Over the past decade, digital technologies have changed many aspects of the consumer’s daily life. Instead of ordering a taxi over the phone, we can order one in seconds using an app. Instead of splitting a bill or having to get cash, we can pay our friends back with a few clicks of a button. Perhaps most notably, instead of driving to a store, we can now order anything we may need online, and have it delivered right to our doors. One of the most disruptive areas in online retail recently has been the online grocery, or e-grocery, space. Consumers can now shop online from anywhere and have all of their groceries brought directly to them. In North America and Europe, companies like Instacart, Amazon Fresh, Fresh Direct, LeShop.ch and Shipt, have been extremely successful, and the e-grocery market is quickly expanding throughout the rest of the world. In autumn of 2019, Uber acquired an e-grocery startup in order to expand e-grocery service to Canada and Latin America (Hawkins, 2019).
One region that has seen a particularly notable boom in digital technologies is Southeast Asia, a region comprised of Malaysia, Indonesia, Vietnam, Thailand, and Singapore, among others. Over the past five years, the number of venture capital and private equity investments in Southeast Asia based digital technology companies has increased by more than 70%, while the total value of such deals has grown over 430% (PitchBook, 2020).
Some of the major names in the digital technology space in the region include:
Grab, a ridesharing service valued at more than €13 billion
Traveloka, a travel booking and search platform with over 2,700 employees
Tokopedia, a unicorn online marketplace for small businesses and retailers backed by Alibaba, Sequoia, and SoftBank
Gojek a ridesharing service that recently raised over €2.7 billion in Series F funding
The dramatic rise in prevalence of digital technologies and the on-demand economy in the region stems from the young, educated, and tech-savvy demographic that is present in the region. In the five most populous countries in the region, the average age is around 31 years (PWC, 2017), meaning much of the population grew up in the “digital age” and are likely both familiar and competent with technology. A study by Google and Temasek found that Southeast Asians spent, on average, 3.6 hours per day using their mobile phone, almost twice as much as Americans or the British (ASEAN UP, 2019). Approximately 352 million of the 573 million inhabitants of the most six most populous countries in the region are active internet users as of 2018 (ASEAN UP, 2019). Additionally, the middle class is growing rapidly in the region. A study by Bain & Company found that there is about $300 billion in disposable income in Southeast Asia’s middle class, with an additional 50 million people expected to move up to the middle class by 2022 (Hoppe & Baijal, 2019). These three demographic factors result in a rising demand for new digital products, services, and technologies. The demand for such matters is evident in the success of the aforementioned consumer-facing digital platforms, among many other growing digital technology companies in the region.
As a result of the boom in demand for digital services and products in Southeast Asia, paired with the global spread in popularity of e-grocery companies, Southeast Asia is poised for huge growth in the e-grocery space. Several companies have emerged to meet the need. HappyFresh, operating in Malaysia, Indonesia, and the Thailand is the most widespread grocery delivery company in Southeast Asia. Other major players in smaller markets of the region include Meituan, Grofers, and BigBasket. Delivery services from global supermarket brands like Big C, Lottemart, and Carrefour also operate in select countries within the region, and many other large supermarkets partner with delivery platforms. As a result of the excellent conditions and growth potential for e-grocers in Southeast Asia, Neventa Capital participated in HappyFresh’s early-2020 Series C round fundraise alongside Grab, Mirae Asset Management/Naver, and Samena Capital.
Due to the COVID-19 global pandemic, delivery platforms and services have become a crucial part of consumer’s lives. This change has increased demand for grocery delivery drastically. Instacart saw a 218% increase in average daily app downloads during February, while Shipt saw a 124% increase during the same period (Dishman, 2020). Forbes reported that Instacart posted its first ever monthly profit in April 2020 and processed 450% more in order value in April 2020 compared to December of 2019, prior to the global spread of COVID-19 (Holt, 2020). Similarly, in Southeast Asia, HappyFresh announced its first net profit in its Indonesian market for Q1 of 2020 and achieved customer acquisition and retention rates that the company had not expected to reach until at least 2021 (Lim, 2020). Since February 2020, there have been 16 fundraising rounds in e-grocery companies (PitchBook, 2020), reflecting investor belief in e-grocers continuing to grow through and after the COVID-19 pandemic. Consumers, now more than ever, have a need for grocery delivery services, and many consumers who try such services now are likely to adopt the process in the future. Furthermore, the increased retention rates are not just for Millennials and Gen Z, but include all age groups, as the need for grocery delivery services will necessitate the adoption and learning of delivery platforms by consumers in all age groups. The increased demand across all age groups will also likely incentivize and enable major grocery delivery companies to expand into new markets.
The rising adoption of digital services in Southeast Asia, combined with the increasing reliance on grocery delivery platforms and the resulting changes in consumer behavior will drive more consumers in the region towards long-term adoption of such platforms. The changing consumer behavior will likely create a paradigm shift in how consumers of all ages approach and view grocery shopping. Additionally, as competition increases for market share in the e-grocery space, pricing and delivery fees will likely decrease, lowering the barrier of adoption for new users. While how society will operate after the COVID-19 pandemic is unclear, the prospects for grocery delivery companies, particularly those in emerging markets like Southeast Asia, are very promising.
References
“Digital Consumer Engagement in Southeast Asia: Addressing the Associated Challenges.” PWC UK Blogs, PWC, 6 Dec. 2017,
Dishman, Lydia. “Effects of Coronavirus Pandemic on Food Delivery Businesses.” CO, U.S. Chamber of Commerce, 30 Mar. 2020,
Hawkins, Andrew J. “Uber Moves into on-Demand Grocery Delivery with Acquisition of Cornershop.” The Verge, Vox Media, 11 Oct. 2019,
Holt, Kris. “Report: Coronavirus Grocery Delivery Demand Has Made Instacart Profitable For The First Time.” Forbes, Forbes Magazine, 27 Apr. 2020, https://www.forbes.com/sites/krisholt/2020/04/27/coronavirus-grocery-delivery-instacart-profitable/#30d79c8a71e2
Hoppe, Florian, and Aadarsh Baijal. “Understanding Southeast Asia's Emerging Middle Class.” Bain & Company, 18 Mar. 2019,
Lim, Kenneth. “Grocery Startup HappyFresh Hits Profit Milestone as Industry Rides Pandemic's Swell.” DealStreetAsia, Nikkei Group, 11 May 2020,
“Overview of e-Commerce in Southeast Asia [Market Analysis].” ASEAN UP, 5 Nov. 2019,
PitchBook,
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