Every Supermarket Is Doing E-Commerce Now. We Tested China's Top Five Chains

RT-Mart, Carrefour, Yonghui, Bailian and Wumart. (We left out China Resources Vanguard, which actually ranks second, and Walmart, which ranks third: the former's online arm barely exists, and the "online Walmart" started life as Yihaodian, which now belongs to JD.com.) Here is what we found.

The blow e-commerce has dealt physical supermarkets still shows no sign of softening.

According to consumer research firm Kantar, physical retail stores — hypermarkets, supermarkets and convenience stores — grew just 0.3% in the first quarter of this year. Take out convenience stores, which are still growing, and the picture gets much worse: hypermarkets fell 0.8%. Over the same period, online sales of fast-moving consumer goods — household and personal care, packaged food and the like — grew 35%. Across all of 2016, 53.5% of Chinese urban households bought fast-moving consumer goods online, 10 percentage points more than the year before.

You have probably not walked into a supermarket in a long time, and it is exactly this loss of young shoppers that has locked supermarkets into falling results. Lianhua Supermarket's revenue fell 2% last year and same-store sales fell 1.23%; Sun Art Retail, which owns RT-Mart and Auchan, saw same-store sales drop 0.34% year on year, and its 4.2% revenue growth came mainly from newly opened stores; Carrefour China is still losing money, enough to drag down the whole Asia-Pacific region. Yonghui is one of the few growing against the trend, opening 33 stores in the first quarter. But with its focus on fresh food and imported groceries, it was never quite the same kind of business as a traditional chain like RT-Mart.

Having tried everything from WeChat to Alipay without pulling young people back into the aisles, supermarkets seem to have no choice left but to sell online themselves.

Walmart moved first, by taking control of Yihaodian. But once Tmall and JD.com both entered the category and pushed their supermarket businesses hard, Yihaodian ended up as little more than a regional player centered on Shanghai, its market penetration down to 1.5%. RT-Mart and Yonghui both launched their own platforms in 2014, and even Bailian, the slowest of the lot, put out its own last June.

When supermarkets went online

2004

JD.com

2012

Tmall Supermarket

2014

RT-Mart launches Feiniu.com; Yonghui's e-commerce arm, then called "Yonghui Weidian," starts trials in Fuzhou

May 2015

"Online Metro" arrives; the Beijing chain Wumart begins working with the app Duodian

June 2015

Carrefour launches e-commerce

December 2015

Yonghui relaunches its e-commerce app, "Yonghui Life"

2016

Bailian Group, parent of Lianhua Supermarket, launches its omni-channel platform "iBailian"

Which leaves them all with one practical question: how do you move shoppers who are already used to third-party platforms onto your own site or app, and then keep them there?

Among the shoppers we stopped at random, most had no idea these supermarkets sold anything online. The financial statements say much the same. Yonghui's filings put online customer spending at 0.098% of physical-store spending — that is, for every 1,000 yuan Yonghui takes in, less than 1 yuan comes from the internet. RT-Mart's Feiniu.com did 2.1 billion yuan in online transactions in 2016, only 2% of the parent's total.

They also buy traffic by working with third-party platforms. After JD.com bought a 10% stake in Yonghui Superstores in 2015, Yonghui opened a fresh-food storefront on JD.com; Bailian announced a strategic partnership with Alibaba early this year, though the online details have yet to be spelled out. More than 10,000 offline outlets belonging to China Resources, including China Resources Vanguard and Suguo Supermarkets, have joined Meituan's food-delivery platform; 230 RT-Mart stores around the country have plugged into the three big delivery platforms as well.

Giving up a grip on customer data in exchange for traffic is a common trade in many industries. But hotels and airlines have both been working to steer customers back to their own apps, and so have McDonald's and KFC. In the long run supermarkets will probably do the same.

So how good are these supermarket platforms, really? From the front end to after-sales service, what is it like to use them? Could any of them persuade a shopper to give up Tmall and JD.com?

