Southeast Asia has 330 million internet users, and those numbers continue to grow. As internet connectivity improves and expands throughout the region, its population is quickly embracing the convenience afforded by acquiring goods and services online.
Grocery delivery services are jumping in on the region’s billion-dollar bandwagon: MSN reports predictions that Southeast Asia’s grocery market will be worth US $309 billion by 2021, and, according to a report from Food Industry Asia, the online grocery business in Singapore alone is set to triple its growth between 2017 and 2020.
RedMart, HappyFresh, and Honestbee dominated ASEAN’s online grocery e-commerce since its inception and the market continues to invite more players. This year, we can expect to see more from competitors like Dei, Lazada, and GrabFresh as they too move into cornering their share of the online grocery market.
Food delivery is growing faster than ever before in Southeast Asia
HappyFresh’s instacart one-hour grocery delivery
Jakarta-based online grocery platform, HappyFresh launched in 2015. It was the first Instacart-style one-hour grocery delivery service launched in Southeast Asia. First available in Jakarta and Kuala Lumpur, within its first year, HappyFresh raised $12 million in funding to support its expansion efforts across Southeast Asia. The company also raised an undisclosed amount in series B funding by the end of 2016.
However, tough business economies made HappyFresh withdraw its operations in Taiwan and the Philippines in an effort to become financially sustainable and focus on their core markets. As of 2019, the company raised $20 million in series C funding and is now focusing on its operations in its three new markets, Indonesia, Malaysia, and Thailand. Despite traffic congestion issues for which the region is known, HappyFresh keeps its promise to deliver your groceries in the quickest time possible. Users can track the status of their orders, via a timestamp through their mobile application.
GrabFresh: from ride-hailing to grocery delivery
HappyFresh’s success captured the attention of Southeast Asia’s tech giant, Grab, who had, essentially, all the pieces in play to make a grab for its share of the market. From ride-hailing services to online grocery delivery, Grab launched GrabFresh in July 2018 in partnership with HappyFresh. GrabFresh utilises its on-demand concierge services, GrabExpress, to deliver customer’s groceries within an hour of placing the order or at a pre-arranged time. What’s more, quality is guaranteed as customers are allowed to decline the goods at the door if they are not satisfactory. GrabFresh is currently available in Indonesia, Thailand, and Malaysia. Grab plans to expand its online grocery delivery service to other Southeast Asian countries, but the tech giant has not yet announced any specific details.
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Lazada’s expansion to online grocery market
In 2016, Lazada acquired RedMart, Singapore’s leading online grocery delivery service, although the change did not take effect until March of this year when RedMart was integrated into Lazada’s marketplace. The integration expands Lazada’s product range and offerings while extending their online grocery shopping service to their Southeast Asian customer base.
Unlike other online grocery platforms, RedMart operates a warehouse and sources its products directly from manufacturers. This allows them to buy items in bulk and offer their products at a discount, but it also prevents them from expanding as aggressively as their competitors might due to high capital expenditures and operational costs.
The Lazada Group plans to expand and launch the service in “at least one other city” in the region by the second half of 2019. Roger Egan, RedMart’s co-founder and now, Lazada Group Head of Supermarket, will be heading the said expansion.
Dei takes little India to big online marketplace
Dei, or “Daily Everything Indian”, is one of the newest players in the grocery delivery marketplace, having officially launched in April 2019 after its debut “soft launch” in Singapore in 2016. Unlike its competitors, Dei provides other home essentials in addition to groceries from 70 brick-and-mortar stores from Little India.
The company helps local stores in Little India introduce themselves to a wider audience and increase their online revenue. As of now, Dei is in discussion with representatives of Chinatown and Kampong Glam as part of its expansion within Singapore. On a bigger scale, Dei plans to launch a hyperlocal, omnichannel-integrated marketplace across Southeast Asia. The company has recorded a 120% growth, averaging 50 orders a day, and bagged a total revenue of $900,000 in the course of three years.
Honestbee’s so-called “success”
Launched in August 2015, Honestbee took an aggressive approach operating in eight markets across Asia: Hong Kong, Singapore, Taiwan, Thailand, Indonesia, Philippines, and Japan. Utilizing “gig” workers, the company employs freelancers whom they call “bees” to do the shopping and delivery. In some markets, the company has expanded its services to food deliveries, and in Singapore the company has launched the world’s first tech-enabled dining and grocery concept, Habitat by Honestbee.
However, despite looking successful on the surface, the company is reportedly running out of cash. In recent months, Honestbee has laid off employees, paused its operation in the Philippines, closed its R&D centres in India and Vietnam and, according to TechCrunch.com, has missed payroll more than once in the past 12 months. In December 2018, Honestbee lost nearly $6.5 million for the month with $2.5 million in net revenue. Accounting for the loss are the cost of user acquisition, online marketing expenditures with low monthly user retention, and a high burn rate in some of its markets.
On average, Southeast Asians spend 2.5 hours a month online shopping on two of the region’s major eCommerce sites. The Southeast Asian region offers massive e-commerce growth opportunities, making it a very attractive market for global and local companies. However, expanding across Southeast Asia can be challenging especially when factoring in the cultural gap between countries, logistics, and payment issues in a region that still has a high rate of unbanked individuals. But these challenges haven’t stopped investors from capitalising on tech-startups bets. Marbach, a HappyFresh investor, describes the region as a “Disneyland for Entrepreneurs”.
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With the increasing acceptance from young people and Asians towards online grocery shopping, we can expect this market to continue to grow with the right and sustainable business models. The Millennials and Generation Z, in particular, will continue to embrace the innovations of the e-commerce industry. Tech giants, on the other hand, will continue partnering and acquiring these tech startups.