23 May 2016
by Angus Grigg

China's biggest retailer bets on Australian products

In 36 minutes during China's Singles Day sale last year, e-commerce retailer JD.com sold 30 tonnes of Devondale milk powder from Australian dairy producer Murray Goulburn.

On the same day it moved 10,000 bottles of Swisse's Liver Detox supplement in 18 minutes, proving yet again the giant sales on offer for the right foreign products in China.

Putting aside the tiny margins attached to such promotion days, these numbers show how quickly e-commerce has come to dominate China's retail landscape.

In 2015 online sales accounted for 12 per cent of the total, double the level of just three years earlier, according to government data.

And while some believe the figure was as high as 15 per cent last year, even the official data puts China well ahead of the US where online sales accounted for 7.5 per cent of the total in 2015.

Within this category there is no bigger player than JD.com, which claims the title of China's largest retailer (online or offline).

JD says its fierce rival Alibaba, which has the Tmall and Taobao platforms, should be viewed as a marketplace or online mall not a retailer, as it hosts shops rather than selling its own products.

Whatever the distinction JD, which briefed the foreign media at its Beijing headquarters on Thursday, is one of two giants in the space. It booked revenue of 54 billion yuan ($11.5 billion) in the first quarter of 2016, up 47 per cent on the same time last year.

And while it's yet to crack a profit, the company is a big supporter of Australian products, after launching an Australia mall on its site in July last year.

"Australia has a lot of good brands in the right categories for Chinese consumers," said Shen Haoyu, chief executive of JD Mall, the company's largest business unit.

That's why Mr Shen indicated the company would hold onto its stake in Murray Goulburn, despite the dairy group's recent troubles.

"We view all our investments as long term," he said when asked about JD's 4.6 per cent stake in Murray Goulburn's listed units.

That should ensure it continues to buy many more tonnes of Murray Goulburn's products amid a move towards higher quality and more expensive foreign brands in China.

JD's chief technology officer, Zhang Chen, said the trend was being aided by a switch to purchasing goods on mobile devices rather than desktops.

"People compare prices a lot less on mobiles," said Mr Zhang citing user behaviour patterns picked up by his big data team.

"They make purchases much quicker and so it's less about price and more about quality."

JD said about 70 per cent of its sales are on mobiles, a trend which should help higher end Australian brands.

This has seen sales across JD's food and beverage lines grow faster than its traditional electronics business.

But within this category Mr Shen said foreign infant formula brands could expect greater government regulation and licensing requirements.

"Vitamins are less of an issue," he said.

"Infant formula will always be more sensitive ... and they [foreign brands] will be required to be compliant with Chinese standards."