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Amazon China: Who is drinking imported fine wines in China– exclusive interview

Posted on by Maxime LU

By Maxime Lu / 陆江

(Published on DecanterChina.COM,  Chinese version of Decanter.)

 

Amazon China speaks exclusively to Decanter China about the scale of their wine business and who are their key consumers.

1Image: Shi Jianjun, vice president of Amazon China, credit Amazon China

The scale of Amazon China’s wine business

The number of wine brands sold directly by Amazon China has ‘quadrupled’ in the last three years, with sales increasing by more than 100% every year, SHI Jianjun, vice president of Amazon China, told DecanterChina.com.

Amazon China launched its wine business in August 2012, followed by a direct import business from September 2013. Now the online shop directly sells wines from the US, France, Australia and Italy, covering more than 130 brands and nearly 800 wines and other fruit-based alcohol.

The wine sector is becoming one of the ‘focal points’ of the online retailer’s direct import business, said Shi Jianjun. ‘As the population of white collar workers increases in China, and the market’s wine knowledge inproves, we are very confident in growing wine sales in China.’

Who is buying the wines and for how much

‘90% of wines sold on Amazon China are imported wines,’ said Shi.

Currently around 3,800 wine products (‘stock keeping unit’ SKU) are sold across the platform.

Wines priced at between 100-300RMB (11 to 34GBP) are currently the most popular on Amazon China, with France being the best-selling origin of wine, followed by Australia, Chile and USA.

Consumers buying wines from Amazon China are mainly aged between 23-40 from first-tier cities including Beijing, Shanghai and Guangzhou, second-tier cities on the eastern coast and provincial capitals, according to the vice president.

Recent Wine Intelligence research found that 48 million consumers from the ‘urban upper middle class’ are now drinking wines at least twice a year, up by more than a quarter than 2014.

135876_amazon-interview-2-shi-jianjun-2Image: Shi Jianjun, vice president of Amazon China, credit Amazon China

Choosing the right suppliers

Amazon China’s advantage ‘lies in the Amazon group’s globalised presence’, said Shi, comparing the business to domestic players.

The buyers of Amazon China share information on wineries with Amazon buyers around the world. After an initial selection of producers, the buyers would visit producing areas and wineries to taste and choose the products. ‘We look for value-for-money wines that are suitable to Chinese consumer’s palate’, said the vice president.

In June 2016, Amazon China established its own wine club. The online retailer plans to invite wineries to hold tastings for wine club members so as to ‘double check’ if these wines will be liked by a wider group of Chinese consumers.

The provenance of the wines sold by Amazon China, said Shi, is ‘protected at the origin’ as all brands sold by Amazon China come either directly from the wineries or the distributors appointed by the producers.

‘We don’t only sell those big global brands, but also the less famous wineries which have their unique features and can well-demonstrate the local terroir,’ he said.

2016: year of expansion

Unlike many of its peers, Amazon China has been comparatively low-key about its wine business.

This year, the online retailer seeks to further utilize its ‘global resources’ to sell more fine wines directly from around the world, said Shi.

Last month Amazon China launched an Australian direct imports wine section, featuring fine Aussie wines including those from the Langton’s classification.

The move will lead to a second and more extensive Amazon China International Wine Festival later this year, said the vice president, during which the online retailer will launch an ‘International wine pavilion国际红酒馆’—a major update from its current wine section.

A heated wine sales contest against its domestic peers seems to be around the corner.

 

Maxime Lu / 陆江

-The founder and Chief wine editor of WineOnline.CN since 2005
-The founder and Chief wine educator of  WineSchool.CN since 2006
-The founder and main contributor for WineBlogChina.COM since 2011
-Wine Judge for international wine competitions: Decanter Asia Wine Awards 2015(Hongkong) , Wines of Portugal Challenge 2014(Lisbon) , Radici del Sud 2013 ( Puglia ) ,and some domestic wine competitions.
-A contributor for Decanter China(Chinese version of Decanter.com)，Prowine China（Prowein branch） and for main stream media on fashion, finance , food and wine.
-The consultant of  Wine Collection.
-The consultant of wine companies.

An Updated Overview of the Chinese Wine Market (2015-2016)

Posted on by Maxime LU

Text: By Maxime Lu / 陆江

Published on ProwineChina.COM, Chinese version of PROWEIN.

