E-Grocery in Emerging Markets. Major Players, Strategies, and Market Structures

Contents

Contents

Table of Figures

Table of Tables

1 Introduction

2 E-Grocery Business Framework
2.1 Business Environment
2.2 Business Models

3 Review of Developed Markets
3.1 Market Conditions
3.2 Consumer Behavior
3.3 Competitive Strategies

4 Review of Emerging Markets
4.1 Asia
4.2 Europe
4.3 Latin America
4.4 Africa & Middle East

5 Prototypical Emerging Markets
5.1 China
5.2 Argentina
5.3 Czech Republic

6 Summary

References

Appendix

Table of Figures

Figure 1: E-grocery share development

Figure 2: Grocery, e-grocery and e-commerce market growth potential in developed markets

Figure 3: Share of e-commerce to GPD of examined countries,

Figure 4: Grocery, e-grocery and e-commerce market growth potential in Asia

Figure 5: Market volume and growth potential per city with more than 1 million inhabitants in Asia

Figure 6: Internet access of emerging markets in Asia,

Figure 7: Tesco displays supermarket shelves to a subway station in Seoul, South Korea

Figure 8: Grocery categories with highest online share in China

Figure 9: Overview of e-grocery players by business model in Asia,

Figure 10: Assortment strategy of e-grocery players in Asia,

Figure 11: Grocery, e-grocery and e-commerce market growth potential in Europe

Figure 12: Market volume and growth potential per city with more than 1 million inhabitants in Europe

Figure 13: Internet access of emerging markets in Europe

Figure 14: Overview of e-grocery players by business model in Europe,

Figure 15: Assortment strategy of e-grocery players in Europe,

Figure 16: Grocery, e-grocery +and e-commerce market growth potential in Latin America,

Figure 17: Market volume and growth potential per city with more than 1 million inhabitants in Latin America

Figure 18: Internet access of emerging markets in Latin America

Figure 19: Overview of e-grocery players by business model in Latin America,

Figure 20: Assortment strategy of e-grocery players in Latin America,

Figure 21: Grocery, e-grocery and e-commerce market growth potential in Africa & Middle East

Figure 22: Market volume and growth potential per city with more than 1 million inhabitants in Africa & Middle East

Figure 23: Age Distribution, Africa & Middle East

Figure 24: Internet access for emerging markets in Africa & Middle East

Figure 25: Overview of e-grocery players by business model in Africa & Middle East,

Figure 26: Assortment strategy of e-grocery players in Africa & Middle East,

Figure 27: Sizes of grocery market channels in China

Figure 28: Cold-chain spoilage rate in China and the United States

Figure 29: E-grocery share in Czech Republic

Figure 30: Cumulated coverage area of e-grocery providers in Czech Republic

Table of Tables

Table 1: Grocery and e-grocery market sizes in selected developed markets,

Table 2: Important enablers for e-grocery in developed markets,

Table 3: Products bought online in selected developed markets

Table 4: Major online players in developed markets with respective market share

Table 5: Grocery and e-grocery market sizes in Asia,

Table 6: E-commerce and e-grocery market volumes in Asia,

Table 7: Important macroeconomical factors, Asia (Statista 2018b; DBS Bank 2017a)

Table 8: Delivery area of companies with perishables in Asia, continent view

Table 9: Delivery area of companies with perishables in Asia, country view

Table 10: Delivery area of companies with perishables in Asia, business view

Table 11: Delivery time of companies with perishables in Asia, continent view

Table 12: Delivery time of companies with perishables in Asia, business view

Table 13: Grocery and e-grocery market sizes in Europe,

Table 14: E-commerce and e-grocery market volumes in Europe,

Table 15: Important macroeconomical factors, Europe

Table 16: Delivery area of companies with perishables in Europe, continent view

Table 17: Delivery area of companies with perishables in Europe, country view

Table 18: Delivery time of companies with perishables in Europe, continent view

Table 19: Delivery time of companies with perishables in Europe, business view

Table 20: Grocery and e-grocery market sizes in Latin America,

Table 21: E-commerce and e-grocery market volumes in Latin America

Table 22: Important macroeconomical factors, Latin America

Table 23: Delivery area of companies with perishables in Latin America, continent view

