Groceries Online Rely More on Supply than Smartphone Penetration to Grow

Written by Rara Kinasih on November 30, 2017

Mobile penetration is often lauded as the driving factor for the growth of retail online, especially in China and Southeast Asia.

But according to Nielsen: What’s Next in Ecommerce 2017, more mobile phones doesn’t exactly mean more online demand for FMCG or groceries online.

The relationship between purchasing groceries online and smartphone penetration proves to be unpredictable and the reasons behind it are unique to each market.

grocery ecommerce growth
Grocery ecommerce penetration in Singapore is lower than France despite the higher smartphone penetration. Source: Nielsen

Take a look at the UK, the early entry of retailers like Tesco online in 1996 helped shape the country’s mass shopping behavior so now more than 20 years later, consumers are accustomed to buying groceries online.

Meanwhile in Singapore, going to the mall to shop for daily goods has become part of everyday life as malls are often situated near convenient and high-foot-traffic locations such as metro stations.

Shopping in a mall has also become a leisure activity and therefore still ‘a thing’ despite the online uproar and country’s high smartphone penetration. The same behavior can also be witnessed across Southeast Asia, which is why,

Retail space in the region keeps growing simultaneously with the growth of ecommerce, unlike in the West

grocery ecommerce growth
For grocery commerce, mobile & connectivity only accounts for 40% of its growth contribution.

What does it mean for FMCG companies?

Ecommerce may only contribute to roughly 10% of total retail sales worldwide but with the industry predicted to have 20% combined annual growth rate (CAGR) by 2020 to become a $4 trillion market, it is still higher than the expected CAGR of 4% for the FMCG category.

In four years, retail ecommerce size will rival the global FMCG market – Nielsen

Although compared to the fashion or electronics categories, the contribution of online to FMCG is still low, there is an undeniable shift in consumer habits that would be unwise for FMCG companies to ignore.

News of Danone’s partnership with Lazada only highlights the increasing number of FMCG companies, take Nestle and Unilever for example, realizing the importance of online channels as part of their growth strategy, especially in Southeast Asia.

  • Sebastian Wijaya

    So what are you trying to say with this article? I can’t seem to understand the objective of the article and the data presented is rather vague. Maybe you should have collaborated with an actual grocery ecommerce for better data before this article is presented 🙂

    • Rara Kinasih

      Hi Sebastian, thank you for your feedback. The key takeaway of the article is the different challenges grocery ecommerce faces as its growing path will not necessarily following those of the retail ecommerce and how unique those challenges would be to each market. I agree – collaborating with the actual grocery ecommerce player would give us a deeper insight as to the working of the industry than market research report will ever give. Would you be willing to share your learnings and experience running Seroyamart in Indonesia with ecommerceIQ for our Insider series?