The grocery market in China is the most intriguing in the world: it is huge (second only to the United States), it leads the pack in online commerce, and it’s growing rapidly. It is also a source of inspiration and awe when it comes to digital and online-to-offline (commerce).

For the past two decades, the center of gravity for retail innovation has been shifting East, with China leading the pack. Its grocery market has been disrupted at a speed and frequency that have left traditional players struggling to keep up. After digital giants led the way in retail innovation, with mixed success to date, community group buying emerged last year to disrupt the fresh value chain (although the model has yet to prove its scalability and sustainability).

China is not only an incredibly competitive market but also unique in its consumer demographics (middle and upper-middle class) and geographies (city tiers and clusters), the segments in which tech-based entrants will do battle with traditional retail. It is also highly unproductive (lowest sales per square meter in the world), severely fragmented, and primarily regional. These factors have created huge challenges for Chinese grocery retailers in delivering economic profit and higher margins.