I still remember how big a deal it was when LianHua opened a supermarket in my neighborhood in the 80′s. Before then, it was completely unthinkable for us to go into a shop and actually pick products ourselves! Obviously, the supermarket was not as big as it is now, neither was the product selection. I think they probably only carried some packaged food, and household products. And you had to check your bag before going in because of rampant thievery. Nevertheless, as kids we would go to the store just for fun -walking through the aisles, picking up food.

A couple years later the LianHua closed down, and replaced by bigger and better. There it was. A big step forward: Carrefour! It was almost legendary when you think about it, how a French company decided to enter the China market at such an early stage.  Carrefour entered with the Chinese name 家乐福 (Jia Le Fu), which means family, happiness and luckiness.  That was a great name later turned into a great brand.

One important thing Carrefour brought to China was private label packaged goods. These products are sold under the Carrefour brand, but are produced by other brands.  The concept was already popular overseas, because of its benefits to both the manufacturer and the retailer. The manufacturer utilizes excess capacity, while allowing the retailer to add a low-price/high margin option on shelves.

Carrefour was also the first to bring a quality shopping-space design, and great customer service.  For the first time, we could shop in a well categorized, ordered store.  Grocery shopping was made logical. This type of model has since been adopted by retailers all over China. You can also thank Carrefour for importing refunds and exchange policies.

Carrefour’s entry benefited the whole industry by setting the bar much higher. We now have first class retail spaces that did not exist prior to Carrefour’s entry. My local Jia De Li even sells non-processed cheese now! Thanks Carrefour.

My eyes shifted, darting back and forth, spotting feather-less chickens, pieces of pig, bloody beef being chopped into digestible meat. I was lost in the heart of an outdoor meat market in the middle of Panjin, a tier three city in northern China. My sneakers traced mud across the cold, hard concrete and I covered my face from both the obtrusive airborne particles, as well as the unbearable meat-locker like conditions.

I walked into Panjin’s most affluent food shopping market in the center of the city, pried my hands out of my pockets, and slid through the plastic door sliders supposedly protecting the inside from the outside. This market represented a food shopping destination for Panjin’s elite. Delicate slices of tender beef were marked at unaffordable prices, a special Japanese import section was carefully displayed behind velvet ropes, and a row of JIF Peanut Butter shined like gold at the bottom of a dark mine.

Panjin’s City Center

Alas, I was buying Peanut Butter at this upscale shopping center. However a typical Chinese tier three city food shopper is most likely not purchasing peanut butter, instead spending around 200 to 300RMB per month at outdoor fresh markets such as the outdoor meat market mentioned earlier. However, as the income levels of these tier three cities continue to rise, and Chinese people seek safer, sanitary, and convenient food shopping methods, the amount of wet markets in small (and large) Chinese cities will continue to diminish. The unpackaged meat industry (aka meat markets) alone in China is set to drop below 10% of all accounted purchases by 2016.

Tier 2 and Tier 3 Supermarket Expansion

The recent global economic crisis in 2009 also makes these second and third tier Chinese cities ripe for foreign supermarket expansion. Wal-Mart, playing catch-up mode to Carrefour’s strong presence and brand image, opened 17 new supermarkets in China, most in second and third tier cities including Yancheng, Jiangsu, Xiangfan, Hubei, and Changde.

However, Walmart, Carrefour, and Tesco are not alone in Chinese supermarket expansion. They may have set the standard for all local supermarkets to follow but local Chinese supermarket chains such as Lianhua (controlled by the state-owned group Bailian Group) intend to go head to head with Walmart in 2010 and beyond. In 2008, Lianhua set targets to open 15 hypermarkets per year and at that time controlled over 120 plus-sized supermarkets across China. In Xi’an a tier two city located in central China, the supermarket scene is dominated by a local Guangdong controlled retailer named Vanguard which has 22 supermarket locations, compared to one Carrefour and three Wal-Mart’s.

There are signs however of supermarket saturation, Japanese supermarket retailer, Aeon Co Ltd. is likely to miss its target of opening 70 supermarkets in China by the end of February 2011 due to local delays. Another supermarket in Beijing, “C-Mart” uprooted and disapearred overnight last year, leaving behind unpaid bills and taxes. This leads me back to the small city of Panjin. It does not represent China’s wealthiest tier three city, however as of my count there were around 5 to 7 “super” wet markets and 3 supermarket style food shopping centers. None of these supermarkets were owned by international food retailers, yet most contained similar service and products. Much like the former Wal-Mart force outs of local food retailers in America, we may yet see a similar type of supermarket strong arming occur in China’s second and third tier cities.

Shopping Habits of Chinese Youth and the Future of the Food Shopping Industry

The presence of grocery stores in large and small cities in China does not mean that young Chinese are shopping at these locations. Convenience stores, online shopping, parental reliance, and well, no shopping at all, represents more typical shopping habits of Chinese youth. Leon Ni, a 23 year old Shanghai resident claims to only use his kitchen for instant noodles, seaweed soup, or for cutting fruit.

So if Chinese youth aren’t shopping anymore, then this diminishes all hope for future growth in the industry correct? Well no. Food shopping is not going anywhere. What’s changing most amongst Chinese youth in the food shopping industry is the habits and overall shopping experience. As Leon states, he and his friends enjoying shopping at Carrefour because it’s wide aisles and excellent selection make food shopping interesting as well as having the ability to “quarrel and fight with friends.” Enhancing the overall shopping experience is a huge opportunity for food retailers to tap into the Chinese youth market.

