Online Grocery Shopping In Asia

Leah Kinthaert 2014

Between now and 2015, there will be 500 million new internet users from emerging markets

These new users will interact with the Internet for the first time in a markedly different manner: through mobile devices instead of traditional desktop PCs. More new users are coming online from Asia than anywhere else.

Most new internet users coming from Asia

Google estimates that between now and 2015, there will be 500 million new Internet users from emerging markets, compared to only 15 million new users from the US. 15 million new ones from the US.

500 Million New Users

2014 Leah Kinthaert

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Google Map of Internet Users in 2000

Figure one: Internet Users in 2000.

An overwhelming majority of internet users came from the US in 2000.

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Google Map of Internet Users in 2010

Figure two: Internet Users in 2010.

Asia, South America and Africa show enormous growth in internet use.

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Shopping Patterns in Asia Shifting to Online

2014 Mastercard Survey

And almost 60% of those in China use their smartphones.

said that 2/3 of consumers in Asia-Pacific shop online.

Grocery Retail is Growing in Asia

2014 Leah Kinthaert

As urbanization is accompanied by a rapid modernization of the retail landscape, the number of modern grocery outlets in Asia-Pacific is predicted to rise by 127,000, with most of the growth coming from China.

Urbanization increases retailPopulation to reach over 1.7 billion

Chinese and Korean retailers recorded strong benefitting from robust economic growth and the move towards a concentration of the retail environment in their domestic markets.

Chinese and Korean retailers grow

In the 10 countries with the largest urban populations in Asia-Pacific, the urban population is forecast to grow by over 190 million inhabitants between 2012 and 2017, to reach over 1.7 billion.

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Grocery retail landscape: By Country

• China

The enormous grocery retail market in China is estimated at U.S. $285 billion and is growing at a rate of 7% annually due to steadily rising disposable incomes and increasing urbanization. Traditional-style markets account for 68% of the market. Local customization and price sensitivity is key.

• Hong Kong SAR

The grocery market in Hong Kong is mature with two main local players. Land is too scarce for hypermarkets and car ownership is low. Traditional style markets are declining. Current trends are towards longer opening hours and the sale of convenience foods which cater to the longer hours people are working.

• India

Despite a large population, increasing wealth and economic growth, the Indian retail market is underdeveloped. Traditional grocery markets account for 98% of grocery retail, although this is changing. The Indian middle class is growing. Problems within the sector include its slim profit margins and highly competitive nature. It is fragmented and there is little brand awareness. Foreign players are few due to tax implications but the government is beginning to address this issue.

2014 Leah Kinthaert

Grocery retail landscape: By Country

• Indonesia

Consumer confidence in Indonesia has been dented by such issues as the Bali bombings, the Asian tsunami, bird flu and fuel prices. The grocery market 99% traditional. Modern retailers are concentrated on Java and are characterized by hyper, super and mini markets all competing on price. Average prices have reduced as a result. There are few foreign players due to onerous regulations.

• Japan

This is a mature grocery retail market second only in size to the U.S. It is not growing. Japan has not fully recovered from economic downturn and there have recently been some food safety scares. Foreign players have not adapted well to the Japanese market. Hypermarkets tend not to be successful as the Japanese prefer fresh food and shop frequently rather than in bulk. There has been some growth in the convenience store sector.

• Malaysia

Increasing urbanization and Westernization have led to growth in the grocery retail market at the expense of the older traditional, independent retailers. Both local and multinational players have been successful in Malaysia. Because consumer tastes are dictated along ethnic lines the market is fragmented. Hypermarkets and convenience stores are popular.

2014 Leah Kinthaert

Grocery retail landscape: By Country

• Singapore

Grocery retailing in Singapore is like that of Western countries. Modern retailers dominate (70%) and there is little growth opportunity due to low population growth. With rising affluence, however, Singaporeans are demanding more convenience and higher quality goods. Supermarkets predominate but there has been a rise in convenience stores due to busy lifestyles. Online grocery shopping is beginning to make inroads, most notably with the online store redmart.com.

• South Korea

With a stable population, growth in the grocery retail sector in South Korea is expected to be only about 2%. Areas where there is expansion include health, well-being and organic product lines. Western-style products are beginning to become more popular. Hypermarkets are taking a bigger share as car ownership increases and people buy less frequently and in bulk. Traditional grocery markets still dominate at 61% of the total.

• Thailand

There is significant growth in the retail market in Thailand at around 10% annually. Demand is increasing for packaged and processed food. Hypermarkets and supermarkets are mostly clustered around Bangkok. Supermarkets are beginning to be squeezed out by the hypermarkets and convenience stores. Traditional grocery markets still dominate at 66% of the total and these retailers have gained government protection.