Table 24: Delivery area of companies with perishables in Latin America, business view

Table 25: Delivery time of companies with perishables in Latin America, continent view

Table 26: Delivery time of companies with perishables in Latin America, business view

Table 27: Grocery and e-grocery market sizes in Africa & Middle East,

Table 28: E-commerce and e-grocery market volumes in Africa & Middle East

Table 29: Important macroeconomical factors, Africa & Middle East (Statista 2018a)

Table 30: Delivery area of companies with perishables in Africa & Middle East, continent view

Table 31: Delivery area of companies with perishables in Africa & Middle East, business view

Table 32: Delivery time of companies with perishables in Africa & Middle East, continent view

Table 33: Delivery time of companies with perishables in Africa & Middle East, business view

Table 34: Food and beverage retail outlets in Argentina (USDA 2010)

Table 35: Grocery player and their market shares in

Table 36: Overview of emerging markets

Table 37: Overview of managerial decision basis for all emerging markets

1 Introduction

E-grocery, which is the distribution of groceries including all fast moving consumer goods such as fresh food or beauty and personal care items via the online channel, has become a global phenomenon over the last years (Kantar Worldpanel 2017b; Nielsen 2017b). It has changed the way many people shop for groceries and at the same time challenged established offline businesses while opening up new opportunities (Darley et al. 2010).

Consumers benefit from higher convenience (Cagliano et al. 2015), for instance since they do not need to take their children with them when buying groceries or when being physically handicapped (Morganosky and Cude 2000), a wider range of products (Ramus and Nielsen 2005), potentially better deals (Brynjolfsson and Smith 2000) and lower search costs (Agatz, Fleischmann et al. 2008). Additionally, in certain emerging markets, expats mention increased food safety and familiarity with foreign goods as major advantages.

To satisfy its customers, an e-grocer has to deliver both, service and product quality, enabling customers to simultaneously save time and still receive a high product quality (Boyer and Hult 2006). This results in major logistical challenges (Agatz, Fleischmann et al. 2008). However, companies benefit from a strengthened customer relationship (Dickey and Lewis 2009), thus higher customer loyalty (Wallace et al. 2004), the value of gathered customer data (Credit Suisse 2017) as well as typically attracting the most profitable customer groups (Lopez et al. 2014).

Within the stream of e-grocery, the focus of press, industry blogs, and many researchers is biased towards developed markets in Europe and North America (e.g. Punakivi and Saranen 2001; Agatz, Campbell et al. 2008; Morganti et al. 2014). However, until now, no paper has been published focusing on the development in emerging markets. Thus, this paper aims to fill the gap.

Thereby, the primary goal is to give an overview of e-grocery activities across various emerging markets. This is done via an extensive internet market study identifying major players, their strategies and the underlying market structure. Additionally, the analysis is complemented by taking into account the respective market environment. Based on that study, the second objective of this paper is to derive prototypical countries and compare them with developed markets.

The paper is structured as follows. In Section 2, by conducting a literature review on e-grocery, relevant criteria to assess the respective markets will be identified. Subsequently, in section 3, a brief analysis of developed markets and in section 4 an extensive analysis of emerging markets will be presented. This will be the groundwork for the derivation of prototypical emerging markets and their comparison to developed markets in section 5. Finally, in section 6 main insights will be summarized.

2 E-Grocery Business Framework

In this chapter, both important external factors influencing the conditions of e-grocery businesses as well as internal factors forming the scope of action on a company level will be elaborated. This will serve as the basis for the review of developed and emerging markets in sections 3 and 4.

2.1 Business Environment

The framework conditions for e-grocery businesses in each country are mainly determined by current and projected market size, social structure, governmental regulations, availability of enablers and consumer behavior.

