Indonesia e-Grocery Industrial Growth

by | May 5, 2021 | Market Research | 0 comments

Analyze the growth of Indonesia’s E-Grocery industry.

Source: Skinnyms

During the Large-Scale Social Restrictions (PSBB) period in Indonesia, schools, tourist sites, recreational areas, and public parks, among other places, are going to be closed. Besides, major restaurant chains are hard hit by the coronavirus outbreak. More than 70% of medium to large-scale restaurants are located in malls, and office spaces have been decided to close during the outbreak and the restriction. That is why the recognition of online shopping is increasing and becoming a trend.

There is a rise in the popularity of online shopping right now, particularly in the online grocery shopping sector, driven by the COVID-19 pandemic. The users of the e-grocery increased about 30% in 2020, and many platforms of e-grocery have been showing up recently. Therefore, the enforcement of PSBB has a big impact on driving growth within the e-commerce sector in Indonesia and Southeast Asia. However, to try and do business in Indonesia is vital to understand the trend. Keep reading to learn more about what is going on during this industry.

E-Grocery: A Brand New Trend

GlobalWebIndex has reported that Indonesia has the highest e-commerce use rate of any country within the world, with an impressive result, 90% of the country’s internet users between the ages of 16 to 64 have also reported that they already change and are adapting to buy products and services online. In Statista reports, it mentioned that quite 100 million Indonesians purchased consumer goods online in 2018, and therefore the amount that they spent on grocery products surged by an impressive 30% year-on-year, putting the country firmly within the five fastest-growing online grocery markets within the world (Data Reportal, 2019).

The impressive surge product is affected by COVID-19 too. However, this increase and the decrease will be based on the new normal and new habit that consumers will have. E-groceries platform HappyFresh Marketing Vice President David Liem has also mentioned that the reinforcement of PSBB measures would cause a surge within the demand on the platform. “Every time the government announces a new regulation on PSBB measures, we see an uptick in demand, but then it goes down. This is because people are adapting to the new normal and they are not as panicked as before,” he said (Jakarta Post, 2020). 

Overall, with the new habit, Indonesian will not leave e-grocery that easy. The argument is additionally strengthened by a survey by management consulting company,  Redseer, in August found that quite half of the Indonesian respondents said their spending on e-grocery platforms had increased during the pandemic, while up to 60% said they might still buy groceries online within the future. “Online grocery platforms will continue to see good growth, even as other categories such as fashion and electronics start to bounce back in the second half of the year,” said the firm’s Southeast Asia partner Roshan Raj Behera (Jakarta Post, 2020).

Indonesia Online Grocery Shopping Platform

In 2019, only 20% of respondents in Indonesia said they bought groceries online, but now that number is rising and has increased to 31% (Jakarta Post, 2020). With the trend of e-groceries in Indonesia, many platforms have shown up and also showed the increasing of their demand with the pandemic, but with the new normal and also the new adaptation of people to shopping and do groceries, this platform tend to experience an increasing more demand too within the future, they have to think the unique way to keep the competitive market and also their customer interest.

Sayurbox

Source: Sayurbox

Sayurbox is a tech supported fresh produce distribution platform based in Indonesia. Sayurbox is an e-commerce based farm-to-table grocery platform and distributor of fresh goods in Indonesia. Within the midst of the COVID-19 pandemic, various startups have recorded a surge in demand for their services. Well, SayurBox is one among them. The startup, which is based on farmers’ crops online, claims the increasing demand for agricultural products on its platform has jumped five times than before the pandemic. Sayurbox is one of the platforms that have the purpose of helping the farmer in Indonesia to keep survive.

“With the increasing demand, we must work harder to reach more local farmers who are spread across Indonesia; so that we can help distribute it to the community,” said the Head of Communication SayurBox, Oshin Hern (Warta Ekonomi, 2020).

