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.

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