Last week, Waitrose announced it would sell 30 products through the Royal Mail online shop on China’s Tmall.
Such inauspicious beginnings in its 59th international market could, Waitrose said, turn into its biggest overseas market in three to five years.
But, so shortly after ASOS decided to mothball its Chinese website, why is Waitrose so confident?
For more on this topic, download Econsultancy’s China Digital Report, Q1 2016.
Are international groceries viable?
ASOS can’t succeed with mid-ticket items – designer clothing – yet Waitrose is hoping its brand will help it sell groceries to the Chinese market.
I can see how Waitrose has a great head start here, already partnering with Royal Mail and laying the groundwork for its products to be considered by the upper-middle class and those buying gifts.
Just look at the aspirational Tmall page (top half shown below). It’s a proper, 1904, heritage British brand.
But, at the same time, Waitrose won’t have physical stores in China, and everything will be shipped straight to consumers’ doors.
The question is whether Waitrose can market enough of its range successfully off the back of its heritage. Well, the brand has chosen some good products to start.
British and Australian baby formula is already popular in China (see this article for background on baby milk as a big import).
The Royal Mail Tmall site already sells lots of baby formula from Aptamil and others (see pic).
So, naturally Waitrose has started with some baby products to get in on the act, too. Smart move – I can see Baby Bottom Butter selling well.
Cosmetics seem to sell well, too. Again, Waitrose has picked some products from this range.
But where to go from here? There are tea and coffee on offer, and it’s here I start to wonder about the longevity of selling this kind of product.
However nicely this is branded, just look at the prices. Currently around 70-80 yuan for one item, usually 200-300 yuan.
That equates to about £7.50 now (on offer) and £25 RRP for 100 teabags. The British price is £2.80, and that’s the high end of the groceries market.
Yes, I understand these products will be seen as quality gifts, but for how long?
British tea and coffee already sells in Chinese supermarkets, but without the premium of delivery, VAT and extra middle men.
Avenue51, the company that integrates Royal Mail with Tmall, advises ‘if your products do not currently sell in China, and you do not have multiple categories, we suggest listing popular products in the £20 – £50 price range’.
Surely grocery products are mostly below this range, even at marked up prices?
Isn’t it companies like Cambridge Satchel Company, selling secondary goods (also via Royal Mail on Tmall), that stand to attract the most Chinese patrons, even if ASOS didn’t manage it?
Competition and the climate
If selling via Tmall gets more popular, what’s to stop boutique coffee /tea /cosmetics /baby companies from selling to the Chinese market and outcompeting the supermarket?
It’s only the Waitrose brand that can keep it ahead for now; the products, taken in isolation, are not necessarily world-beating.
As a range they are, sure, I love shopping in Waitrose. But would Chinese customers choose Waitrose tea over, say, Twinings, if they had the choice?
They might do when doing a full grocery shop, but that’s not the service Waitrose is providing in China.
There are also the factors that spelled trouble for ASOS – local competition, red tape and the economic slowdown.
If the middle classes stop spending, or favour Chinese products (as Bloomberg has warned), British brands exploring the market may not get the boost they need.
Will Waitrose open stores?
The categories on the Tmall Royal Mail website include baby formula, fashion, beauty, and health food. I can see Waitrose succeeding here.
But Waitrose will need to have local ops/distribution and stores if it wants to sell, for example, fresh goods.
In every other of its markets Waitrose has stores, so I imagine it will have to do so fairly rapidly in China if it’s to hit the three to five year ambition (of being the second-biggest market for the retailer).
I’m not a retail insider, and I’m not a pessimist either, so please qualify my thoughts appropriately.
I’d love to know what our readers think. In general, hats off to Waitrose for dipping its toe in the Alibaba waters. Let’s hope the temperature is right.
For more on international expansion: