China’s Wine and Spirits Market (5): Information/Purchase Channels and the Hong Kong Advantage

Comprehensive e-commerce platforms are the most popular channel to purchase imported wine and spirits, according to a survey conducted by HKTDC Research¹. Even fragile and temperature sensitive products like bottled wine can be delivered intact to consumers through China’s well-developed online shopping system. But respondents also regularly bought wine and spirits from offline outlets such as liquor stores and duty-free shops. In fact, 41% of respondents said they had never purchased liquor online. Clearly liquor consumers have different preferences for online and offline shopping. In view of this, liquor suppliers should develop both online and offline sales channels.

Although the percentage of respondents who had purchased liquor in Hong Kong was rather low , according to the survey, many of them were aware of advantages that Hong Kong offers, such as the duty-free imports available in the Special Administrative Region (SAR), good prices (46%), diverse varieties (31%), and guaranteed quality (29%). Consumers generally agreed that Hong Kong is a shopping paradise and that it should continue to consolidate its position as Asia’s wine hub.

Diverse Channels for Obtaining Information

Respondents obtained liquor related information from a diversity of channels, with the majority of them using comprehensive e-commerce platforms (53%). This was a much higher proportion than for product displays (30%) or favourable comments by relatives, friends and other buyers (28%). It seems that large e-commerce platforms have extensive coverage. Respondents also obtained information about liquors from liquor e-commerce platforms (23%), entertainment venues (23%) and eateries (22%). Other sources were sales personnel (20%) and recommendations by experts or KOLs (16%). Online social networking platforms such as Zhihu and Xiaohongshu were information sources for 15% of the respondents.

Respondents with different profiles used more or less the same information channels. More respondents with an intermediate knowledge of wine² used large e-commerce platforms a little more (57% vs overall average 53%), perhaps because they drank more frequently and bought liquor more often³. Male respondents (25%) used liquor e-commerce platforms more than their female counterparts (19%), while female respondents obtained liquor related information more from relatives, friends and other buyers (30% vs males 27%). Respondents in the 26-35 age group (17%) used online social networking platforms for information more than did their counterparts aged 36-45 (15%) or those aged 46-55 (12%).

The above survey findings reveal three important facets of how consumers learn about liquors. Firstly, the influence of traditional media is rather weak. Neither TV (14%), trade publications (11%), airport and railway station ads (10%), or newspapers and magazines (7%) reached consumers extensively. Secondly, it appears that consumers actively search out information given the high use of large comprehensive e-commerce platforms, product displays and liquor e-commerce platforms.

Thirdly, online social networking platforms such as Zhihu and Xiaohongshu are growing in importance. An increasing number of consumers, especially the younger generation, like to find out what other people are drinking through online social networking platforms. One focus group participant said: “On online social networking platforms such as Zhihu, I can search the responses given by other people as well as raise questions for fellow netizens to reply to. Through these platforms, I not only learn from other people but can also exchange wine knowledge with them.” Another respondent aged 35 remarked: “I have learned a lot about how to choose and savour wine on Xiaohongshu. Since Xiaohongshu has a lot of young users, through this platform I can learn how to appreciate wine from the perspective of my peers.”

Most Trusted Information Channels

There is a marked difference between the liquor information channels which consumers trust most, and those channels from which consumers obtain information on a regular basis. The respondents’ most trusted information channels were liquor e-commerce platforms and comments by relatives, friends and other buyers, both accounting for 14%. This suggests that consumers appreciate the professionalism of liquor e-commerce platforms and also trust the opinions of people who have tried the product. It is interesting to note that although large comprehensive e-commerce platforms were the most popular information channel used on a regular basis, only 12% of the respondents cited them as the most trustworthy channel. There are so many vendors on these e-commerce platforms that consumers may find it difficult to tell whether the information provided is reliable or not.

Brand websites, liquor stores and wine tasting events also rank among the most trusted information channels. These were not the most frequently used, but they were considered some of the most reliable channels, despite their small coverage.

Liquor information channels which many consumers use on a regular basis have nevertheless not won their trust. Entertainment venues, eateries, recommendations by experts or KOLs, and advice given by sales personnel were considered the most trustworthy sources of information by less than 5% of respondents, probably because consumers think these salespeople are looking for doing business, so consumers are cautious towards opinions from salespeople.

Among the respondents with different profiles, females tended to rely more on the comments of relatives, friends and other buyers (16% vs males 13%), while respondents in the 26-35 age group tended to rely less on the comments made by relatives, friends and other buyers (9% vs overall average 14%). There was little difference in evaluations of trust between respondents with different wine knowledge, monthly household incomes or cities of residence.