We tested five: RT-Mart, Carrefour, Yonghui, Bailian and Wumart. By Kantar's latest count, RT-Mart leads with 6.5% of the market, Carrefour is fourth at 3.1%, Yonghui (2.9%) and Bailian (2.8%) are all but tied for fifth, and Wumart follows at 1.7%.

We should explain our selection. We left out second-place China Resources Vanguard (6.2%) and third-place Walmart (4.9%): Vanguard's "e-Vanguard" barely exists, and the "online Walmart" started life as Yihaodian, which now belongs to JD.com. We added Metro, because its business with individual shoppers keeps growing even though it was built to serve companies.

Here is what we found.

Measured against mature e-commerce, every front end has flaws. Carrefour's are the worst

Shoppers spend more and more of their time on their phones; a retailer that is not on mobile hardly counts as e-commerce at all. Yonghui and Wumart simply never built websites — they have no desktop stores. Carrefour, Yonghui, RT-Mart (Feiniu.com), Bailian and Wumart all have standalone apps of their own; Metro built a mobile storefront inside its WeChat official account.

The home screens of these apps look a lot like Taobao and JD.com — Bailian's excepted. Four or five tabs sit in the "dashboard" along the bottom, a search bar and a pinned banner ad sit at the top (a layout most apps share), and eight to ten round icons fill the middle. In some apps that middle band of buttons is just clutter, Carrefour's especially, given how little the app can actually do. It is fair enough that not every app offers what JD.com or Taobao (and Tmall) do — utility bill payments, or credit.

The Carrefour app is oddly poor for a multinational this size. The worst part is search. Search for "sparkling water" and you get sparkling wine first, then Wetcode skincare; actual sparkling water turns up around the 20th result.

The app also seems unable to tell scrolling from tapping — it is far too sensitive. And you cannot choose between large, medium and small sizes of a product. It is hard to believe this is what nearly a year of work produced.

Yonghui's app, by comparison, has no fatal flaws in its interface. But it is not smooth to use, mainly because it splits its catalogue into "same-day" and "next-day" goods that ship from different stores and barely overlap.

So you will often find your shopping list split between a same-day item (from a nearer store) and a next-day item (from a farther one), or between store A and store B — you cannot combine them, and you do not want to pay shipping twice. Wumart (Duodian) keeps this simpler: it assigns the order to same-day or next-day delivery automatically, based on how far your address is from a store.

Some of them have been careless with the desktop site too. For part of our testing period, the Bailian site scrambled its layout after login (since fixed); and Feiniu.com, RT-Mart's site, will not render in Chrome on a Mac — only Safari works.

Payment options, to their credit, are well covered. Every one of these supermarkets takes Alipay and WeChat Pay, the two dominant methods. Carrefour and Yonghui take Apple Pay as well. Then again, adding payment options is the easiest thing to do, and the least you would expect.

Prices, on the other hand, hold up well against the third-party platforms

We picked five products at random — packaged food, imported food, fresh produce and household goods — and compared prices. Tmall Supermarket and JD.com no longer look obviously cheaper. Tmall Supermarket often raises a price before discounting it (plenty of people on Zhihu report the same): Hearttex wet wipes come with a "50 yuan off 99" coupon on Tmall, but the list price is twice what the cheapest channel for that product, Carrefour, charges. Across our five items, Carrefour and Wumart had the most appealing prices.

Worth noting: apart from Metro and Wumart, which promise "the same price online and in store," none of the others can guarantee that their stores and their websites charge the same.

They all sell imported goods, and discounts are still the standard way to win new customers

Bailian's platform and Feiniu.com work more like the online supermarket-plus-department-store model of JD.com or Amazon, with a reported million-plus SKUs. Carrefour, Metro, Yonghui and Wumart/Duodian stay closer to the traditional hypermarket, mostly food and household goods, with 10,000 to 20,000 SKUs.

All of them — Carrefour, Yonghui, Bailian, Feiniu.com, Metro — have moved into cross-border e-commerce. Yonghui built a separate app for it, "Yonghui Global Shopping," selling mostly cosmetics, alcohol and baby products. The rest sell imported goods inside their main apps, shipped from bonded warehouses or their own overseas stores.