The size of a national e-grocery market can be seen in contrast to two major figures: First, the total grocery market and second, the total e-commerce market. Building on that, two key market indicators can be derived. First, the relative online share of a grocery market (Kantar Worldpanel 2017b) and second, the relative share of online groceries of the total e-commerce market (Statista 2018f).

To evaluate the number of potential individual consumers of e-grocery services, population and age distribution (Wan 2017) can serve as a first basis. Thereby, studies have shown that younger generations are more in favor of ordering their groceries online than older ones (Morganosky and Cude 2000; Hui and Wan 2009). In a second step, the population currently that already uses e-commerce services can delineate potential customer groups, since generally e-grocery is a following step of existing e-commerce structures (Desai et al. 2017). This paper applies the definition of Statista (2018e) of e-commerce users counting as such, if they undertook at least one online transaction per year. Additionally, the urbanization rate is crucial (DBS Bank 2017a).

The importance of taking into account governmental regulations has already been shown by Saskia et al. (2016) in their comparison of the German and French e-grocery market and by Kshetri (2007) for developing countries. In this paper, the Ease of Doing Business Ranking developed by the World Bank will serve as an indicator of the quality of government regulation as it allows a global comparison of respective countries. The ranking combines ten subindices dealing with topics such as starting a business, protecting investors, paying taxes, resolving insolvency or enforcing contracts (World Bank 2018a). Out of 190 evaluated countries by the World Bank, for this paper the reviewed countries will be grouped into favorable, if they are within the top third of the ranking, and unfavorable otherwise. The applicability of the ranking has been proven by several researchers, e.g. Corcoran and Gillanders (2015) as they successfully connected it to foreign direct investment in the area of finance.

Enablers play a significant role for supply chain management as well as for companies in general (Gorane and Kant 2013). Since the customer’s point of contact of e-grocery businesses logically is online, internet and smartphone penetration are key enablers. Thereby, they are defined by the percentage of individuals using the internet or smartphone on a monthly basis, following the definition of Statista (2018e).

In their respective research, Hawk (2004) and Uzoka et al. (2007) integrate internet penetration for their assessment of e-commerce adoption in developing countries, whereas Cagliano et al. (2015) highlight the importance of smartphone diffusion in the e-grocery supply chain. In addition to that, the speed of the internet connection plays a significant role (Liu and Arnett 2000).

Furthermore, logistics, especially last-mile logistics, is a key success factor of e-grocery businesses (Punakivi and Saranen 2001). Therefore, the Logistics Performance Index developed by the World Bank will be used to compare differences among developed and emerging markets. The index measures a country’s logistics quality and competence by evaluating a wide range of expert interviews on seven categories such as infrastructure, timeliness or customs (World Bank 2018d). Its usefulness and significance has been proven by Martí et al. (2014). In this paper, since logistics is such a key success factor for e-grocery businesses, there will be a threefold division of countries based on their respective logistics competence score.

Lastly, it is essential to take into account the underlying culture a company is operating in (Hofstede 2001). There have been several studies on consumer behavior in e-commerce (Rohm and Swaminathan 2004; Zhou et al. 2007; Darley et al. 2010) and e-grocery (Ramus and Nielsen 2005; Zhu and Semeijn 2015). Primarily, these studies focus on developed markets and identify the motivation of consumers for buying online rather than offline. In addition to that, it is interesting to ascertain differences in purchasing behavior between online and offline channels. Chu et al. (2010) found empirical evidence that when purchasing online, consumers in the United States have higher brand and size loyalty as well as lower price sensitivity.

2.2 Business Models

In principal, four different business models have emerged in the e-grocery business.

