Why Sainsbury’s is selling tea to the Chinese in trial deal with Alibaba

The supermarket will sell products from its Taste the Difference and So Organic brands through Alibaba’s Tmall as it looks to target the platform’s ‘emerging middle class’ shopper.

It marks the first time Sainsbury’s has made a move into the Chinese market. Alibaba’s Tmall Global platform allows it to do so with relatively low risk as it bypasses the need for a mainland business licence, which would require it to set up a physical store in the region.

Sainsbury’s is instead able to create a store on the platform, settle payments in preferred native currency and ship orders from outside of China.

Sainsbury’s said it is trialling a small number of ambient products for sale, including its upmarket So Organic and Taste the Difference lines which should appeal to the rising “middle class” shopper on the platform.

Last year, Ken Ardali, director of international e-commerce at Alibaba told The Drum that this group are young, e-commerce savvy, have more disposable income and looking for “aspirational, good quality, international brands”.

Refining its product offering

On its Tmall store, Sainsbury’s has played up to its British heritage and is heavily promoting the classic components of afternoon tea, including speciality teas, coffee and biscuits.

The decision to make available So Organic and Taste the Difference ranges is reflective of a market where there is rising concern for provenance of food and willingness to spend more in return for better quality.

A recent report from Beijing-based Horizon Research and Horizonkey found as many as 80 per cent of consumers in China worry about food safety, while there is also an increasing desire for imported organic produce after government figures revealed up to 40 per cent of rivers and 20 per cent of farmland is polluted.

Meanwhile, demand for Western baby brands is higher than ever following a 2008 scandal that saw contaminated China-made milk powder and formula result in the death of six babies and thousands more hospitalised. Sainsbury’s, then, is looking to establish its Little Ones brand as a trustworthy source for Chinese parents.

A toe in the water

According to IGD, the online grocery market in China could grow five-fold to almost £115bn in the next five years and will be worth more than the other top nine online grocery markets combined.

Speaking to The Drum, Grey Shopper managing director Rob Sellers said the agreement with Tmall is a toe in the water for Sainsbury’s to test its proposition.

“It’s a bit like having an eBay shop; it’s leaning on Alibaba’s data and infrastructure. It will be costing virtually nothing but it gives them a way of selling a little bit of stuff to a massive consumer base. There are over a billion Chinese people so even if only a few want to buy So Organic granola then it’s still a big market [for Sainsbury’s],” he said.

However, driving visibility on Tmall will prove the biggest challenge for the grocer. According to a review commissioned by the Wall Street Journal last year, 70 per cent of the stores are currently are doing “almost no volume”.

There is no advertising inventory on the platform and so it could see Sainsbury’s forced to invest in other marketing activity, namely social media, in the region to drive visitors to its storefront.

Sellers said “standing out is going to be pretty damn hard” but Sainsbury’s will quickly find traction with the expat community and word of mouth.

Nenad Cetkovic, chief operating officer at Lengow, added that Sainsbury's will also have to focus its attentions on more detailed product pages with more images, which have come to be inherently expected by online Chinese shoppers.

"However, the ecosystem is much simpler than in Europe. There are no comparison shopping engines in China and the market is roughly divided between six marketplaces. The markeplaces from Alibaba, Tmall and Taobao dominate the market – combined, they account for approximately 75 per cent of market share," he said.