In recent years, the Chinese wine market has witnessed dramatic changes, with transformative adjustments made in both major consumer groups and the sales model of wine merchants.

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The spending spree emerging in China in 2006-2007 culminated in early 2011 and then subsided. With the introduction of the policy for tightening spending on official overseas visits, official vehicles, and official hospitality in 2012, the country’s wine market rapidly entered the period of adjustment. Major consumer groups have changed from enterprises, institutions and government authorities to the public. Following the slump and stagnation in 2012-2014, the Chinese wine market bounced back in 2015.

Take imported wine as an example. In 2015, the volume of imported wine totaled 550 million liters, a 44.58% y-o-y increase, valued at US$ 2,039 million, a 34.30% y-o-y increase. Nonetheless, we should be cautiously optimistic about the high percentages. It should be reminded that the market was rather sluggish in the previous two years. Moreover, we should consider the following factors: replenishment following the clearing of stocks in the distribution area, purchase following the introduction of new capital, and of course market growth.

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Regarding origin countries of imported original wines in 2015, France ranked No.1. The volume of wines imported from the country totaled 167 million liters, an increase of 33.66%, valued at US$867 million, an increase of 41.25%. The average price was US$5.19/liter, increasing by 5.68% over the previous year. French wines accounted for 46.2% of China’s imported original wine market, still occupying a solid position. Australia ranked No.2. Thanks to lowered tariffs, the volume of wines imported from the country surged by 56.54%, with the import value soaring by 77.80%. Australian wines accounted for 23.4% of China’s imported original wine market. Chile gained a market share of 9.1%, ranking the third place in the list. Countries ranking No.4 to No. 10 are Spain, Italy, the United States, South Africa, Argentina, New Zealand and Germany.

With a market share of nearly 70% (in volume), domestic wines remained to be a leading player in the Chinese wine market in 2015. Changyu and GREAT WALL monopolized the domestic wine segment. Facing foreign competitors and increasingly mature consumers, leading domestic wineries doubled efforts to adjust the pricing system of their product lines, and further improved low price product lines with the highest sales volume in the mainstream market. In addition, these wineries purchased overseas wine chateaus and established cooperative relations with renowned international brands in a bid to enter the imported wine market, fully reflecting their ambition and vision for the future market. These wineries are expected to have more market moves in 2016. In another development, domestic wine markets in Beijing, Shanghai and Guangzhou were severely hit in 2015. In wine markets in a number of tier-3 and tier-4 cities, nevertheless, domestic wines with wide brand influence and strong market operational capability will maintain a leading role over a certain period of time in spite of mounting challenges.

It should be mentioned that, in recent years, quite a few fine wine chateaus were founded in wine regions such as Ningxia, Xinjiang, Shanxi and Huailai. Wines made there were well reputed in domestic and international markets. These fine wine chateaus have boosted local consumers’ confidence in domestic wines and increased their knowledge and understanding of domestic wine regions. More and more big importers began to act as an agent of domestic fine wines. Market feedback shows that more industry resources will be utilized to promote Chinese wines in 2016.

As for market expansion and sales activities, the entire industry continued exploration efforts.

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B to C platforms, such as JD and Amazon, gave more support to direct-selling categories and merchants trading on the platforms so as to increase the conversion rate. These platforms have always been focusing on individual consumers, so they were not hit by the policy for tightening spending on official overseas visits, official vehicles, and official hospitality. Instead, these platforms developed swiftly along with the growth of the consumer market. According to sources from JD, the company’s revenue of wines in 2015 tripled from that in 2014, and the figure in January 2016 quadrupled from the same period of last year. Since the beginning of 2016, these leading platforms have been planning to enhance market expansion in tier-2, tier-3 and tier-4 cities and towns. They are gradually becoming the core platform of the wine market.

Once a hotspot in the capital market, vertical e-businesses have suffered from mounting pressure in operation. In the past one or two years, some of these e-businesses were acquired or merged, some began to sell multiple categories, and others faded away. Currently, the O to O mode in the wine industry is increasingly becoming a highlight in the capital market. By leveraging capital and the O to O mode, some wine merchants, such as jiuxian.com, 9bianli.com and 1919.cn, have realized rapid expansion. But both suppliers and salespeople consider such a mode and expansion controversial. However, for several leading O to O wine merchants, they will experience rapid expansion in 2016, with both bubbles and opportunities.

