Why Hong Kong's wine e-commerce could be turning a tad sour

In a recent debate over where the future of wine in China lies, the message was very clear – the one who can reach the masses (and in China there are masses of them) will be the one who wins the market. The question of how to do that is essentially a forked road: it is either through the supermarkets, or other mass retail like the convenience stores, or it is through the internet.

Ian Ford of Summergate is a big believer in the internet path; in his estimation, the supermarkets are done for (before they’ve even begun, as far as we can tell) only representing 5% of the imported wine market in mainland China, and unlikely to grow anytime soon. Unlike the UK and the US, where the multiples rule the roost and truly have the power to move markets, in China they are mere bit players.

Meanwhile, online wine giants like yesmywine, wangjiu and general E-retailer yihaodian claim volumes on a scale of 10,000 bottles a day, and have winemakers worldwide salivating.

Hong Kong is a different story again, with approximately 30% of our wine sales volume passing through the supermarkets. This is mainly through two dominant players: the camp of Dairy Farm and the camp of A.S. Watson Group.

This roster of two has more or less kept the market from being nearly as price competitive as in the UK, US and Australia, where supermarkets are seen as an excellent source of value for money wine. However, the news that Mr. Li’s grand plans to sell off ParknShop, announced earlier this year, have subsequently been shelved, indicates that potential buyers are aware that without the Hutchison connection the supermarket scene might become much more competitive, and consequently wine prices might have to soften.

However, E-commerce in Hong Kong isn’t nearly such a big hit as you’d expect based on the mainland market either. In an arena where perceived authenticity is key to closing a sale (wine retailers we surveyed named “provenance” as one of the most valued aspects of their business, behind only price and staff relationships), the need to physically touch the product and see it with our own eyes is easy to understand.

In the absence of this capability, we are not willing to trust somebody else to do the job. This is perhaps unsurprising, as compared with Japan – identified by “Trust” author Francis Fukuyama as a high-trust society – where e-commerce use (70%) is high, in Chinese societies trust has traditionally been concentrated within the family unit, with less trust extended to those outside the family.

But why is Hong Kong less wine e-commerce-friendly than our neighbor to the north, who presumably have even fewer historical reasons for believing in the kindness of strangers? Anybody with a basic grasp of mathematics and an inkling of Hong Kong real estate prices could tell you there’s no way a brick and mortar retailer can beat an online player on price, even if they too have a finger in the online pie.

The only answer we can come up with is the distinctively Hong Kong obsession with convenience and our brilliant transport network (courtesy of the MTR corporation). Who has the time to wait for a delivery van when there’s a Watson’s around the corner?