Also look for a growth in convenience stores in first, second, and third tier cities. In addition to the myriad of convenience store options that already exist in China, Wal-Mart entered this competitive market by opening three shops in Shenzhen last year. Convenient stores represent an opportunity to “hyper-localize” both experiences and products. Chinese college students looking for a study boost find more of these types of products, working individuals find more lunch options and so on.

Tier 1
Zoe is a 23 year old Shanghai-based photographer. She spends approximately RMB1200-1500 per month on food: 15% percent on meat, 50% on vegetables, 20% on fruit and 15% on snack. She normally does her shopping at Carrefour and her neighborhood fresh market, where she prioritizes fresh and healthy ingredients. She cooks once or twice during the week, but most of time she orders food. During the weekends, her and her friends treat themselves to restaurants.

Tier 2
Lihui, 26 year old, works in Changsha as a Project Manager. Her choice for food purchasing are also hyper-markets like Wal-mart and nearby wet-markets. Her monthly spending on food is 500 to 800 rmb including 15% percent meat, 50% vegetables, 25% fruits and 10% snacks. Natural, nutritious and fresh are her principles for food purchasing. She mostly cook at home during work days but at weekends she meets her friends and eat together.

Tier 3
Lilian Lin, 25 years old, she teaches at a middle school in Zhuzhou, Hunan province. Because she gets free lunch at school and she mainly shops at fresh markets, her cost on food is 200 to 300 rmb which mainly on vegetables and fruits. Fresh is the priority for food purchasing. She mostly cook for herself instead of eating outside with friends. At weekends, she goes back home and eats with her parents.

As one would assume, we see a pretty dramatic difference in budgets between tier one, two and three cities. People from lower tier cities are more inclined to cook for themselves, whereas youth in cities like Shanghai and Beijing prefer a quick, yet more expensive solution.

The post-80′s Chinese have a very different approach to food purchasing than their parents. With jobs and social lives taking up most of their time, Chinese youth are reluctant to buy fresh ingredients for the kitchen. They prefer eating out to cooking at home, and when they do make it to supermarkets, they are more likely to buy snacks and prepared food.

Eva Ma, a senior from Shanghai Normal University, represents many of her peers. She usually goes to a Hyper-market, like Carrefour, with her parents once a week. She buys snacks like chocolate, biscuits and some dairy. Sometimes she passes by the 24- hour stores to buy drinks, instant noodles, and kanto cooking (关东煮). But she said she never goes to a fresh market. Generally, the only time she eats home-cooked meals, is when her parents do the cooking. Otherwise, she orders food or goes out for a quick bite.

As in the West, our increasingly fast-paced, modern lifestyles have led to a surge in fast food consumption. Whether it’s those anonymous All-Days stews, or KFC sandwiches, as long as it’s quick and cheap, it’s fine by us.

The busy and fast paced lives of today’s Chinese youth means they’re looking for an easier, more convenient way to shop. If you’ve ever been to a local Carrefour after 5pm you would understand. It’s utter pandemonium. That’s what Cai Guan Jia is banking on. Chinese youth have already become accustomed to buying just about anything online. Furthermore, many are dissatisfied with take-out food and restaurant food. Others are concerned with food safety. So what do they do if they want to get convenient, fresh and high-quality organic food? The answer may soon be online shopping.

Cai Guan Jia has encountered several obstacles. First off, fresh food is different from other products whose quality can be easily standardized and identified. Consumer’s have their own preference. Therefore, the customers’satisfaction is difficult to manage. Secondly, the market is still young, the demand still small. Generally, people who buy food seldom surf online, while people who surf online seldom buy food. Yet this can change very quickly. If it’s convenient and the price is right, Chinese youth may very well turn to the ‘net to stock up their fridges. Cai Guan Jian has accepted this. Yu Tian, COO of Cai Guan Jian states, “In order to build our brand, we have prepared operate at a loss for 2 – 3 years.”

“Aside from a few dishes, the 80′s generation is basically incapable in the kitchen. Their excuse is Chinese Food Culture is too profound to command. Basically, a kitchen is a furnishing for my friends and me. All we use it for is cooking instant noodles, and seaweed soup, or cutting fruit.

How we deal with our dinners? We order take-out on workdays, or buy food from convenient stores on workdays. On weekends, we gather with friends and go to various restaurants to enjoy ourselves. It is enjoyable to have hot pot in the freezing winter!

Speaking of hot pot, due to Hong Kong’s cultural influence, more and more Chinese youth are cooking hot pot at home. It is easy to make, sometimes more hygienic than restaurants and inexpensive. Plus it’s fun. Also, the preparation for the hot pot—purchasing food ingredients in Carrefour with friends is very enjoyable. Therefore, once every two weeks, we gather and have hot pot.

Where do we buy the food ingredients? Carrefour is our favorite. The food is and fresh and the selection is plentiful. What’s more, there is enough space so we can quarrel and fight noisily when shopping. As for the crowded Lianhua Supermarket, and the convenient stores with insufficient kinds of food, they are not for us.”