Like the food-delivery platforms chasing new users, these supermarkets offered heavy discounts and subsidies early on, then trimmed them back. When Feiniu.com launched in 2014 it gave every new user a 20-yuan voucher good on anything; Carrefour ran new-customer promotions for at least three months running, from February to May this year, at 50 yuan off 99 for new accounts. iBailian, which recently launched "Bailian Daojia," its three-hour delivery service, is still running 15 yuan off 88. Wumart offered 40 yuan back on 80 when it first teamed up with Duodian.

In short, if you want a deal, look at the supermarket platforms that launched most recently. Anniversary sales can be worth checking too.

In a big city like Shanghai, they deliver about as fast as JD.com and Tmall Supermarket

Duodian (Wumart) and Feiniu.com (RT-Mart) run their own logistics; the rest hand delivery to third-party couriers.

In Shanghai and Beijing, the two first-tier cities we tested, all of them can deliver the next day; in second-tier cities, reportedly, it is the day after that — roughly what Tmall Supermarket and JD.com manage.

That is the ideal case. Tmall Supermarket once sent me the wrong goods and the order ran two days late; fruit I bought from Yonghui also arrived a day late. Whether a parcel actually lands on time depends on the courier, too.

A few supermarkets offer same-day delivery, Yonghui and Wumart/Duodian among them. As noted above, Yonghui's same-day and next-day catalogues overlap very little, which is both baffling and a nuisance. Search for "Maling luncheon meat": for same-day delivery you can buy a single 340-gram can; for next-day you have to buy two. Wumart (Duodian) advertises two-hour delivery in Beijing, but in our experience it took at least three.

Everyone offers in-store pickup — but does it actually help the shopper?

A network of physical stores is the supermarkets' advantage, and almost none of them skip the pickup option. Online Carrefour is the odd one out: you can collect only at "Carrefour Easy" convenience stores, not yet at a Carrefour supermarket. The rest are all hoping to push traffic into their stores. RT-Mart/Feiniu has the most collection points — RT-Mart stores, plus C-Store, which shares the parent company Sun Art Retail, and in Shanghai a tie-up with FamilyMart, where customers can also pick up orders.

Store pickup saves the supermarket the cost of the last mile, which in some cases runs to about half of total logistics costs. In the United States, Walmart discounts more than 10,000 products on the condition that you order online and collect in store, because that saves Walmart the delivery. Pickup also brings extra foot traffic, and sometimes extra sales: Target, the second-largest US chain, found that a third of customers collecting online orders bought more once they were inside.

There is a case for it: no one home to take the parcel, a collection point close by, a stop on the way home. But for shoppers used to having things brought to the door, it is hardly the most convenient choice.

Fresh food is still the weak spot. If you shop these apps, steer clear of it for now

All six of the platforms we tested sell fruit, vegetables and meat online. Metro only lets you collect fresh goods in store; the rest will deliver them. But buying fresh food from any supermarket app is an unpleasant business.

The biggest problem is the quality of the goods. Looks aside, some supermarkets cannot guarantee even the basics of speed and refrigeration. In my one test, Yonghui — the chain known for fresh food — failed on both. I ordered yogurt and fruit. When the yogurt arrived the next day it felt nowhere near chilled, and the ice pack had melted into a bag of water; nearly half of the eight small cups had swollen lids. The fruit, also promised for the next day, came a day late. This does not look like a freak case: App Store reviews of "Yonghui Life" mention fresh orders arriving late too.

The other problem is the free-delivery threshold on fresh food, which is high, and the same as for ordinary goods. Bailian's is 68 yuan, Feiniu's 98. The more established platforms have the same issue — Tmall Supermarket sets free shipping at 88 yuan, JD.com at 99, and the fresh-food specialist FruitDay at 68.

Fresh and non-fresh spending generally cannot be combined toward that threshold, which means that to reach it I have to fill the basket with fresh food alone. Presumably this is because fresh goods are stored and shipped through a separate chain. Carrefour and Yonghui do a little better: their fresh items can go into the same basket as everything else and arrive in one delivery.

In a QDaily Research Lab survey in early 2015, readers named three main problems with buying fresh food online: what arrives does not match what was pictured, you can rarely buy every ingredient you need, and it costs too much. Two years on, none of them has really been solved.

