by Ella Kidron

Like everything in 2020, trends around mooncakes ahead of China’s upcoming Mid-Autumn Festival this year, are anything but ordinary. With Mid-Autumn Festival and the eight-day Golden Week holiday (National Day) happening concurrently this year, many consumers take a much-needed trip to their hometown for a family reunion after half a year in lockdown.

As a traditional Chinese food that symbolizes family reunions, mooncakes are an essential ingredient for the Mid-Autumn Festival celebration. This is the case not just in China, but around the world for overseas Chinese and others who choose to observe the holiday. According to a recent report, over the next five years the mooncake market will register a 3.4% CAGR in terms of revenue, and the global market size is estimated to reach $2539.6 million by 2025, from $2219.6 million in 2019.

Given the unique circumstances of this year, the mooncake market in China has seen some surprises. JD Big Data Research Institute has the low down.

First, mooncake sales on JD increased 135% YOY (Note: year-on-year from here on out refers to the lunar calendar), the largest amount of growth on record. Some of the reasons for this growth include purchases of gifts for families in preparation for the journey home, the movement of more consumption of mooncakes online, increased customization of products and packaging, and increased attention to quality.

Xiaojun Wang (王晓军), general manager of dry goods at JD FMCG Omnichannel who oversees the mooncake business had a clear strategy going into the sales season. “We have continued to vigorously develop exclusive C2M mooncake products, causing the proportion of C2M mooncake sales to continue to increase.”

Providing consumers more access to mooncakes through a multi-pronged approach is also important. He explained that this year the team has also carried out numerous omnichannel activities such as offline tasting promotions, joint marketing with JD New Markets, SEVEN FRESH, Yihaodian and other self-operated channels. “We have also integrated offline stores of suppliers such as Daoxiangcun(稻香村，literally means Village of Rice Fragrance), integrated supplier resources and implemented an omnichannel operations strategy to gain a larger increase.”

Selected data from JD Big Data Research Institute report on mooncake sales trends

From local to regional

One famous Shanghai mooncake brand, Xinghualou (杏花楼, which literally means Apricot Blossom Tower) discovered that one of the many benefits of starting to sell online is that they can reach consumers far outside of the Shanghai region. The brand was surprised to find that through JD, besides Shanghai, their mooncakes sell best in Chongqing, a city about 2000km west. Despite the fact that Shanghai (known for light and sometimes sweet cuisine) and Chongqing (known for lots of spice) have very different eating preferences from a regional perspective, they happen to overlap in taste preferences for mooncakes. It might be near impossible for Chongqing consumers to find Xinghualou mooncakes locally, but they can access the real thing, just as if they were in Shanghai. Previous reports also indicate that the channels consumers choose to buy mooncakes from are becoming more and more diversified. Thanks for services like JD Logistics’ broad coverage network, many brand are observing similar trends. For example, consumption of Guangdong- and Beijing-style mooncakes by consumers in Northwest China has increased 160% and 190% respectively.

From standardized to custom

It is not enough to provide nice-looking traditional mooncake boxes anymore. Now it is all about appealing to consumers’ individual needs and preferences. This is where JD’s data-driven product development approach, Consumer-to-Manufacturer (C2M) comes in.

In fact, C2M products have accounted for between 60-70% of mooncake sales on JD this year. Through Big Data, JD is able to provide manufacturers with insights about specific tendencies from regional or economic status standpoint, all of which can help guide them as to packaging, price range, flavor and more.

As a result of making products that are suitable for JD consumers, sales have improved, as has customer satisfaction. Sales of mooncakes on JD have surged in the last few months. From July 21st to September 16th, sales of the Palace Museum (Forbidden City) themed mooncake gift box developed through JD’s Consumer-to-Manufacturer (C2M) initiative increased 143% YOY, and became the most popular mooncake gift box on JD. A custom mooncake box developed with Starbucks also saw sales increase among young customers. According to JD’s research, only 10% of consumers surveyed are aware of the concept of C2M. But 92% of consumers surveyed are satisfied with C2M products, whether or not they know how the product is designed.