Meanwhile, the B to B mode has also taken shape in China’s wine industry. More and more e-businesses dealing wines have adopted the mode, such as wajiu.com and jiuxian.com.

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As for long-established wine merchants, they have been exploring new business models while continuing to develop traditional channels including restaurants, shopping malls and supermarkets. For instance, Pudao, the Chinese subsidiary of Australian retail giant Woolworths, is exploring the mode of wine boutiques to provide private customers with cost-effective fine wines and professional wine service. ASC has closed its expensive clubs providing services for private customers. The company has been increasing investment into e-commerce, enhancing cooperation with other e-commerce platforms, and lowering its profit margin and product prices. Aussino World Wines, ASC and other wine merchants are launching wine education and cultural promotion campaigns to improve customer affinity. These traditional wine merchants will continue transformation in 2016.

Regarding the overall development of the Chinese wine market in 2016, representative wineries gave basically positive feedback. They expected an increase rate of 15%-30%. We are looking forward to the new year with modest growth.

Source link: http://prowinechina.com/channels/138.html

JD.com: preventing fake wines online

Posted on by Maxime LU

By Maxime Lu / 陆江   ( 21 April 2016)

Published on DecanterChina.COM, Chinese version of Decanter.

 JD.com, one of China’s biggest online retailers, spoke to DecanterChina.com about how they choose producers for their fast-growing wine sector and the efforts made in preventing fake wines.

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·Click here to read Part I of the interview on the scale and current state of JD.com’s growing wine business.

Direct import: choosing reputable suppliers

Among wines directly sold by JD.com, there are two types, said ZHAO Dabin, head of the wine department of JD.com. One type is wines bought directly by JD.com from overseas producers or their Chinese agent. ‘We always choose reputable suppliers in the business,’ said Zhao.

The other type is the big and famous wine brands owned by major companies and groups. ‘They have their own quality control system, so fake wines won’t be an issue.

’When working with agents, ‘we usually involve the producers as well to guarantee the authenticity of these products’, he said.

‘For any wine we choose, we’ll conduct internal tastings. This can, to some extend, assess the quality of these wines’, said Zhao Dabin.

‘Our reputation has always relied on importing authentic and reputable goods.’

Merchants: play by the rules

Unlike direct import brands, the online retailer has ‘relatively less control’ over registered merchants, said Zhao.

Instead, merchants need to sign ‘rigorous agreements’ with JD.com when they seek to start up a shop with the retailer. They also need to pay a deposit to the retailer as a guarantee of the quality.

Should any registered merchant sell fake wines, they need to pay ‘a minimum fine of 1m RMB or 10 times of the total sales of these fake wines, whichever is highest’.

To supervise the merchants, JD.com has a ‘dedicated quality-control department’, who would regularly examine random samples from the portfolios sold by merchants.

‘We also have a third-party institution who regularly visits our warehouses, as these warehouses temporarily store some merchants’ wines before shipment. They are responsible for sampling and examining the quality of these wines.’

A ‘consumer experience department’ was set up with the involvement of LIU Qiangdong, Managing Director of JD.com, who has a ‘personal interest in wine’, according to Zhao.

The department regularly purchases wines from JD.com, in order to test the quality of the wines like a consumer.

Choosing the right producers

In terms of choosing direct import brands, ‘we try to cover the most famous wine regions in the world, namely the top three or five producers of each region,’ said Zhao, adding that these wines need to be ‘value-for-money’.

JD.com also buys wines from domestic distributors with ‘less rigorous criteria’ than direct import, ‘but we would choose carefully’.

‘Because we have an enormous sales volume, we need the local distributors to give us a very competitive price,’ said Zhao.

When seeking for a producer in a certain region, ‘we would firstly try our connections in the wine circle, or ask local trade bodies to recommend producers for us,’ said Zhao. The online retailer also sends their buyers to trade fairs including Vinexpo and ProWein to choose wines at the scene.

For producers who directly get in touch with JD.com, the retailer would ask for samples to do a blind tasting first. ‘We may choose a few; then we will discuss with the producers about prices and how we can work together.’

134951_jd-com-zhao-dabin-liu-qiangdong-twe-signing-cropped

Image: ZHAO Dabin (right on the front) and LIU Qiangdong of JD.com signing agreement with Treasury Wine Estates·

Storage and logistics

How to store and deliver the wines has been one of the most difficult tasks for start-up online wine shops in China. Upon receiving investments, many online retailers have reported spending them on developing a storage and logistics system.

