of requests from farmers and agricultural enterprises and helped them sell over 3,900 tons of agricultural products that were impacted by the coronavirus. In just two days, 100 tons of strawberries from Dandong were sold on JD, helping over 30 local farmers get through the hardship and earn more money.
Seventeen years ago, a small outlet in Beijing’s Zhongguancun area started transformation, from brick and mortar to an online retailer because of SARS (Severe Acute Respiratory Syndrome), when the epidemic also stopped people from going outside and halted footfall at offline stores. That small outlet has become JD.com. Will the novel coronavirus change people’s shopping habits for fresh food over the long run? Will cold chain logistics leap forward in scale? Are we on the cusp of a major revolution for fresh food e-commerce? The unexpected arrival of the coronavirus raises many questions for decision makers.
“We’ve seen many agricultural production bases become increasingly aware of the significance of e-commerce due to the virus outbreak. We expect the scale of e-commerce companies’ sourcing directly from farms to further rise,” concludes JD Fresh’s Tang.