To develop new products, JD mooncake buyers will spend significant time analyzing customer profiles and market trends. And, once a product is ready to go, they will do taste tests to ensure quality. One JD mooncake buyer even gained 20 pounds as a result of taste testing mooncakes in advance of sales season, all in the name of guaranteeing an unmatched customer experience.

JD’s C2M mooncake box in partnership with the Forbidden City

Early this year, JD Super formed a mooncake alliance with famous Beijing snack brand, Daoxiangcun , Guangzhou Restaurant (广州酒家), traditional Peking duck chain Quanjude (全聚德) and other brands. Under the alliance, members have access to five major types of resources provided by JD, such as customization through C2M. Furthermore, on Sept. 28^th JD Super kicked off its livestream for mooncakes in which executives of major mooncake brands, as well as industry experts discuss the Mid-Autumn Festival traditional and mooncake production process. On that day JD Live, the company’s livestream studio, attracted over one million viewers.

JD and brand partners launch alliance for mooncake sales

From a ‘good bargain’ to ‘good quality’

COVID-19 has brought significant unprecedented challenges to mooncake brands this year. According to industry experts, the main sales period for mooncakes kicked off late and is shorter than previous years. As a result, many mooncake makers were not optimistic about sales performance this year.

However, consumption demonstrates a positive upward trend. Not only has the number of consumers increased by a lot, but also a considerable number of new consumers come from lower-tier markets. Moreover, as consumers across the board pursue quality much more than last year, major brands with top-level mooncake boxes have seen good sales.

Owing to these factors the average price of mooncake products on JD has increased by more than 35% compared with last year. In addition to highly developed areas such as Beijing and Guangdong, the main driving force of the price increase actually comes from Northwest, Southwest and Central China. This sends a clear signal to the whole industry that consumers are moving from emphasizing price and convenience to focus on brand and value, including taste, safety, nutrition (a hot topic in the wake of COVID) and more.

Who is buying these mooncakes anyway?

By analyzing mooncake growth across tier 1-6 cities based on unit price, brand concentration, high education and age, JD Big Data Research Institute discovered that 70% of JD’s mooncake consumers have undergraduate or higher degrees. Sixty-five percent of consumers were born after 1990. In addition, consumption from the “small town middle class” is on the rise. These consumer groups are pushing the overall market from performance-to-price ratio to pursuit of brand and aesthetic.

One type of mooncakes, five kernel or mixed nuts (五仁), which have been shunned in recent years, surprisingly occupy first place in sales this year (although its overall proportion has declined). Five kernel mooncakes are traditionally from Yunnan province. The very first five kernel mooncake was born there in 1939, while the baking style is in fact Cantonese. The five kernels are apricot seeds, peach seeds, peanuts, sesame and melon seeds (or sunflower seeds).

One of the causes for concern around five kernel mooncakes is that the production process is quite complicated, and in the past some companies use peanut kernels to replace other nuts in an attempt to cut costs. The fact that these mooncakes perform well on JD, especially those from top brands, is testament to the extra mile JD and its buyers go to ensure that only the best of the market is made available.

What’s next?

With this year’s mooncake season nearing its end, Wang and the team are thinking about what’s next. “Overall, this year’s mooncake market presents the following characteristics – health and nutrition, tasty and fashionable, varied style and abundant flavors. Overall quality will see improvements.” He sees the proportion of online sales continue to expand. “Online will become a leader in development of the industry.” While the overall market may remain basically flat or even experience a slight decline, high quality brands and enterprises will maintain a stable growth trend.

 

(ella@jd.com)

by Ella Kidron

JD is in the fifth year of its journey in the exploration and application of blockchain technology. The company was a pioneer in blockchain technology applications in China, with three goals in mind: transparency which would improve the consumer experience by increasing trust, as well as how to both improve the efficiency and reduce the cost of this trust. Later, JD’s blockchain business was transferred to JD Digits, the leading digital technology company which has its roots in JD.com

“The basic infrastructure for JD’s blockchain system has been formed. Now we are focused on using blockchain as a service (BaaS) to create technical value for retail internally and to empower external parties, and continue to generate revenue from technology services,” explained Larry Zhai (翟欣磊), who is responsible for blockchain at JD Digits.

