Online grocery sales in Asia to rocket; market share in SEA remains small

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Competition in the online grocery space in Singapore is fierce, with retailers building scale by attracting more customers while also investing in technology for long-term growth. RedMart for instance has migrated onto the Lazada platform, as a move towards expanding online grocery to other countries in Southeast Asia.
JULY 05, 2019 - 2:02 PM

The market share of online grocery sales in Southeast Asia is expected to remain small despite these markets seeing some of the fastest growth according to international researcher IGD Asia. Its latest forecasts puts online sales generated by Asia by 2023 at  US$2,264 billion, which is almost the same as Europe and North America combined. 

The top five markets - China, India, Japan, Indonesia and South Korea - will account for 82.5 per cent of the region's grocery sales in 2023, and 78.8 per cent of total growth over the next five years. 

China will extend its position as the leading grocery market, despite growth slowing, it is expected to maintain a compound annual growth rate (CAGR) of 5.5 per cent until 2023. India and Indonesia on the other hand will see the fastest growth, with CAGRs of 11.2 per cent and 7.5 per cent respectively. 

The more mature markets of Japan and South Korea will see slower CAGRs of 0.9 per cent and 4.6 per cent respectively. 

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Retailers in Japan are seeking better ways to integrate their physical store networks with online operations, noted Shirley Zhu, programme director at IGD Asia. For example, 7-Eleven has made its smartphone order and delivery service, Net Convenience Store, available at more than 1,000 stores, and retailers are collaborating to strengthen their online proposition e.g. Seiyu (Walmart) and Rakuten, and Amazon and Life supermarket.

Despite market share of online grocery remaining less than 3 per cent in all Southeast Asian markets (excluding Singapore), Indonesia and Thailand will see some of Asia’s most rapid growth over the next five years, albeit from a low base.

"E-commerce is forecast to grow significantly in Indonesia as companies such as Alibaba and JD.com invest further. Thailand is also forecast to see a rapid growth in online grocery sales as key players such as Central Group, JD.com, Tesco Lotus and Villa Market build better infrastructure and more seamless apps for shoppers," said Ms Zhu. 

Singapore, meanwhile, is expected to "firmly establish" itself as the most advanced online grocery market in Southeast Asia. Ms Zhu noted that competition in Singapore is fierce, with retailers building scale by attracting more customers, while also investing in technology for long-term growth. She cited two examples, of RedMart migrating onto the Lazada platform, as a move towards expanding online grocery to other countries in Southeast Asia; and of FairPrice On is making use of robots and data analytics to improve its service.

“Asia’s online grocery channel clearly provides huge opportunities for suppliers over the next few years, but there are a number of things they need to consider. The first is prioritising where to invest – the size and growth of each market varies significantly, so suppliers should be prepared to make choices and have a dedicated strategy for each country," she said.

“Suppliers should also evaluate their products, packaging and supply chains in each market to make sure they are ready for the opportunity. As online retailers expand across the region and form more partnerships with bricks and mortar retailers, getting to know these companies will become the key to winning online. New innovations around mobile, delivery and payment are also emerging all the time, so suppliers should keep a very close eye on these rapid developments.”