Online crab sellers losing money while building fresh food retail business

2016-09-29 09:48Global Times Editor: Li Yan ECNS App Download

Autumn has arrived, and with it, hairy crab season. This year, the delicacy, especially if harvested from the famous Yangcheng Lake, has become not just the target of Chinese consumers, but also online retailers looking to build up a business selling fresh food over the Internet. These retailers include e-commerce giants such as and, who hope selling guaranteed genuine Yangcheng Lake crabs will help Chinese consumers see just how convenient it is to buy fresh food online. However, the high cost of building a customer base has left many online retailers struggling to stay afloat.

Chinese love themselves some hairy crabs. Yangcheng Lake hairy crabs are especially prized due to the quality of the water where they are harvested.

During the opening of the crab harvest in Suzhou, East China's Jiangsu Province, in late September, e-commerce platforms including, and each announced they had won the right to sell authentic Yangcheng Lake crabs online this year.

Suning said that it was the first e-commerce platform to sign an agreement with the Suzhou Yangcheng Lake Crab Association, an industry association responsible for promoting and managing the quality of crabs from the lake, the Southern Metropolis Daily newspaper reported on Saturday.

With the agreement, Suning aims to ensure the authenticity of the crabs it sells to its customers.

Alibaba Group Holding's said that it has contracted rights to harvest a portion of the lake to ensure the crabs sold on its platform are authentic.

For its part, has pledged to work with, an online supermarket belongs to, to take 50 percent of the crabs market this year, according to a report from Xinhua News Agency on Friday.

The online retailers' focus on authenticity makes sense considering that most Yangcheng Lake crabs in the market are counterfeit, meaning they are harvested somewhere other than Yangcheng Lake.

The proof is in the numbers. Although Yangcheng Lake produced just 2,100 tons of crabs in 2015, more than 20,000 tons of "Yangcheng Lake" crabs were consumed last year, according to the association.

Fresh growth

The industry association forecast that 2,100 tons of crabs will be harvested from Yangcheng Lake in 2016.

In an effort to fight knock-off Yangcheng Lake crabs, the delicacy has been sold only through authorized brick-and-mortar stores, supermarkets, high-end hotels and e-commerce platforms since 2010, according to a report by the Beijing Youth Daily on Saturday, citing Yan Jinhu, the association's secretary-general.

Over the past few years, an increasing proportion of the crabs have been sold over the Internet. In 2015, nearly 60 percent of Yangcheng Lake crabs were sold online. The figure is expected to rise to 70 percent in 2016.

Still, fresh food sales account for only a sliver of the total online food sales in China.

"The fresh food market is nearly 1 trillion yuan ($149.88 billion), however, less than 2 percent of products are sold through the Internet, which means the market still has a lot of room to grow," said Cao Lei, an analyst at the China E-commerce Research Center, the Hangzhou-based news portal reported on Tuesday.

E-commerce platforms including, and all hope to attract more consumers by selling authentic Yangcheng Lake crabs to build a competitive advantage in the fresh food sector, the report said.

China's online fresh food market has been growing by more than 80 percent a year, according to a June report by the Beijing-based research consultancy iResearch.

Nevertheless, the gross merchandise volume (GMV) of the online market for fresh food accounted for 3.4 percent of China's agricultural product retail sales, according to the iResearch report.

The GMV of China's online market for fresh food is expected to exceed 100 billion yuan in 2017 with a market penetration rate of 7 percent, the iResearch report noted.

The cost of customers

The online market for fresh food might be growing, but fresh food retailers are paying a high cost to get a piece of the market.

Since the second half of 2015, many fresh food sellers online have had trouble surviving, Wang Xiaosong, head of's fresh food department, was quoted as saying by the Southern Metropolis Daily.

Of the roughly 4,000 online retailers of fresh food, only 1 percent are profitable and 4 percent are breaking even, according to a report by in early September. Meanwhile, 88 percent are running at a loss and 7 percent are running up huge losses.

Furthermore, the tried and true strategy of cutting prices to gain market share hasn't worked because the people who buy fresh food online are more concerned about quality than saving money, Wang noted.

The cost of winning customers is growing higher. In 2015, it cost at least 35 yuan to deliver a parcel of fresh food to a customer, Wang said, far more than the 8 yuan cost of delivering a parcel through a regular third-party logistics company.

"I think the penetration rate of the online market for fresh food is only 2 percent of the entire e-commerce retail market," Wang said.

The market is also a risky one to enter. "There are more than 1,000 crab sellers operating online, many of which are running at a loss," Sun Yixing, deputy general manger of a Yangcheng Lake crab company, was quoted as saying by Shanghai Morning Post newspaper on Saturday.

To grab a larger piece of the market, many online retailers gambled by offering customers the chance to pre-order crabs in advance of crab season, Sun said. The problem was that the retailers didn't know how much the crabs they were selling would end up costing them. If crab prices turned out higher than expected, the retailers would likely lose money.

"Our firm lost 800,000 yuan in the 2015 Mid-Autumn Festival," Sun said.

In addition, Sun's company spent nearly 2 percent of its 20 million yuan in revenue on Internet promotion and advertising in 2015.

Despite these problems, fresh food online retailers still see selling authentic Yangcheng Lake crabs as a good way to bring in customers. This year, the harvest for Yangcheng Lake crabs is delayed due to unseasonable weather.

Industrial experts said that crabs prices will increase by about 20 percent to 30 percent from 2015, its highest in a decade, according to the Beijing Youth Daily newspaper.

Currently, is selling crabs weighing 0.25 kilograms in batches of eight for 1,388 yuan. is selling crabs weighing 0.15 kilograms in batches of 10 for 1,358 yuan. And is selling crabs weighing 0.17 kilograms in batches of 10 for 1,438 yuan.


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