Double-Digit Growth Ahead for Asian Online Grocery Business

Increased mobile accessibility and broadband penetration are disrupting the traditional grocery-buying business model, enabling consumers to purchase groceries anywhere, at any time. According to the Ericsson Mobility Report: On the Pulse of the Networked Society, mobile penetration in the Asia-Pacific region (excluding China and India) reached 110 percent in the first quarter of 2015, surpassing the global average of 99 percent.

“We are seeing an ‘uberization’ of the retail industry in Asia. The outlook has never been more promising. Opportunities abound in this region with its sophisticated food-loving consumers, growing wealth and rapid urbanisation. The continued increase in mobile adoption and broadband penetration has helped boost our online grocery sales,” the CEO of HappyFresh, Markus Bihler, said.

HappyFresh is Southeast Asia’s leading online grocery company. In 2015 the company completed a $12 million Series A funding led by Vertex Venture (Vertex), the venture arm of Temasek Holdings, and Sinar Mas Digital Ventures (SMDV), the venture arm of Sinar Mas Group of Indonesia.

“Ordering online for home delivery is gaining in popularity in the region. Currently, two out of five online shoppers want to receive real-time offers via their smartphones while they shop. We foresee a double-digit growth ahead for the online grocery business,” Mr. Bihler said.

The driving forces of change

More consumers are purchasing groceries via digital platforms such as mobile apps. Since its inception, HappyFresh has seen a ten-fold increase in the downloading of its mobile app in the region.

The increased popularity of online grocery shopping in Asia has been fueled by two social developments; traffic congestion and long working hours. Traffic congestion is a characteristic in most Asian cities, making travelling very stressful. Three Southeast Asian cities (Jakarta, Bangkok and Surabaya) are in the Top 10 cities with the worst traffic congestion globally, according to a traffic congestion survey conducted by Castrol and TomTom. For this reason, few people want to push their way through a crowded supermarket after a long day at work.

Secondly, Asian countries also tend to have the longest working hours; they have the highest proportion of people who spend more than 48 hours a week at work. This number is expected to rise as Asia becomes even more affluent.

“Customers are also becoming very selective when it comes to quality foods. A Nielsen study shows that today’s shoppers are seeking fresh, natural and minimally processed foods with ingredients that help fight disease and promote good health,” Mr Bihler said.

“This presents a tremendous opportunity among niche consumer segments, especially in the healthy eating space, and other categories that may be more difficult to find on in-store shelves. As a result, a number of specialty retailers have emerged in the health and wellness space, from national online grocery delivery services with extensive fresh sections to local produce delivery services.”

The future of online grocery business

The online grocery markets in Asia are set for double-digit growth, reaching SG$19 billion by 2020, according to the latest forecast by HappyFresh.

In Indonesia, middle and upper income consumers will continue to drive the growth of modern, online retailers. Meanwhile, spending power and credit card penetration are higher in Kuala Lumpur than in Jakarta, and in general people are more used to buying things online in Kuala Lumpur.

Large supermarkets and hypermarkets are important players in the grocery retail landscape and they will continue to do well and dominate in this region. Many are integrating online delivery service into their business model to make it even easier for tech-savvy, time-crunched consumers

“As a differentiator, HappyFresh partners with supermarket retailers - particularly the SMEs who do not have the capacity or ability to invest in technology - to go digital and reach out to new set of customers. In other words, HappyFresh compresses a 2,000 square metre store floor in as little as a 4-inch smartphone screen. Currently, we have the largest network of retailers, with partners such as Ranch Market (Indonesia), LOTTE Mart (Indonesia) and Village Grocer, Sam’s Groceria and de Market (Malaysia), Big C, Gourmet Market and Tang Hua Seng (Thailand), Lafé Market and Simple Mart (Taiwan),” Mr Bihler said.