JD’s Larry Zhai shares some insights on development of blockchain over a coffee

Blockchain, the “buzzword” that keeps on buzzing

In recent years, blockchain has become highly popular as a means of improving consumer trust because of the undeniable transparency it provides. A survey from ROI found that 78% of consumers trust transparent brands more than those that don’t offer visibility into their supply chains. In addition, 86% of millennial moms are more likely to pay more for a product that offers complete transparency.

Furthermore, in an article for Harvard Business Review (HBR), Alexis Bateman, director of MIT Sustainable Supply Chains, and Leonardo Bonanni, founder and CEO of Sourcemap, wrote that the concept of supply chain transparency was “virtually unknown” 15 years ago. Today, however, companies are under pressure from governments, consumers, NGOs, and other stakeholders to divulge more information about their supply chains, and the reputational cost of failing to meet these demands can be high. At the same time, researchers at MIT Sloan School of Management found that consumers may be willing to pay 2% to 10% more for products from companies that provide greater supply chain transparency. Blockchain’s inherent benefits make it particularly suitable for providing this type of transparency in the upstream and downstream of the supply chain, and JD’s supply chain advantages, mean a lot of potential applications for the technology in many different sectors.

“JD is a supply chain infrastructure-based company, so if you want to do supply chain technology, JD is the place to be,” said Zhai.

The genesis of JD Blockchain

In 2015, with the support of the Linux Foundation, IBM and other contributors, Hyperledger, an open source blockchain community focused on developing a suite of stable frameworks, tools and libraries for enterprise-grade blockchain deployments came into being. However, it wasn’t really until 2016 that the value of blockchain started being recognized globally. Thousands of blockchain enterprises started springing up, and enterprises and services started to realize scale.

This was not lost on JD founder and CEO Richard Liu, who devised a plan to get in on the action. In November 2016, the JD-Y business unit, which is devoted to supply chain innovation, particularly in the retail space, was officially created, and with it, the JD Blockchain team was also formed.

“JD Logistics’ high speed fulfillment and precision have deeply influenced JD’s technology development,” Zhai explained. “As such, JD’s technology implementation ability is very strong. In 2016, the company had been listed for not even two years, and had a lot of resources [to explore new projects.] Technology talent started recognizing the JD brand more enthusiastically, and the company as a place to do innovation,” he commented.

Starting with food safety and product supply transparency

In 2016, Walmart, IBM, an important contributor to hyperledger, and Tsinghua University had released news of a collaboration to improve the way food is tracked, transported and sold to consumers across China via blockchain. Digital currency applications of blockchain started in 2008, and up until 2016, 80-90% of the blockchain market was still digital currency. IBM had started to focus on blockchain applications for enterprise-level supply chain. As JD has a strong supply chain and is a supply-chain based company, it was decided that JD’s blockchain should revolve around supply chain. From that time, JD began looking into practical and commercial applications of blockchain in retail to link the physical and digital worlds. “JD already had the digitized scenarios, layout and logistics in the physical world to do this mapping,” said Zhai.

JD announced the establishment of JD Tracing and Counterfeit Alliance in June 2017, aimed at putting data from important steps in the production process online and tamperproof through blockchain. A host of information, including origin and the entire production process is displayed to consumers through the scanning of a QR code, enhancing the persuasive power of brands and encouraging purchase loyalty. JD’s blockchain traceability platform has already partnered with over 1,000 brands and merchants, accumulated more than one billion pieces of commodity data, and responded to more than 7.5 million consumer traceability requests. Scenarios covered include fresh good, maternal and infant, alcohol, makeup, super market and convenience store and more. “JD mainly covers food safety-related, high value and long supply chain [such as cross-border] products,” Zhai commented.

