honestbee Thailand officially introduced its on-demand groceries services to the public on March 16th earlier this year in Bangkok with a buzzy press conference.

This isn’t the company’s first step into Southeast Asia, the Singaporean based company is already present in eight markets since its initial launch in 2015.

eIQ sat down with Joel Sng, CEO and co-founder of honestbee, to talk about the company’s on-demand model, product market fit and scalability in a developing market.  

Groceries online in Southeast Asia

Delivering apples and milk to a customer’s front door isn’t a new concept. Instacart, US born groceries service, took off in 2012, serves 25 markets in the US, and raised $400 million in March. The company’s valuation was $2 billion in 2015.

Jakarta based on-demand service HappyFresh that raised a $12 million Series A and an undisclosed Series B launched in both Indonesia and Thailand two years before honestbee entered the same markets.

Why has there been so much money swirling around groceries?

According to Nielsen, 30% of Millennials (ages 21-34) and 28% of Generation Z (ages 15-20) respondents say they’re ordering groceries online for home delivery, compared with 22% of Generation X (ages 35-49), 17% of Baby Boomers (ages 50-64) and 9% of Silent Generation (ages 65+) respondents.

And groceries are only the beginning. honestbee doesn’t only offer apples and oranges, they want to be the ‘everything, everyday’ app.

Much like the mentioned businesses, honestbee shares similar value propositions:

  • Exclusive partnerships with supermarkets and other retailer partners
  • A single check-out purchase through a mobile app
  • An operations network composed of part-time workers and motorbikes taxis
  • A vast inventory of groceries and fresh produce
  • Scheduled “slotted” deliveries
  • Asset light business: no warehouses, only hubs (grocery stores) and no delivery trucks

There are a few differences that make honestbee stand out: the company makes money from delivery fees and revenue share and can actually save up to 30% on labor costs because shoppers are hired as independent contractors, not traditional full-time, salaried employees.

Product market fit for a demanding income bracket  

Unlike the others, honestbee targets the top 10% money makers in each market by being more selective with partners to offer a service consumers are willing (and able to afford) to pay a premium before the rest of the market adopts the behavior.

Current exclusive partners include Villa Market, Fresh Deli, organic produce provider Fruits for Health, and all natural household cleaning line Pipper Standard.

“We figure out what each market needs and work with the right partners to bring value and convenience to our customers,” says Joel.

What also differentiates honestbee from its competitors is the varied service it offers across markets. How does the company decide what to launch? Through regular customer focus groups like the one held in Singapore of March this year.

A few questions the focus groups aim to answer before officially launching a new service:

  • Do the customers like our partners?
  • How do they suggest we improve the shopping methodology?
  • Is the infrastructure already there or do we need to build it?
  • Is the market growing fast enough in terms of age and adoption of behavior?

These feedback loops help honestbee work out what each market needs and led the company to discover certain market intricacies:

  • Offering garbage removal in Taiwan would be an instant success as the country has high stringent waste policies   
  • Launching an on-demand laundry service in Hong Kong works as there is large expat population in the country
  • Singaporeans would not pay for marked up meal deliveries as offered by rivals foodpanda, UberEats
  • Online grocers in Japan accounted for only 2%, or $5.5 billion USD, of the retail grocery market in 2015

Although each market is different, the core of the business still remains its groceries delivery service and is always launched first.

A teeny problem: “Managed crowdsourcing”

There are a few challenges with on-demand models:

  • Shopper retention and shortage because of fluctuating wages in a developing market
  • Expectancy for shorter and shorter delivery times by customers: same day → in two hours → next hour
  • Out of stock items and inaccurate deliveries – balanced with a “Bee” training program

Although it is risky to be spreading services so thin in concession, Joel is confident the company has the resources and isn’t concerned about needing more external investment aside from the $15 million it raised last year.

“We are comfortable with our economics right now,” comments Joel.

honestbee aims to become a one-stop solution for customers and make it possible to have anything available at the touch of a button by marrying the online and offline world.  

“Groceries is such a generic term,” comments Joel. “We never envisioned just being in the groceries business – we want to solve problems for our customers.”  

In the US, consumers have more channel choices when it comes to purchasing toiletries, soft drinks, processed food and other fast moving consumer goods than ever before.

According to Nielsen, 50 retailers accounted for nearly 80% of all FMCG sales in 2016. Specialized companies drove more than half of all FMCG growth over the last few years by focusing on particular verticals, while the bigger companies on average posted flat growth.

Beauty and pet care specific companies are experiencing higher sales than others, evident by the popularity of beauty subscription boxes – Althea and Birchbox – and pet food/accessories platforms such as in the US.

The wide FMCG umbrella is increasingly filling with online players that are offering what Nielsen coins the “total customer” something more than simply walking into a department store.

A total customer is someone who wants to the ultimate shopping experience from top quality, to brand value and a personalized product offering.

In the US, beauty care and pet care are the two categories with the highest ecommerce dollar share of total sales.

As the grocery-retail landscape continues to incorporate digital, there are six core (and relatively broad) factors that make determine whether customers will likely stay your customers.

  1. Trust
  2. Value
  3. Experience
  4. Assortment
  5. Convenience
  6. Personalization

It’s pretty obvious to most retailers that the total customer wants products delivered on time without damages, special discounts to save money, and an easy to navigate online interface.

But the latter three factors: assortment, convenience and personalization are particularly important to the more digitally engaged shopper as they tend to have higher expectations.

So what kind of things will appeal to this group?

Well, when it comes to experience, assortment and personalization, these online players are currently doing it right.

According to Nielsen, “click and collect” services like Amazon Fresh Pick Up will increasingly bring perimeter-store shoppers online. Currently available to only employees, Amazon-run stores will have groceries brought out to your car if you order online as a Prime Member.

In China, both Alibaba and lead online grocery sales. Why? Because delivery men on electric bicycles pick up orders from supermarkets and small corner shops to provide same day delivery.

Grocery delivery service Instacart from the US focused on personalization by partnering with PlateJoy last year to deliver customized meals to customers who shared their health and taste preferences.

Entering groceries in Southeast Asia

Although not as mature as the west, the rising popularity of on-demand platforms such as honestbee and HappyFresh, and food delivery specific services such as foodpanda, Line Man and UberEats creates a highly competitive space.

Each player is attempting to entice Southeast Asians with aggressive promotions and value added services. In Thailand, HappyFresh often has “buy-one-get-one” periods, 30% flash sales and more recently, begun targeting pet owners, stated by Nielsen as a growing vertical for ecommerce.

Source: HappyFresh Thailand Facebook

Competitor honestbee is instead working on creating a “convenience ecosystem” for its shoppers by adding extra verticals such as a laundry service and food delivery.

It’s very likely each market in Southeast Asia will have its own dominant grocery service as the region is highly fragmented and therefore highly differentiated preferences but one thing they all have in common is their obsession with convenience and personalization.

Here’s what you should know today.

1. Ecommerce help drives Uniqlo’s profits outside Japan

Fast Retailing, the company operating the Uniqlo chains, booked a net profit of 97.23 billion yen ($890 million) for the 6 months through February – almost doubling down from 40.78 billion yen . Overseas market were the main growth drivers. 

The operating profit for its overseas store rose 66% to 48.77 billion yen. The profit for its Japanese outlets increased 7% to 68.78 billion.

According to Tadashi Yanai, chairman and president of the company, profits from China and Southeast Asia significantly contributes.

In China, the spread of ecommerce and localised campaigns tied to China’s national holiday has helped its business. Meanwhile, in Southeast Asia regional items including summer wear and hijabs for Muslim women sold well.

Uniqlo has 1.029 stores outside Japan, the total figures for these countries increased by 51 during the six months. In Japan, they have 832 stores.

Read the rest of the story here.

2. Prada turns to ecommerce as its offline sales waning

Italian luxury fashion brand Prada will expand its online sales platform to offer more products and reach new markets as they’re experiencing a decrease in their offline sales.

Online stores for China, South Korea, Russia and New Zealand will be opened by the end of the year and they will expand their ecommerce operations further next year. 

The range of products available will also be expanded to fit its offline stores. The company will also limit new openings of flagship stores.

Prada reported a net store increase of just two last fiscal year and its sales fell 10% last fiscal year to 13.8 billion euros. Their overall operating profit slipped 14% to 431 million euros.

Read the rest of the story here.

3. Online grocers HappyFresh marks its second anniversary by building more partnerships

Launched in 2015, HappyFresh marks its second anniversary by building more partnerships with suppliers, listening to customers and improving services. 

They are now partnering with seven supermarkets in Indonesia with 62,000 products available and more than 50 active stores in the app.

They note the importance to have a long-term and “in-depth” relationships with their partners to improve service and customer experience. The online grocer employs a pool of trained personal shoppers, drivers and customer service staff.

For personal shoppers, they provide approximately two weeks of training which includes teaching them how to use their native shoppers and drivers apps, as well as basic English language.

“Even though most of our customers are locals, we realised that it will be difficult for those who do not speak Bahasa Indonesia and this is also good for our shoppers’ development,” said Filippo Candrini, Managing Director of HappyFresh Indonesia.

Read the rest of the story here.

Here are today’s top ecommerce news.

1. Garena in talks to make $1B IPO in the US

It is in talks with several banks in Singapore this week to discuss the IPO. According to sources close to WSJ, the deal could commence in 2018. Garena is seeking to IPO in New York, but other details such as listing venue and total funds to be raised has not been finalised.

Founded in 2008 by Forrest Li, the Singaporean unicorn is currently valued at US$3.75 billion.

Read the rest of the story here


2. Google’s tax settlement talks with Indonesia fall through

It looked like a win for Google. Less than a month ago, the Wall Street Journal reported that the search giant was about to settle a tax bill with Indonesia, “for $73 million or less.” That deal is off, Indonesian tax authorities recently told Reuters, because the amount offered by Google is too small. It’s unlikely an agreement will be reached this year. Indonesia initially aimed for US$400 million in unpaid taxes and fines.

The Indonesian government has been pressing global internet firms like Google and Facebook to pay taxes in the country on the basis of the digital ads revenue they are generating here.

Read the rest of the story here


3. Tesco Malaysia partners with HappyFresh

Tesco Malaysia has partnered with online grocery platform HappyFresh to expand its capacity and capability to fulfill online orders. Shoppers are offered more than 12,000 products, including the grocery group’s private labels, while fresh produce is selected by HappyFresh’s concierge shoppers in Tesco Malaysia hypermarkets.

Read the rest of the story here


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