In 2020, PT Astra International Tbk invested in two technology startups earlier this year. Both are Sayurbox and Halodoc, with an investment of USD 5 million and USD 35 million, respectively (Merdeka.com, 2021). This investment is not just for modernization but also because they would like to be more aggressive in finding inorganic growth opportunities, especially for technology startups. Astra thinks Sayurbox features a definite and clear business case. Also, with this investment, Sayurbox will meet another increase and be more potent with the corporate concept to support Indonesian farmers.

HappyFresh

Source: Dribble

HappyFresh is an online grocery platform in South-East Asia with headquarters in Jakarta, Indonesia. The marketplace for online grocery shopping in Indonesia and other Asian countries have seen double-digit growth in market turnover to be worth USD 19 billion ( USD13 billion) by 2020, driven by the increase of the young, social class population in urban areas across the region, consistent with Jakarta-based grocery shopping smartphone app HappyFresh.

The startup just got a USD 12 million funding led by Singapore’s Vertex Venture and Sinar Mas Digital Venture last year, allowing users in Malaysia, Indonesia, and Thailand to buy groceries through a smartphone app. In Indonesia, HappyFresh also already partners with Ranch Market and Lotte Mart as one of the innovations that HappyFresh does as a differentiator.

“As a differentiator, HappyFresh will partner with supermarket retailers, particularly with some small and medium-sized enterprises (SMEs) who do not have the capacity or ability to invest in technology, to go digital and reach out to new sets of customers,” Bihler said (Jakarta Globe, 2016).

Amazon Fresh

Source: CNET

Amazon Fresh is an America e-commerce subsidiary company Amazon.com that is located in Seattle, Washington. Amazon is the biggest retail success story within the past 20 years, and its ambition remains to let customers buy anything they need online. But it is not yet a significant player in food, the most crucial retail segment of all. Through a series of Amazon.com innovations, tie-ups, and acquisitions – including the recent purchase of Whole Foods – Amazon is serious about planning and keeps innovating in focusing force in food retail through AmazonFresh. However, that does not mean it will simply take market share within the current marketplace for groceries. 

Amazon Fresh is pretty popular in Singapore among other Southeast Asia countries. With Amazon.sg, as the owner of Amazon fresh, has successfully leapfrogged to become the fourth most visited e-commerce website within three months after going online (KrAsia, 2020). The improved version of Amazon Prime, Amazon Fresh is free with Prime membership, which offers the most straightforward shopping and entertainment from Amazon. Amazon Fresh has tried to simplify the shopping experience for many people and especially Prime members. With Amazon Shopping apps as one of the ways to fulfill the goal to simplify the shopping experience, surprisingly, the strategy gets many good reactions from Singaporeans.

“Customers have told us that they love the ultrafast, free delivery of Prime Now and we’re excited to be able to introduce a new and improved shopping experience for Prime members with the launch of Amazon Fresh in Singapore,” said Henry Low, Amazon Singapore Country Manager (Riau Green, 2020).

Challenges in the E-Grocery Sector

As a very new breakthrough for Indonesian people who are still very attached to several traditional habits such as shopping for daily necessities at traditional markets and nearby supermarkets, shopping for daily necessities is a challenge in itself where there must be a new habit. These following examples are some of the challenges typically faced by companies starting an online grocery business in developing countries like Indonesia.

Customer Barriers to Online Grocery Shopping

Many customers want to physically view a selection of different brands or types of the same product before they make up their mind about which option to go for, so there is a problem when customers want to hand-pick their own groceries. This fact is based on the theory that consumers  behave  rationally, which means that they aim to maximize their satisfaction or their utility function. Also, many people tend to buy the same things every week, but there is always some level of variation. Websites or any online grocery platforms that simply show shoppers a list of what they have bought in the past is not convenient enough for most customers (Bloomreach, 2020).

Non-tech Savvy Customers

With a total population of  272 million people, Indonesia has a young and tech savvy population in which 2 of 3 people are of working age and the average age is 28 (Calchamber, 2020). However, digitization in this sector is not fully understood by many housewives who usually buy household necessities. Also, most customers belonging to this older age group do not want to learn technical aspects and hassles which come with it. This lack of understanding of existing technology becomes an obstacle and will eventually return to existing traditional options such as shopping at traditional markets.