Offline Channels Still Preferred by Consumers

While many consumers use online channels to buy liquor, they continue to visit brick-and-mortar establishments to purchase their favourite imported wine. Outlets used regularly by the respondents to buy imported wine were large comprehensive e-commerce platforms (33%), hypermarkets (25%), branded liquor stores (25%), liquor e-commerce platforms (15%), and duty-free shops (13%). Other channels used included department store counters (10%), medium to high-end boutique supermarkets (9%), and entertainment venues (9%).

The results of the survey reveal certain characteristics of the sales channels for imported wine. Firstly, consumers who buy wine online would mostly choose large comprehensive e-commerce platforms or liquor e-commerce platforms but seldom use other online channels (such as micro businesses⁴ and live-streaming sales etc). Secondly, consumers use multiple offline channels, and different outlets have their supporters. Third, while large comprehensive e-commerce platforms and liquor e-commerce platforms are two of the most important sales channels, there are no signs that they are squeezing out offline channels. On the contrary, consumers still prefer to visit brick-and-mortar outlets to buy imported wine. In fact, such outlets are the main sales channels for imported wine in the mainland.

Different consumers have their preferred channels for buying imported wine, with females opting to buy more from online platforms. More female respondents bought imported wine from large comprehensive e-commerce platforms (37%) and liquor e-commerce platforms (18%) than did their male counterparts at 31% and 14% respectively. Male respondents tended to purchase imported wine from hypermarkets (26% vs females 23%). Older respondents tended to shop more at duty-free shops. 15% of those in the 46-55 age group said that they would usually buy imported wine at duty-free shops, a little more than their counterparts in the 26-35 age group (11%) or those aged 36-45 (13%). Respondents earning a monthly household income of less than RMB20,000 (34%) or in the range RMB20,000-30,000 (33%) mostly bought wine from large comprehensive e-commerce platforms, more so than those with a monthly household income of over RMB30,000 (28%). Such e-commerce platforms offer a considerable variety of wines at a wide range of prices. There was little variation in point of purchase for respondents with different levels of wine knowledge or living in different cities.

Sales Channels for Wine and Spirits are Similar

While the channels used by consumers to buy imported spirits and imported wine do not vary greatly, there are two main differences. Female respondents (27%) tended to buy spirits at liquor brand stores to a greater extent than their male counterparts (20%), while younger respondents bought imported spirits more at hypermarkets. Among the respondents in the 26-35 age group, 32% usually buy imported spirits at hypermarkets, more than those aged 36-45 (29%) or those aged 46-55 (24%). This difference is not seen for imported wine.

Different sales channels each have their own characteristics. One focus group participant said: “Big e-commerce platforms normally launch promotional sales during the 6.18 and 11.11 shopping festivals, and buying wine then is more economical.” Another participant remarked: “At liquor stores I can find products which are rare on the market.” Yet another participant added: “If I want to buy a large quantity of wine, I go to hypermarkets not only because they have sufficient stock, but also because they also offer a wide choice.” In view of this, liquor suppliers should choose the right sales channels according to the positioning and features of their brands in order to reach their target customers.

Online Shopping Offers Extensive Choices and Attractive Prices

Choice and price are the main reasons for consumers to shop online. Among all the respondents, 59% (843 in number) said they had bought liquor online, with 69% of them citing the extensive choice and 55% naming attractive prices as their reason. Many respondents also pointed to the merits of fast and professional delivery (49%) and good price comparison (44%). One focus group participant said: “Online shopping offers excellent services, the goods arrive about two days after placing the order and the bottle is properly packed to protect it from breaking.” There is little variance in the reasons for buying liquor online between respondents of different genders, age groups, household incomes, wine knowledge or cities of residence.

Worries About Product Quality in Online Shopping

Over half of the respondents had purchased liquor online, but many had doubts about online shopping. For example, 41% (597 in total) said they had never bought liquor online. Their concerns were that product quality was not guaranteed (56%), they had no experience buying liquor online (39%), or the product might get damaged in transport (39%). Other reasons cited included long delivery time (36%) and the absence of face-to-face professional consultation (32%). Being accustomed to shopping offline (18%) and higher online product prices (21%) were not major reasons given. The main concern for making purchases online was product quality. Liquor suppliers should provide details on how couriered products are packed and handled, the size of their company and its warehousing facilities in order to reassure customers.

Targeting the Festive Gift Market

In addition to planning their online and offline marketing strategies, liquor suppliers wishing to tap into the mainland should target the festive gift market. A majority of respondents said that they might give imported liquor (including wine and spirits) as a gift on Spring Festival and Lantern Festival (74%), or on Valentine’s Day or Chinese Valentine’s Day (59%). Giving imported liquor as a gift on Valentine’s Day or Chinese Valentine’s Day is popular amongst both young and old. The survey found that 60% of the respondents in the 46-55 age group would consider buying imported liquor as a present on these occasions.

