Unilever PCL, the maker of Dove soap, Comfort fabric conditioner and Lux shampoo, had its sales fall off a cliff in 2014 as Chinese consumers turn to online stores.
In its third-quarter report last year, the company was warned of a 20-percent drop in China sales. About a third of China's population, or 461 million consumers, are now shopping online. A Nielsen survey of 30,000 consumers confirmed that nearly half of Chinese consumers are already buying online.
Jean-Marc Huet, Unilever's chief financial officer, said that consumer-goods companies in China were too slow to react to the changes in the marketplace.
Nestle was also caught off guard, confirming the incineration of unsold instant coffee and burning millions of yuan since the beginning of the year. This was Nestle China's move to trim its mounting inventory and stem losses.
Beiersdorf AG and Colgate-Palmolive Co. are also citing issues with overstocking.
While giant companies are hurt by the Chinese consumers' migration to online shopping, a new study may add insult to the injury but could help consumer-goods companies in intensifying marketing campaign.
The OC&C Strategy Consultants--together with Google Inc., eBay Inc. and PayPal--found that U.K., U.S., Chinese, and German online retail markets will double in size by 2018 to $984 billion. Chinese shoppers spend more when online-shopping for British goods than domestic ones.
"If we like it or not, e-commerce will change our business," said Reinhold Jakobi, Nestle China's food and beverage managing director. He added that if the companies go online, everyone gets the same screen space.
Recently, Nestle invested more into online sales and intensified its campaigns. The company is inviting Internet star Angelababy to endorse the brand.
Another company, Walmart Stores Inc., is also working on its online strategy rather than aiming to be China's largest retailer.