Delivery is not a major problem for a big-scale and mature online retailers such as JD.com, said Zhao Dabin.

Besides having their own express delivery network, ‘we package our wines in the same way as delicate electronic products such as mobile phones.’

As for storage, JD.com currently uses their food storage warehouse, some under normal temperature, some with constant temperature and humidity, to store their more affordable wines. ‘These are not professional wine cellars,’ admitted Zhao, ‘Considering we mainly store fast-selling wines in these warehouses, and it takes only a month for the wines to enter and leave the warehouse, the influence should be minimal.’

Fine wines, certainly, enjoy more professional storage environment, said the retailer.

 

Wine shopping tips on JD.com

Ask JD.com: I always find various sales deals and discounts vouchers for wines on JD.com. But why are these wines discounted?

Zhao Dabin: In most occasions these wines are slow sellers from our merchants, which is why they need to be pushed with discounts.

Also as we buy wines in big volume, we usually get very competitive prices, hence the discount.As for the vouchers, they are usually paid for by JD.com, with some help from our partners as well. Therefore, it’s very possible for people to find wines sold under the average market price on JD.com.

Translated by Sylvia Wu / 吴嘉溦
All rights reserved by Time Inc. (UK) Ltd.

 

 

JD.com: Mapping the landscape of online wine sales in China

Posted on by Maxime LU

By Maxime Lu / 陆江

Published on DecanterChina.COM, Chinese version of Decanter.

2 March 2016

In recent years, online retailers and their highly efficient delivery systems have largely changed people’s shopping habits in China. Such changes made online shopping one of the most important and fast-growing channels for Chinese consumers to purchase wine.

Read our exclusive interview with ZHAO Dabin, head of the wine department of Chinese online retail giant JD.com, to learn about the scale and current state of its rapidly growing wine business.

134951_jd-com-zhao-dabin-liu-qiangdong-twe-signing-croppedImage: ZHAO Dabin (right on the front) and LIU Qiangdong of JD.com signing agreement with Treasury Wine Estates

The scale of the business

As one of the biggest online retailers in China, JD.com launched its wine business at the end of 2010, ZHAO Dabin, head of JD.com’s wine department, told DecanterChina.com.

Wines sold on the site come from two sources, Zhao explained; JD.com works as an importer to buy wines from abroad and sell it directly, but it also serves as a ‘shopping mall’ for wine merchants to host their own shops.

The wine sales from both channels now account for a quarter of the retailer’s total annual sales of alcoholic beverages, which is expected to fetch CNY10.5bn (GBP1.1bn) in 2016.

‘Chinese white spirit (Baijiu),’ said Zhao, ‘still occupies the vast majority of the sales.’

In 2015, JD.com imported and sold CNY400m’s worth of wines itself, and the number is expected to triple in 2016. The sales through the merchants, on the other hand, are expected to hit CNY1.5bn, three times the amount of 2015, according to the retailer.

These estimates may still be ‘too conservative’, said Zhao, as JD.com has already sold 100m RMB’s worth of wine on its own from the start of 2016 to 20th January. ‘For January only, we have achieved four times the sales of last year.

Direct import vs merchants

Though JD’s direct wine import and sales business is growing rapidly, Zhao doesn’t believe that it would pose significant threat to merchants who sell their wines through JD.com.

‘Not all the wines are suitable to be sold by JD.com,’ explained Zhao.

For brands that are dealt by JD.com directly ‘they need to share a fixed amount of gross profit with us’, and their sales figures need to ‘keep up the pace’ of the fast-growing online retailer. JD.com would evaluate the performance of its own brands, and ‘eliminate’ the underperformers.

In fact, currently wine merchants take up a bigger chunk of the wine sales on JD.com, said Zhao. More and more merchants come organically or are invited by JD.com to build their own online stores. ‘The number of merchants defines the growths of the sales.’

The vast consumer base also suggests the size of the market. At the moment, wine consumers on JD.com are mainly office workers from Beijing, Shanghai and Guangdong, said Zhao. In late 2016, the retailer plans to reach out to villages and third and fourth tier cities.

‘Most of our wine consumers are still at entry level, though there are so many wine brands out there,’ said Zhao, pointing out that ‘only 3% to 4%’ among JD.com’s vast number of registered users buy wines at the moment. ‘There’re still plenty of room to grow.’