Christmas is not the most important festival at which consumers would buy imported liquor as a gift in the mainland. Only 28% of the respondents said they would consider giving such a gift at Christmas. There was little variation in festival gift-giving between respondents of different gender, household income, knowledge of wine or city of residence. The survey suggests that liquor suppliers should target the festive gift market at Spring and Lantern Festivals and Valentine’s Day to improve sales.

The survey suggests that although mainland consumers are aware of the advantages of buying liquor in Hong Kong, they do not do so when they visit. Industry players should promote Hong Kong’s advantages such as a guarantee of genuine products, professional liquor related services, and fabulous wine and dine events. This will encourage mainland visitors to attend the wide range of interesting liquor related events and buy liquor in Hong Kong.

Many mainland consumers have full confidence in buying liquor in Hong Kong. A respondent from Guangzhou said at the focus group: “I often visited Hong Kong (before Covid-19), and on every return journey I would buy liquor at Hong Kong’s duty free shops. The liquor sold at duty-free shops in Hong Kong is reasonably priced and product quality and authenticity is guaranteed, so I am not worried about buying fake stuff.” When the mainland and Hong Kong resume normal customs crossings, attracting mainland consumers to come to Hong Kong to buy liquor, enjoy catering services and participate in various liquor related events will help reinvigorate the local economy.

Conclusion

The internet has become a leading channel for mainland consumers to obtain information and buy wine and spirits. But because wine has to be transported and stored at specified temperatures and relative humidity, and wine bottles are fragile, many consumers are unsure about buying liquor online. Liquor suppliers selling online to the mainland should devote sufficient resources to ensuring product quality. They should look at opportunities arising from the festive gift market.

Although the number of mainland consumers who have purchased liquor in Hong Kong remains small, their impression of Hong Kong’s liquor sector is positive. This offers opportunities for Hong Kong liquor suppliers. Given the large number of potential customers in the mainland, Hong Kong suppliers should promote themselves there by emphasising the good prices and guaranteed quality of liquor products. This will attract more consumers to buy liquor in Hong Kong on their next visit and encourage them to take part in the many wine and dine events, thereby raising their appreciation of wine and spirits. In so doing, Hong Kong’s position as Asia’s wine hub will be further strengthened.

¹ See Appendix for background information on this consumer survey.

² Survey respondents were asked how much they knew about wine and how they would rate themselves: as a beginner (with limited knowledge of wine, who would take other people’s advice before making purchase decisions), intermediate (with some knowledge of wine and an interest in learning more), or connoisseur (with years of experience and an in-depth knowledge of wine). For details, see China’s Wine and Spirits Market (1): Wine Consumption Trends and Habits.

³ This survey found that respondents who rated themselves as intermediate drank wine more often. 95% had drunk wine once or more each week in the past six months, while only 21% of those rating themselves as beginners had done so. For details, see China’s Wine and Spirits Market (1): Wine Consumption Trends and Habits.

⁴ Micro businesses refer to the way of promoting product sales by using social media (e.g. WeChat) to lure friends to make purchases.

Appendix

Survey Background

Mainland China is one of the world’s fastest-growing markets for wine and spirits. As the Covid-19 pandemic continues, it has also been one of the few regions where economic activity has been able to recover within a short time. The mainland’s retailing and catering sectors have been developing rapidly in recent years, and as they are likely to grow continuously after the pandemic is under control, the chances are that sales of wine and spirits will be sustained in the future.

Since the removal of wine duties in 2008, Hong Kong has become a trading hub for the industry in the Asia-Pacific region. Not only is there a full range of wine-related services available in Hong Kong, but wine traders can also benefit from customs-facilitation measures when importing wine to the mainland through the city. With the mainland wine and spirits market developing apace, more business opportunities are in store for Hong Kong. In view of this, HKTDC Research conducted a consumer survey on the mainland’s wine and spirits market to grasp some knowledge of the mainland middle class’ demand characteristics, spending mentality and purchase preferences for wine and spirits, in order to help Hong Kong companies understand this market and expand their businesses on the mainland with a more targeted approach.

Methodology

The survey carried out in May 2020 polled 1,440 mainland wine and spirits consumers by online questionnaire. Six online consumer focus group discussions had earlier been held in Guangzhou, Shanghai and Xian – two in each city – with the objective of taking an in-depth look at the spending mentality of mainland wine and spirits consumers.