Boosting Storage and Delivery Cost

Storage cost might fluctuate rapidly. Many elements are affecting the same like taxes, rent of the storage space, maintenance issues, electricity, and many more. Besides that, the delivery cost can vary as well according to the expansion of the target market, transportation maintenance costs, fuel costs, and other related costs. Having a warehouse in several locations is one way that can be done to overcome this challenge (Mobile App Daily, 2021). 

Fresh-produced Products Problems

Some food ingredients must be processed or eaten immediately. As an online service provider, companies have restrictions in offering their selling items which must run out immediately. In addition, customers cannot directly see the quality of the fresh-produced products they are going to buy, so they are reluctant to buy and have an impact on stock in storage. By having several storage locations, the quality of products, especially fresh-produced products, will be maintained, and also the cost of shipping to customers will be more affordable.

Indonesia’s E-Grocery Future Prospect 

Apart from several challenges that have emerged in the development of online grocery shopping, this sector also has very broad and promising prospects for companies in it. This shift in consumer habits is driving platform adoption and benefits grocery retailers in 2020 and will continue into the following years. According to Forbes (2021), some prospects could be the key to success in this sector throughout the following year.

Emphasis On Success Rather Than Just “Good Enough”

The Institute of Grocery Distribution (IGD) Asia stated that the online grocery market value will grow 198% from USD 99 billion in 2019 to USD 295 billion in 2023. In 2021, there will be a push to increase e-commerce fulfillment capacity to maximize revenue and fulfill customer demand, in addition to driving toward profitability. There will be a focus on increasing basket size, which is an area many retailers fail to realize the potential. There will also be an increased measurement of customer satisfaction, as retailers look for ways to improve the customer experience. Southeast Asia is projected to have the fastest growth (Daily Social, 2020).  

Increased Customer Experience Expectations

With shoppers becoming more comfortable with online ordering, expect consumers’ expectations to keep on rising as e-commerce, especially e-grocery, becomes the norm. Grocery retailers will no longer get credit for simply having an e-commerce option, instead they will need to offer a user experience that truly makes consumers’ lives more convenient. According to the CEO of HappyFresh, Guillem Segarra, there is a shift in consumer behavior in this pandemic situation where buying groceries online has become the first choice in buying daily necessities which almost happened in all countries (Daily Social, 2020).

The Evolution of Payment Options

In this economic recovery situation, unemployment and underemployment issues will continue to face many people around the world, especially developing countries. Electronic Based Transaction will continue to become a payment option on a majority of retailers’ e-commerce platforms, making online shopping accessible to a rapidly growing portion of the market in Indonesia. 

Also, do not be surprised to see alternative payment options such as cryptocurrency introduced by progressive retailers seeking to build loyalty among younger consumers which has been happening since early 2021.

Make a perfect path with BRIGHT Indonesia

As a country with the largest e-commerce development in the world, Indonesia has enormous prospects in the development of online grocery shopping or e-grocery. Supported by the condition of the COVID-19 pandemic which limits daily activities, e-grocery is the most appropriate answer to stay home and can still buy their daily needs. Each country has its own unique market, followed by different consumer behavior. Thus, having a local partner is the right way to find out your business goals.

BRIGHT Indonesia provides several services such as Market Insight Research, Business Partnership Engagement, Business Registration and Establishment, Business Incubation and Accelerator, and Foreign Direct Investment services that can help you in expanding and developing your business, register and establish your products and company, as well as obtain the work and stay permit in Indonesia ((expatriates utilization plan (RPTKA), expatriates utilization permit (IMTA), and limited stay permit (KITAS)) easier. Also,  link your company both from the private and public sectors in global foreign direct investment.

BRIGHT Indonesia always strives to give excellent services designed only to fulfill your company’s needs with experiences in assisting multiple global clients in entering Indonesia and Southeast Asia Market. These collaborations are proof of our unrivaled service. 
For more information, email info@brightindonesia.net.

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