China’s e-commerce sector set for rapid growth as consumers go online for daily essentials

China’s e-commerce giants will enjoy fast growth as more people turn to online shopping for daily necessities such as biscuits, shampoo and drinks, according to new research by Goldman Sachs.

The market for so-called fast moving consumer goods (FMCG) is so large that it will support high sales growth for both Alibaba and JD.com as they take business away from offline stores in the coming years, according to a report published by the investment bank.

However, the online retailers face major challenges as they look for ways to bring fresh produce such as vegetables and live seafood to households across the country, said Goldman Sachs analysts led by Ronald Keung.

FMCG accounts for 37 per cent of all retail spending in the mainland, and the market is expected to expand by an average of 6 per cent annually before reaching US$2 trillion in 2020.
But due to low margins and a lack of fast delivery services, only 5 per cent of those purchases are currently from online shops, compared with 30 to 40 per cent for clothes and electronics.

The game is changing as e-commerce firms battle for new and innovative ways to spur growth. Last year, both Alibaba and JD.com finished building their key nationwide ‘fulfilment centres’ – warehouses from which the distribution of goods is coordinated – allowing people in more than 200 cities to enjoy same- or next-day delivery for groceries ordered online.

“We expect Tmall and JD’s new supermarket initiativesto drive further online growth in the supermarket segment,” Keung said.