Friday Read: Wine ecommerce - learning from China

By Emilie Steckenborn

Published: 06 March, 2020

China has become the world leader in wine ecommerce and there is much we could learn, writes Emilie Steckenborn, founder of the Bottled in China Podcast.

When most westerners think of the primary wine consuming and producing countries, China doesn’t immediately spring to mind. In fact, it’s only over the last decade or two that wine culture in China has really evolved, largely thanks to a boost in popularity amongst the country’s younger generations.

Like most things in China, the growth of wine consumption has been rapid, and is expected to rise by over one third between 2019 and 2024. This is mirrored in the sale of wine on ecommerce platforms, as half of Chinese wine consumers purchase it online.

This figure should come as no surprise, given how integrated online sales and mobile purchasing are in Chinese people’s shopping habits. In fact, wine ecommerce accounts for 20% of all total wine sales in China - compared to just 2% in the US.

So, given the country’s historical preference for other alcoholic beverages and its newcomer status to widespread wine consumption, how did China become the world leader in selling it online? And what can brands learn from this experience?

Light-years ahead

Ecommerce in China has been expanding rapidly and now has a firm place in the daily lives of hundreds of millions of consumers - 71.1% of the population, to be exact. By 2023, it is predicted that retail ecommerce will represent an incredible 63.9% of total retail sales - a proportion unheard of in other large economies.

It also bodes well for ecommerce sales that the internet use of Chinese consumers has developed through smartphones, rather than computers. This means millions of people have become accustomed to having access to consumer goods literally at the touch of a button.

While previously, consumers might have associated online shopping with value goods, luxury brands now have a strong online presence, including big fashion labels. Online platforms such as Alibaba.com and JD.com have grown to become multibillion-dollar companies with a hefty share of the ecommerce market, making it easier than ever for consumers to get what they need online.

It should come as no surprise that this has translated into a surge in online wine sales too, as the wine industry caters to a population that increasingly consumes on the internet.

Fast and flexible

While in countries like the US there are numerous legal restrictions on shipping and delivering alcohol, in China, these are significantly fewer. There are often no requirements for the purchaser to be present in person for the wine to be delivered, making the whole process a lot more flexible.

Despite China’s vast geographical landmass, ecommerce platforms have nailed down their logistics operations and can get a delivery virtually anywhere - and fast. Online giant JD.com claims to cover 99% of the population of China, and 90% of all its orders can be delivered within 24 hours. Meanwhile, online wine-seller Cheers Wines promises to deliver wine in Beijing within a mere 19 minutes.

Added to that, ecommerce shipping in China is so competitive that companies are forced to either severely diminish their delivery costs - or simply deliver for free. This further incentivizes consumers to order their wine online, making the whole process more-often-than-not easier, faster and cheaper than walking out of your house and buying a bottle of wine at the store.

With China’s wine ecommerce boom being based on such a country-specific established ecosystem, can it be replicated elsewhere?

Perhaps not for now. There are, however, important lessons to be learned from the Chinese model about how to approach selling wine online.

Hybrid approach

Despite buying so much online, Chinese consumers still hugely value the shopping experience they get in brick-and-mortar stores. In person, they are able to see the physical bottle, ask questions to sales people, and in some cases, even try the wine itself.

Offering this customer experience contributes towards brand credibility and visibility, and can actually translate into more online sales. By no means should selling wine online mean shutting down in-store operations: if people see a wine in-store, they’re more likely to consider buying it on the internet.

Combining both in-person and online shopping experiences seems to be the recipe for success for brands looking to thrive in the wine ecommerce market.

Claudia Masueger, CEO of Cheers Wines, argues that in person, brands are able to provide a heightened customer experience. Yet when buying online, customers can gain a deeper brand understanding of the brand story through text, photos, and videos displayed on the website, as well as the decision-making help of reviews and ratings. Not to mention the price. Like many ecommerce goods, it’s generally cheaper to purchase wine online.

In China specifically, many consumers actually search the internet for the wine that they are thinking of buying, either from a store or in a restaurant, to check out its pricing and reviews. In fact, ecommerce platform Taobao has an AI-powered feature that allows users to search for products using just a photo of it, making it easier and quicker than ever for consumers to find what they’re looking for online. This means brands should be especially careful not to drop their prices too low online, as it could negatively impact in-person sales.

To combat this, some brands adapt the label of the bottle being sold online so consumers don’t realise that they are looking at the same bottle as the one they’re deliberating purchasing in a restaurant. Other companies create specific tiers of wines to be sold on their website to differentiate them from store or restaurant-bought bottles.

Coronavirus impact

Now, to address the elephant in the room: coronavirus.

While it’s difficult to fully understand how the entire ecommerce market will react during these tumultuous times, there are opportunities for the industry to grow with many Chinese families staying homebound and spending more time than ever online.

As it stands, delivery services are still functioning across China, while many retail stores are closed down or only taking online orders. The country largely has the logistics and payments systems and online purchasing habits necessary to support an increase in ecommerce sales, so online shopping is a safer choice amidst an epidemic. However, platforms have unsurprisingly been struggling to keep up with demand.

Like the online sales of food and other groceries, the online wine sales category is expected to grow while in-store purchasing takes a dive. However, given that wine is primarily consumed at banquets, gatherings and work events in large volumes in China, it’s severely unlikely that a boost in online sales from home-drinkers will make up for the previous demand.

China’s wine ecommerce success is the result of a number of factors, but the existing ecommerce infrastructure has certainly laid the foundations for its seemingly exponential growth.

However, for brands looking to sell wine online both in and outside of China, there are certain aspects of this boom to pay close attention to. Whether it’s in-store or online, the key to making sales is grounded in the quality of the customer experience. Brands can leverage the strengths of each approach and combine them to achieve their growth potential.

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