Firstly, there are bricks-and-mortar retailers that added an online option and which are then called clicks & mortar retailers (Barnes et al. 2004). Well-known examples are the globally operating retail chains Wal-Mart and Carrefour. These retailers benefit from existing infrastructure and sourcing channels. Furthermore, they can exploit their established reputation and industry knowledge (Kempiak and Fox 2006) as well as an already existing customer base, for which customer loyalty can be strenghtened through this supplementary service (Wallace et al. 2004). However, challenges arise since the players are newcomers in e-commerce (Zhu 2016). Also, shifting to the online channel involves a drastic change in consumer behavior (Dickey and Lewis 2009). Additionally, cannibalization effects and channel conflicts can arise (Webb 2002). Bernstein et al. (2008) elaborate in which general setting it is economically viable to offer both channels and come to the conclusion that in a market with online players it is a necessity for retailers in the long run and otherwise, comparable to the introduction of ATMs, consumers will always benefit from the additional channel.

Secondly, there are pure online players. Those companies often have a technology background and can exploit this to gain a competitive advantage over clicks & mortar players (Zhu 2016). They typically face low entry barriers (Keh and Shieh 2001) and carry lower overhead costs (Burns 2017). However, in order to gain market shares, these businesses regularly have to survive initial years of losses (Keh and Shieh 2001) and have on average higher marketing costs per new acquired customer (Burns 2017).

Thirdly, there are online marketplaces acting as intermediaries between consumers and both manufacturers and retailers. This business model is closely linked to pure online players. However, the providers typically do not hold inventory themselves but obtain a commission. The model enables small grocery businesses to offer their products online without bearing the costs of setting up the online channel itself (Codebrew 2017). Examples are e-commerce platforms such as Alibaba that added groceries to their offering (Bloomberg 2018).

Fourthly, there are third-party service providers i.e. concierge shopping services. In this model, after receiving the order from a customer, an employee of the concierge company visits a local supermarket and purchases the respective groceries. Evidently, the biggest limitation of this model is labour costs (Zhu 2016). One major player exploiting this strategy is Singapore-based Honestbee that is even striving for a global presence (Sim 2017).

2.2.1 Last Mile Delivery Options

All business models basically have the choice of two methods to bridge the last mile to the customer: home delivery or pick-up points (Daduna and Lenz 2005).

Home delivery can further be divided into unattended and attended delivery (Kämäräinen and Punakivi 2002). While unattended home delivery increases the systems overall flexibility, it can hardly be used for perishable products (Agatz, Fleischmann et al. 2008). This problem could be solved through the use of a reception box system, which on the downside requires each customer to possess a respective box (Kämäräinen et al. 2001).

Attended home delivery requires a previous agreement on the delivery time window. Thereby, window length and timing during day and week are critical in the customer’s service perception (Boyer et al. 2003). However, shorter time windows are costlier and harder to maintain and the demand for certain time slots is mostly not uniformly distributed (Agatz et al. 2011). Campbell and Savelsbergh (2005) thus propose dynamic incentive schemes via pricing or restricting the number of delivery options per delivery area. Nevertheless, an optimal solution for the home delivery with time window problem has been developed by Bent and van Hentenryck (2004). In this paper, time slots are recognized as such if they are two hours or shorter following the paper of Agatz et al. (2011).

Another drawback of attended home delivery is that it suffers from a high failure rate due to customers’ absence which leads to a decrease of the overall logistics efficiency. To minimize this loss, Pan et al. (2017) developed an innovative model to exploit customer-related data. Thereby, customer absence probability is estimated through the mining of electricity consumption data. However, the approach requires the availability of extensive data which is subject to data protection regulations and is therefore hardly applicable for all e-grocery players.

The second option in fulfilling customer demand is focusing on pick-up points, also called click and collect. The research of Boyer and Hult (2005) indicates that customers who choose click and collect are harder to satisfy. However, it significantly reduces the complexity of the system by transferring the last mile transportation to the customer (Colla and Lapoule 2012). According to a McKinsey study, the overall margin of click and collect can be up to 30% higher than pure online delivery (Galante et al. 2013).

Morganti et al. (2014) developed a conceptual framework for the click and collect system and identified main variables and limitations for urban, suburban and rural settings. The main success factor is customer proximity (Vyt et al. 2017).