Returns were the worst part of the whole test. Bailian and Feiniu.com are reasonably easy; the rest are bad

Returns are the most unpleasant stretch of any purchase. This time we found that the supermarkets shipping from dedicated e-commerce warehouses — Bailian and RT-Mart's Feiniu.com — handle them far better, while the ones that use stores as warehouses, such as Metro, Carrefour and Yonghui, make returns complicated, sometimes terrible.

Carrefour's order slip states in black and white that online customers can return goods at any store. When I went to the nearest Carrefour, I was told I had to go back to the store that shipped the order. The staff member called the Gubei Carrefour on my behalf and told me someone there would ring me to collect the item. No one ever did.

"Yonghui Life" is the only one of these platforms with no stated after-sales or returns policy; the delivery paperwork says nothing either. Only after calling customer service did I learn I had to bring the receipt to the store that shipped the order. When I got there the staff looked lost — perhaps no online customer had ever come in to return anything. She checked with the store manager and then told me it could not be done there. On my second call, customer service said someone from the store would contact me about the return. A week later nothing had happened. As at Carrefour, I had been fobbed off.

Metro only takes returns in store. It does not have many stores to begin with, and most sit in neighborhoods far from the city center — not much use to an individual shopper.

This is plainly what happens when the online and in-store returns systems are never connected. Using stores as warehouses saves money, but it makes it easy for the stores and the online business to go their own separate ways.

The two supermarkets that ship from warehouses rather than stores were far easier. Feiniu.com's process is simple: select "return" on the site or in the app. A Feiniu courier came for the item the next day, glanced it over, and the refund was back on my original payment method on day three.

Bailian was quick too. Its returns page is a little more involved than Feiniu's — you have to upload photos. Customer service called the next day to check the details, a third-party courier collected the item on day three, and the money was back on my bank card on day four.

As for return shipping, Feiniu.com charges nothing to return its own-stock goods, which next to Tmall Supermarket counts as generous — JD.com recently introduced "return insurance," which also cuts what shoppers pay to send things back — even if it adds to operating costs. Bailian's stated policy puts return shipping on the customer when there is nothing wrong with the product. It did not charge me, though, when it processed my "seven-day no-questions-asked" return.

One caveat: a single test is not a reliable sample, and any chain's service may change.

If you care about loyalty schemes: everyone earns points, and the points may be useless

Yonghui aside, all five of the others make you a member the moment you register; there is nothing to apply for. "Yonghui Life" membership costs 100 yuan a year and comes with 100 yuan of vouchers on signup (with conditions attached) plus free-shipping coupons, since its same-day service charges for delivery. It runs a fairly elaborate online scheme, but it is far from clear what the points you earn by spending are actually worth — one user complained in the App Store that Yonghui's points cannot be used at all.

Yonghui, Carrefour and Feiniu.com (RT-Mart online) have also left their online and offline membership systems unconnected. If the plan is to build a base of customers and hold on to them, joining those systems up matters.

In sum…

For all their bright spots, these in-house supermarket platforms are still a long way behind the mature third-party ones. Meanwhile JD.com, Alibaba and Amazon, the three biggest e-commerce companies in the world, are all buying supermarkets offline — because logistics costs are rising, because online retail still cannot reach vast numbers of people, and because some categories still sell best in a store.

Nielsen's research finds that shoppers still prefer to buy fresh food and groceries in a physical supermarket, and are readier to buy household goods and things that keep online. In China, shower gel (48%), toothpaste (42%), tissues (37%), hair care (37%) and laundry detergent (36%) are the top five online purchases, with cosmetics just behind. Food and drink take 94% of their sales in physical shops and grocery stores and only 6% online — which is why nearly every supermarket is expanding its food range in store, and why Yonghui has gone as far as adding prepared foods and a restaurant business.

Supermarkets' physical stores are still enormously valuable. But their problems online have clearly become urgent.

(Reporter Lan Lianchao also contributed to this article.)

Graphics: Feng Xiuxia

Cover image from Pixabay