Sainsbury’s has potentially cracked one of the biggest e-commerce deals of the year and let it go almost unnoticed with its digital launch in China.
The supermarket, which has endured lean times in the UK in recent years, has done a deal with Alibaba’s Tmall website after exploring the Chinese market for more than five years. Retail Week has revealed that the company has begun to sell high-end foodstuffs in China without a single physical shop, which is a triumph for the e-commerce model. Rolling out physical shops would be prohibitively expensive, this is a risk-free entry to the Chinese market.
It is starting out with an exceptionally limited range, including long-life British milk, a baby line, British afternoon tea and an additional line of speciality teas. Selling tea to China is an interesting model, but with a growing expat community, there could be some logic to the supply of teas, coffee and biscuits that the Western world knows and loves.
Sainsbury’s is focusing on its premium organic range, which it expects will find a solid market in China. With the order fulfilment houses of Alibaba behind it, too, Sainsbury’s does not have to worry about the logistics. Alibaba dwarves the likes of Amazon and eBay in terms of outright sales and visitors, so the deal could be a game changer for the supermarket.
China’s online groceries industry could well grow 500% to around £115 billion a year by 2020, which will make it more than 30% more valuable than the other top nine markets in the world combined.
Of course, the Chinese economy is a concern, but Sainsbury’s has entered the market in almost textbook fashion, with low initial costs and overheads, and a potentially massive market opening out in front of it.
By linking up with Alibaba, Sainsbury’s has annexed a powerful ally that could help ease the UK supermarket’s entry into one of the world’s most coveted markets. If Sainsbury’s can carve out a niche in the Far Eastern nation, the British arm of the industry could pale in significance to the potential returns from this powerful new e-commerce alliance.