2.2.2 Assortment Strategies

Besides scope of decision making in the last mile delivery option, all businesses can also decide on their assortment strategy. In this paper, inspired by the research of Saskia et al. (2016), there are mainly three distinct strategies: offering imperishable packaged goods, offering perishable food, or offering a full assortment including both packaged and fresh products. In this context, the logistical complexity increases for perishable goods (Morganti and Gonzalez-Feliu 2015).

2.2.3 Other Business Design Possibilities

Further options of each e-grocery service providers evaluated in this paper are payment methods, sustainability, the provision of a respective smartphone app and language the websites are offered in. Thereby, language is distinguished by local language and the availability of an English version. The delivery area of each provider is differentiated into four buckets: single city, 2-5 cities, more than 5 cities and nationwide. This allows conclusions on market and company maturity. Thereby, by utilizing economies of scale, the coverage of additional cities should be more economical. Also, delivery time stated in each company’s terms and conditions is categorized into four buckets: less than three hours, same day delivery, 1-2 days or more than two days. This on the one hand allows conclusions on either a focus on rapid delivery or rather planned grocery purchases from a consumer perspective. On the other hand, the inability of quick delivery might also result from logistical barriers.

3 Review of Developed Markets

The selected developed markets are France, Germany, Great Britain, Netherlands and the United States. These countries are both, within the top 10 e-grocery markets worldwide (Credit Suisse 2017; Mkansi et al. 2018) and in the focus of researchers, industry blogs and the press.

3.1 Market Conditions

According to Kantar Worldpanel (2017b), Great Britain exhibits the second largest online share of grocery markets with 7,5% (table 1). France follows as number six with 5,6%. However, the underlying grocery markets are very large making it more difficult to obtain high online percentages.

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Table 1: Grocery and e-grocery market sizes in selected developed markets, 2016

Nevertheless, as shown in figure 1, the online shares are steadily growing for all of the five countries within the last four years.

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Figure 1: E-grocery share development

(Kantar Worldpanel 2014, 2015, 2016, 2017a)

This growth is also expected to continue in the future (figure 2). It is especially interesting to see that in all developed markets the e-grocery market grows significantly faster than the overall grocery market. Additionally, within products bought online, groceries are also growing faster than the overall e-commerce in all countries but France (Statista 2018e).

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Figure 2: Grocery, e-grocery and e-commerce market growth potential in developed markets

Table 2 shows important enablers for the e-grocery business. The average of each indicator is calculated by assigning the same weight to all countries’ scores. It can be seen that within all categories, developed markets show similar results, being located in the upper part of the respective rankings. This is especially the case for logistical performance but also for legal frameworks. It can thus be assumed that also e-grocery framework conditions within these countries are similar.

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Table 2: Important enablers for e-grocery in developed markets, 2018

3.2 Consumer Behavior

Through consumer surveys, Nielsen (2017b) discovered significant differences between consumers attitude towards e-grocery in developed and emerging markets. For the category beauty and personal care, respondents from developing markets state that traditional information sources such as word of mouth or mass media as well as modern sources such as social media or online reviews influence their purchasing decision in a much higher degree than in developed markets.

This allows the conclusion that consumers in markets like Germany or the United States have more stable consumption patterns making it more difficult for approaches like e-grocery to accelerate (Kantar Worldpanel 2016).

In Germany, where e-grocery is basically only offered in urban areas, supermarket access is too ubiquitous for customers to actually experience higher convenience through doorstep delivery (Kantar Worldpanel 2016). This is also confirmed in a study of Rich Relevance (2018b), in which German respondents mention last minute timing as their biggest concern, almost four times more often than French and seven times more often than British survey participants. Additionally, high delivery costs, the obligatory booking of a delivery window (DPA 2018) and the unpopularity of modern payment methods – 94% of Germans prefer receiving an invoice rather than paying upfront – are mentioned as barriers in the German market (Kantar Worldpanel 2016).

