Chinese fruit retail is in the process of expansion into regional markets
The volume of fruit imported into China, and the volume of fruit produced in China, have both increa…The volume of fruit imported into China, and the volume of fruit produced in China, have both increased year on year in the last 5-10 years. For some types of fruit the price increase exceeds 100% per year. However, it follows that the ability of markets in some areas to absorb this increased supply volume has not kept up with the growth in imports and the production of fruit. This development signifies to traders that market competition is about to get more intense and this in turn means that the profit margins will shrink.
Take 2018 as an example, most people in the fruit industry will say that this was a difficult year. The overall fruit market was in depression and sales conditions were chaotic. In many areas an abundant harvest was swiftly followed by a price drop. Losses are severe, whether for farmers or fruit traders. Is this only the result of growing production volume, a situation where supply exceeds demand? Or is it perhaps because retail strategy and market supply structures do not match?
The number of wholesale fruit markets rapidly grew to better satisfy the consumer demand in first- and second-tier cities in recent years. The difference in price between most first-tier wholesale markets is minimal and there is no more room for profit. Third and fourth-tier cities, however, see the rapid rise of new wholesale markets right now. There is still great potential in market development.
Representatives of several large-scale fruit and vegetable companies expressed their view on the market in recent times. They are already very aware of this business opportunity and have begun to set up operations in these regional wholesale markets. What market characteristic is it that attracted them?
First, the expendable income level of consumers in third- and fourth-tier cities is rising, and so their capacity and their demand as consumers becomes stronger. This is not just true for wholesale fruit markets, but there is similar potential in retail markets.
Second, such large-scale distribution companies as JD rearrange the local playing field in third- and fourth-tier cities through large investments in regional markets. They put particular pressure on the swift development of the express delivery industry. This development meets with the great demand in third- and fourth-tier cities for dependable e-commerce services.
Of course, business opportunities and market competition exist side by side in this industry. The companies in the fruit industry that dream of successful permeation of the regional markets in third- and fourth-tier cities should also be prepared for the great competition that is in front of them. For example, distribution companies that continue to advance in third- and fourth-tier cities also educate the consumers in regional markets in the wide variety of fruit supply. Consumers then become more familiar with fruit supply and the value of fruit, thus expanding the market for companies in the fruit industry.