134952_jd-interview-decanter-2015-shanghai-fine-wine-encounter

Image: Chinese consumers at 2015 Decanter Shanghai Fine Wine Encounter

Domestic wines vs Imported wines

In 2015, China has imported significantly more bottled wines compared to 2014. The Free Trade Agreement signed between China and Australia is believed to pose more challenges to China’s domestic wine producers in the next few years.

Currently domestic wines account for 30% of JD.com’s self-run wine business, whereas imported wines take up 70%. Zhao believes that other major online retailers, such as Tmall.com and Yhd.com, rely ‘even less’ on domestic wines.

Among the merchants on JD.com, 15% of the brands they sell are domestic, although the sales volume of domestic wines is ‘slightly more’ than that of imported wines, said Zhao.

Though the growths of imported wines are constantly put under the spotlight, in the third or even fourth tier cities in China, domestic wines still dominate the market. ‘Imported wines still can’t break into the smaller cities,’ said Zhao, ‘although in the first and second tier cities, the sales of imported wines are almost equal to that of domestic wines.’

Facing such challenge, domestic producers are seeking to expand their business.

The two biggest wine producers in China, Changyu and Great Wall, ‘are still among the top three best-selling brands on JD.com,’ said Zhao, adding that the two brands alone take up over 90% of the sales of domestic wines on the platform.

134953_jd-interview-decanter-2015-shanghai-fine-wine-encounter-reading-bookletImage: Chinese wine lovers at 2015 Decanter Shanghai Fine Wine Encounter

The most popular price ranges

The top countries for imported wines on JD.com are led by France and followed by Australia, Chile, Spain, Italy and America. The most popular price ranges on the online retailer, according to Zhao, are ‘under 50RMB’ and ‘50-100RMB’.

The ‘under 50RMB’ tier is dominated by Spanish table wines. Among wines priced 50-100RMB, consumers can find entry-level wines from the Domaines Baron de Rothschild (Lafite) and branded wines such as those from Penfolds Rawson’s Retreat, Yellow Tail and Casillero del Diablo of Concha y Toro.

The range of ‘100-200RMB’, however, showed the most significant growth among JD.com’s self-run brands, said Zhao.

‘We work as an importer and retailer at the same time, so we won’t add too high margins. This is a very popular price range in the general market as well.’

JD.com is also keen to develop its fine wine portfolio, namely those priced at 200 to 500 RMB. The sales during 2015 and the Spring Festival period in 2016 showed the potential of these wines.

‘None of the online retailers would satisfy on selling only the entry-level wines. We need to go upstream.’

The effect of the austerity policy

‘The austerity policies have brought no negative effect to JD.com what-so-ever; if anything, it was beneficial to us,’ said Zhao.

‘The anti-corruption drive mainly tackled the mid-to-higher range products. JD.com, on the contrary, is a retailer targeting the mass consumers.’

The bubbles of the mid-to-higher range have now burst, bringing the price back to the reasonable range. ‘More and more people were looking for value-for-money wines, which was great news for us,’ said Zhao. ‘While overall the industry struggled to grow, we managed to triple our wine sales from 2014 to 2015.’

Choosing the right supplier

Now five years in the wine business, JD.com believe its biggest challenge comes from the supply chain.

The suppliers can’t necessarily foresee the scale of the sales, thus may struggle to prepare enough stock for the fast-growing retailer, said Zhao.

Facing such challenges, in 2016 JD.com intend to re-evaluate its 1300 wine products by regions, and to focus its resources on fewer but better brands and suppliers. However, the adjustment should not interfere with the growth, Zhao said, ‘we should be able to keep growing at the rate of 300% to 400% (per year).’

About 2016

Speaking about China’s wine market in 2016, ‘I don’t expect an explosive growth,’ said Zhao.‘We still don’t have enough wine consumers in China, which is why we need to encourage more consumers to start drinking wine. Meanwhile, we need to further control the distribution costs, and provide down-to-earth prices to consumers.’Coming next month:JD.com: Controlling the authenticity and quality of wine products

Translated by Sylvia Wu / 吴嘉溦

Source:    https://www.decanterchina.com/en/knowledge/people/importers/jd-com-mapping-the-landscape-of-online-wine-sales-in-china-part-i

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