In two surveys, British and US-American consumers mention the inability to see the groceries ex ante and self-select them as their biggest concern (Rich Relevance 2018a; Tetra Pak 2018). For the United States, Kantar Worldpanel (2016) states that customers are very value-centric and price is a substantial decision criterion. Thus delivery costs are the deciding factor for buying groceries offline.

However, especially younger generations are interested in the service. In Germany, 45% of people aged 16 to 24 mention to have shopped online for groceries while the nationwide average is only 31% (Mintel 2016). While in Great Britain the convenience of home delivery is valued most, US-Americans enjoy to shop at any point of time (Tetra Pak 2018). Additionally, getting good deals and stress-free shopping are among the top reasons in the US (Kantar Retail 2017). In France, 72% of survey respondents state the ability to save time as their key reason to buy groceries online. This is higher than in Great Britain (59%) and Germany (52%) (Rich Relevance 2018b).

The examination of the current customer base of e-grocery services reveals that in France, online baskets are with an average of $69 of much higher value than when consumers buy offline with a mean of $32 (Kantar Worldpanel 2016).

Furthermore, in table 3 the actual product categories bought online are presented. It can be seen that both, fresh food and packaged groceries are represented.

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Table 3: Products bought online in selected developed markets

3.3 Competitive Strategies

The biggest players in the respective markets are presented in table 4. For all countries besides the United States there is always one dominating player followed by several companies with similar market share. Furthermore, all markets are dominated by clicks & mortar players. This is in line with the overall grocery market, where large supermarkets and hypermarkets account for majority of the market size whereas compared to developing countries, traditional channels, also called wet markets (Goldman et al. 1999), do not play any role (Nielsen 2015b).

Furthermore, there are only a few pure online players such as Ocado in Great Britain, Amazon and Peapod in the US, Allyouneed, Amazon and Hellofresh in Germany and Picnic in the Netherlands.

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Table 4: Major online players in developed markets with respective market share

Generally, companies’ delivery areas vary across the developed markets. The Netherlands are geographically concentrated and thus simple to serve (Syndy 2015). In Great Britain, a company can cover 80% of consumers’ purchasing power through four clusters, namely London, Manchester/Liverpool, Scotland and the northeast. This can be a key reason for the strong e-grocery market (Kantar Worldpanel 2016).

In Germany, the biggest player Rewe offers its services in 75 cities. Competitors like Edeka only serve Berlin and Munich. The Dutch firm Picnic focuses on the Rhineland, which is closest to its home market the Netherlands (Kanning 2018). However, a Credit Suisse (2017) report claims the lack of an anchor metropolitan area like London or New York as a major disadvantage.

Kantar Worldpanel (2016) states the geography of France and the United States to be similar. Paris is the only megacity worldwide with a lower online grocery share (3,8%) than the country overall. In general, there are a couple of bigger cities on the opposite sides of the country. Thus, the market is widely dispersed. In the United States there are three hotspots: New York City, Los Angeles and Seattle (Syndy 2015).

While this geographical setting is less favorable for home delivery from a cost perspective, interestingly, in both countries click and collect does work very well. This is especially the case for rural and suburban areas in France (Kantar Worldpanel 2016). There has not been found any conclusive evidence why this is the case. Click and collect, which grew slowly after its introduction in France in 2002 (Wells 2017), enables convenient pickup not just from grocery branches but also from points like kiosks (Kantar Worldpanel 2016). Customers still save time not having to walk through supermarket aisles, mentioned as the biggest motivation for French consumers to order groceries online (section 3.2).

Today, groceries bought in France via click and collect have a market share of more than 5%, enabled by 3.800 pickup points. Furthermore, it accounted for 45% of FMCG market growth in 2015 and exhibits larger basket sizes (Kantar Retail 2017). Also, a McKinsey report estimates the profitability of click and collect significantly higher than home delivery (Galante et al. 2013).