From application to infrastructure

Starting in 2018 JD began developing its own blockchain infrastructure called JD Chain. It was released as an open platform in April 2019. “If we rely solely on international open source technologies, we lose our [advantageous] position, so in addition to applications, we also have to develop our own underlying core technology.”

Blockchain is not a mysterious high barrier to entry technology, but rather a collection of pre-existing computing technologies, such as cryptography, peer-to-peer transmission, consensus, distributed storage and more. “The core [value] of blockchain is to verify the authenticity of data involving many parties, and turn that data into vouchers that can be priced so that data can flow. If blockchain wants to perform well, it needs to be combined with application scenarios, constantly expand network scale and have more people use it.”

An early example of JD’s blockchain application is the Running Chicken project. Through the project, JD helps farmers in Wuyi County in Hebei province raise free-range chickens. To ensure that the chicken takes enough steps, JD fits each chicken with a specially designed pedometer, with the aim of having each bird take one million steps during the rearing process. The company uses blockchain technology for maximum quality assurance and full traceability. Since early 2018, JD customers have been able to review details about the rearing process for every chicken they buy. A scan of the QR code on the poultry’s packaging allows buyers to view detailed information on sourcing, feeding intervals and more. The chickens are delivered via JD’s self-operated logistics network.

JD’s Running Chicken project

“Technology needs to resolve issues related to user experience, cost and efficiency,” said Zhai. “When we first started the Running Chicken project, the network at the breeding farm was behind the times, so we researched an offline operating system.” He explained that, for example, when the code on the chicken’s pedometer and the source information needed to be linked, it was possible there was no internet, so they implemented a PDA system to upload the data. The project is also intended to improve the economic situations of those involved. “When we are doing anything with technology, we need to pay attention to how to help [farmers] sell at a better price, or to resolve production efficiency and cost issues. On the user side, if customers think the product is of good quality, they are willing to pay more for it.”

In another project, JD cooperated with Xinyulong, a sea cucumber enterprise in Dalian, Liaoning province. Sea cucumbers are considered to be a nutritional delicacy in China, and as such, quality control needs to be strictly managed. Xinyulong recognized the importance of ensuring QC in the upstream and downstream of the supply chain. All of its products have been added to JD’s platform, and a video system set up at different stages of the breeding and production process guarantees consistency of quality. By working with JD to implement blockchain into their own enterprise and supply chain, Xinyulong is also pushing transparency in the whole industry. Furthermore, on the consumer end, the transparency can increase their willingness to buy.

Xinyulong Sea Cucumber Factory in Dalian, Liaoning province

Expanding the universe of blockchain applications

JD’s blockchain technology has already been applied in many industries, such as retail, supply chain, digital finance, digital deposit, and electronic licensing. For example, the technology has been implemented in paperless signing of logistics documents, electronic VAT invoices and more. Through paperless logistics, JD is able to save nearly RMB 400 million yuan in costs and reduce paper by more than 5,000 tons.

Relying on blockchain digital certificate technology, JD Chain’s cloud contract signing platform provides a complete and secure online contract signing solution, E-Sign. Blockchain is used to record the entire process, including real name authentication, digital certificate acquisition, data generation, signature and transmission, which ensures the reliability of the contract. Furthermore, to help more small and medium-sized enterprises who may not have blockchain capabilities of their own enjoy the convenience of blockchain e-contract services during the epidemic, JD Chain also launched a support plan for them to enjoy free services until the end of 2020. The service is available at https://esign.jd.com.

Another way to expand the universe of blockchain application is though combination with other technologies. Zhai explained that there is a very natural relationship between blockchain and cloud as cloud makes it less expensive to implement blockchain. At the same time, IoT and blockchain are connectivity technologies; IoT is about collection and blockchain is about connection. Finally, AI is about data calculation and computation. If blockchain is able to link more data, then cloud and AI can be used to analyze it more accurately.

The team now spends a lot of time on business development. From 2016 to 2019, China’s blockchain market began to acknowledge the importance of enterprise blockchain services and explore a model system. Now it is time to focus on the commercialization of enterprise blockchain services.

 

(ella@jd.com)