Is China’s Wine Market Feeling the Profit Squeeze from E-Commerce?

on July 7 2014 | in Wine & Spirits | by | with No Comments

Vinexpo, Dynasty wine, Asia-Pacific, wine industry, China

Traditional wine sellers are feeling the profit squeeze.

With the popularity of e-commerce, traditional Chinese wine companies have seen a sharp decrease in sales—as much as 30 percent for some — due to the competitive prices of online resellers.

Smaller wine companies are the most hard hit. They are struggling to maintain shelf space in big stores as they can’t afford the high price. Want China Times reports that supermarkets usually charge an average of US$48 per item, but with most supermarkets being chains, the vast expansion is proving too pricey. They say it could cost up to US$16,000 a year to stock one wine in a big-box store.

While a decade ago 90 percent of China’s wine industry was ruled by local wine producers — China Great Wall Wine, Changyu, and Dynasty — imports have risen to take 30 percent of the market. The imported wine market in China has reached US$16 billion, but there are still no standout companies or retailers when it comes to sales.

Even with the stiff competition of e-commerce and the stocking expenses, imported wines do stand a chance. In 2013, China consumed 1.865 billion bottles of red wine, up 136 percent since 2008. Vinexpo, a leading wine exhibition company, has also predicted that China’s wine industry will grow another 33.8 percent by 2017.

Just like other luxury industries in China, the wine market has seen a boost in sales and interest due to the changing lifestyles of their clientele. With the Chinese middle class on the rise and more people eager to spend money on themselves, expansion of the market is promising, but online competitive pricing is likely to keep profits in check.

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