Online Grocery in Asia

2014 Leah Kinthaert

Online grocery retailing is still in a nascent phase across most of the Asia Pacific region, as less than one-in-10 shoppers regularly access grocery retail websites

Still in Nascent Phase

South Korea is a notable exception, however, as close to 80% of grocery shoppers there regularly purchased grocery products online in 2012, and the frequency of purchasing increased to nine times a month from seven times a month in 2011.

The exception: 80% of South Koreans purchase groceries online

Most of the retailers across the region see opportunity in online retailing and are investing in online strategies. Consequently, grocery retailers’ digital footprint will expand in the year ahead as they identify new ways to engage and sell profitably through online channels.

Digital Footprint to Expand in 2014

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Overall Online Grocery Market by Category

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“Brands absolutely need an online retail presence” John Fang, China Market Research Group

Worries about pollution may be making consumers shift to online shopping even faster,” Fang says.  “So brands absolutely need an online retail presence to reach their customers where they are looking to buy.  And increasingly, retailers need to be accessible on mobile devices, as purchases are starting to shift from home computers to phones and tablets.”

While pointing out that China’s broadband penetration is only 30%, McKinsey predicts the country’s online sales could reach $650 billion by 2020.

618 million internet users

Online spending growing at 40-50% per year compared to just 12-14% per year for overall retail according to John Fang of China Market Research Group

301.9 shop online (half), although some estimates now say 2/3

Alibaba 76% of mcommerce sales

500 million are mobile users (80%)

Mobile Growing 141% YOY

Alibaba 50% of ecommerce sales

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Overview of eCommerce in Asia

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How is eCommerce in China Different from Western Countries?

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Only a small portion of Chinese e-tailing takes place directly between consumers and retailers.

This provides the impression of a high-energy shopping atmosphere

e-tailing stimulates consumption that would not otherwise take place.

Chinese online shoppers prefer that each click on a site opens a new window

Most eCommerce occurs on digital marketplaces

Chinese shoppers' behavior is quite different from western countries

Chinese shoppers favor crowded websites with information and links all packed into one page

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In general, Chinese consumers are very price sensitive and right now, Chinese e-commerce is primarily a promotion driven business. Shoppers do not yet value the concept of "time is money." Whereas, in the western countries, shoppers are willing to pay considerable fees for expedited delivery, this behavior in China is rare.

China's e-commerce industry is experiencing a transition from online shopping as more of a niche market towards online shopping becoming a lifestyle. It is evolving from tasting new, special, and hard-to-find products to buying daily consumption needs such as food, drinks, toothpastes and shampoos.

2014 Leah Kinthaert

The Evolution of Online Grocery in China

Price

ProductsPromotion

Tmall.com - Alibaba-owned Tmall is the market leader. It sells pretty much anything.

Suning.com – Sells appliances.

Dangdang.com - Its main focus is still on gadgets and books leaving it vulnerable to the growth of Suning and its rival Jingdong

Jingdong (formerly 360Buy.com) - has expanded aggressively to outpace its main rival Dangdang. The two merchandising mortal enemies cover much of the same area: Mainly electronics and home appliances, but also books and clothing.

Amazon.cn - Close behind is the US company whose Amazon China site, which has the very short URL Z.cn, focuses on its core products more in the manner of a western company.

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China’s Top 10 eCommerce Sites

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Vancl.com - This is China's biggest clothing e-tailer, selling only its own-brand clothing in the manner of, say, GAP, or Uniqlo.

Coo8.com - They sell electrical appliances

YiHaoDian.com - Walmart-backed YiHaoDian is the country's largest food and consumables online retailer.

51Buy.com - Sells mostly gadgets and home appliances.

NewEgg.com.cn - Sells electronics.

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China’s Top 10 eCommerce Sites

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3 Major Online Grocery Players

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Majority owned by Walmart since 2012. Came online in 2008. Yihaodian saw close to $1.9 billion in sales last year, which marks a new high. That also brought it into an exclusive club of only five sites in China to have rung up over RMB 10 million ($1.64 billion) in transactions in a single year.

Yihaodian

(main rival to Jingdong, owned by Alibaba) collective $159 billion in sales revenue in 2012. Tbao is an ebay/Amazon of sorts where third parties sell food. Complaints about spoiled or mislabeled food purchased from this site may lead to more regulation in the future.

Tmall and Tabao

(formerly 360 buy) Relatively new in the food market and challenging the dominance of Walmart-majority-owned Yihaodian. Jingdong stocks some interesting imported items that most regular brick-and-mortar stores wouldn’t have. Saw $9.85 billion in sales in 2012.

Jingdong

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