【E-Commerce】Online shopping opens window for locally-made food

Food supplies in Hong Kong have largely relied on the imports from China and foreign countries. However, Hong Kong’s food suppliers, especially new start-ups, are currently benefiting from the growth of online shopping platform.

Reciprocally, the online platforms, branding themselves as “local-made food sellers”, successfully survive the fierce competition against the traditional offline shopping-model, and are opening up a new way for local food buyers.

 

“Ztore” is an online grocery store founded in 2015. It acts as an online platform for the sales of Hong Kong’s new start-up brands and traditional brands. Those suppliers commonly lack capital and methods to set up hypostatic stores in Hong Kong, so the platform provides them with a venue to sell and promote their goods. The founder of Ztore, Jack Leung, said that he found business opportunities in locally made products: “Supermarkets are located everywhere, but people can only buy standardize products without many choices.” Therefore, his “online grocery store” provides consumers choices for brands hard to be found in supermarkets, like Aging Lemon Sauce from brand “Tai Ma,” Turmeric Powder from brand “Pat Chun,” Black Glutinous Rice Vinegar from brand “Koon Woo.” It would be time-consuming if a costumer looks for them in a supermarket but turns to be super easy to buy them online.

According to the latest grocery market survey released by the consumer council, 60.4% of respondents agree that chain supermarket is their top choice to buy daily food. At the same time, small stores only account for less than 1% of the total market share. Under such a fierce competition against large corporations, is there any room for new start-up brands to expand their business? “Ztore” provides a possible answer.

Jack Leung said, at the beginning of setting up Ztore, his team spent a lot of time looking for potential suppliers of locally made food, and let them use Ztore platform without launching fee. “The wholesale price that we get from them is normally under market average, as the low fixed cost of online store. The gross margin sometimes can reach 30%,” said Jack Leung. Gradually, they chose supplier by tasting the products in person, and word of mouth from the public buyers.

In Jack’s words, Ztore aims to promote sustainable consumption by supporting local productions and social enterprises. This concept brings Ztore over 2-3 million sales per month. “In Ztore, I hope people buy not only the products, but also the thoughts behind the concept of ‘made in Hong Kong’.” Jack is ambitious on not only making Hong Kong’s consumers refocus on locally made products, but also shifting their consuming model from offline to online.

Apart from locally made grocery goods, local agricultural products are also attracting consumers. “Wooping” is another online agricultural store mainly selling locally produced fresh livestock and vegetables. Consumers can order via either their website or phone, and the shipping within Hong Kong is fast. The founder of Wooping, Mr. Chung, used to sell chicken in wet market. “We closed the poultry stall tenancies when the government launched the voluntary surrender scheme for poultry farmers eight years ago. Then, we started to sell chicken online,” he said.

Mr. Chung later got supplies of pork, fish and vegetables, and started to run his business in a mini supermarket. “Thanks to the online service, customers can combine all kinds of agricultural products through making one delivery order,” Mr. Chung said. He believes that locally produced agricultural goods are of high quality and safety, which would be attractive enough when competing against imported goods.

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Limited supply pushes up the prices of local fresh food.

However, the supply of fresh locally made food is insufficient. Mr. Chung said, “local agricultural industry in Hong Kong is facing a recession. Fewer young people are willing to work as farmers and the industry doesn’t get enough government support.” Limited supply pushes up the price of local fresh food. Mr. Chung admitted that he is facing difficulties to some extents as the price of local chicken has risen a lot.

Terence Chong, Associate Professor of Economics in the Chinese University of Hong Kong, pointed out that the following criteria may determine the success of an online local food store: First, reaching the economy of scale is decisive. Online store needs to attract a large number of consumers to balance their profit and cost, due to a relatively low gross margin. Bulk buying also reduces the delivery cost. Second, product differentiation is important under keen competition. Online stores need to highlight their broad choices to attract offline consumers to begin online shopping.

Prof. Chong agrees online platforms like “Ztore” and “Wooping” can help suppliers with their product promotion. On the other hand, diversified distribution channels would increase the variety of local food supply. However, he admitted that locally made food only accounts for a limited market share, and the relative high price of some local agricultural products may limit its market penetration.

Online shopping is changing the retail industry in Hong Kong. “Not only local food store goes online, more local light industry starts to do so,” added Prof. Chong, “The online platforms would be able to not only promote the local products to the entire region, but even to the world.”

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Online stores need to highlight its broad choices to attract customers. Photo from Wooping meat.

Reporting by Charlotte Lam, Editing by Enzo Li

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