4 Review of EmergingMarkets

The selection of emerging markets will follow the MSCI Emerging Market Index. This index reflects opinions of the international investment community and includes economic development, size and liquidity requirements, and market accessibility (MSCI 2018). Building on the MSCI classification, all countries will be clustered by continent into Asia, Europe, Latin America as well as Africa & Middle East.

These clusters are also presented in figure 3, which shows the relative share of e-commerce to gross domestic product (GDP). This relation serves as an indicator for the market readiness of e-commerce and has for example also been used by the largest European e-commerce association Ecommerce Europe (2016). It can be derived that only developing countries in Asia, namely China, South Korea and Taiwan have a higher percentage share than the average of developed markets from section 3 with 2,23%. However, for all other countries the shares are quite consistent around the one-percent level.

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Figure 3: Share of e-commerce to GPD of examined countries, 2017

(Statista 2018e; World Bank 2018b)

4.1 Asia

The Asian e-grocery business is globally leading and currently experiencing many investments (Kantar Worldpanel 2017b). Just recently, American retail chain Walmart invested 500 million US-dollars to participate in the Chinese e-grocery business (Reuters 2018). However, return on these investments are still rather mixed, sometimes even resulting in events of insolvency. Most famous examples are PepperTap and LocalBanya. Both operated in India and were equipped with heavy venture capital (Singh 2016).

4.1.1 Market Sizes

Based on their relative market share of online grocery, emerging markets of interest can be grouped into large (South Korea), medium (China, Taiwan) and small (Malaysia, Thailand, Vietnam, Indonesia and India), as shown in table 5.

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Table 5: Grocery and e-grocery market sizes in Asia, 2016

From an e-commerce perspective, that is i.e.based on the relative share of groceries to total e-commerce volume, three clusters can be derived. The first cluster again is filled with South Korea, second with Malaysia, Vietnam, Thailand and Indonesia and finally the third with China, Taiwan and India (table 6).

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Table 6: E-commerce and e-grocery market volumes in Asia, 2016 (Statista 2018b)

When it comes to growth potential, the Asian retail market overall is growing faster than the global average (Deloitte 2018). In figure 4, the growth potential of all Asian emerging markets is presented. Especially in Asia, there is varying figures on the growth of the e-grocery markets in the press. Thus, two different sources are utilized. First, collated various sources (grey bars) and second, cross-nationally consistent figures by Statista (2018b). It can be seen that various newspaper articles propose a significantly higher growth than Statista. However, there is consensus on the relation that in all countries the online grocery market will grow faster than both, total e-commerce and total grocery market. Thereby, the strongest e-grocery potential lies in Thailand and Malaysia followed by Vietnam, India and China.

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Figure 4: Grocery, e-grocery and e-commerce market growth potential in Asia

Last mile delivery is a key success factor in the online grocery business (Punakivi and Saranen 2001). Thus, to evaluate the actual playground for respective businesses, it is interesting to compare countries’ market sizes divided by the number of cities with more than one million inhabitants. The resulting metric represents an estimator of how big on average each sub-market is. The underlying assumption thereby is that providers of e-grocery services mainly serve urban areas which is supported by primary data presented in section 4.1.2.

The evaluation is presented in figure 5. Additionally, expected growth data are added. It can be seen that Malaysia and Thailand show both high market size per city with over a million inhabitants and growth potential, directly followed by Indonesia, while China’s, South Korea’s, and Taiwan’s markets are already quite established. Furthermore, the relative size of the Indian market is much smaller compared to a full national view.

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Figure 5: Market volume and growth potential per city with more than 1 million inhabitants in Asia (Statista 2018b; United Nations 2018)

4.1.2 Social Structure

Urbanization shares, population, e-commerce penetration as well as GDP per capita and consumer spending per capita are presented in table 7 and are key social success factors in the Asian e-grocery business.

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Table 7: Important macroeconomical factors, Asia (Statista 2018b; DBS Bank 2017a)

With a very high population in almost all Asian countries, there is a high potential consumer base. While South Korea almost matches the average of urban population share of the selected developed markets, lower figures especially in India do not necessarily prevent the emergence of a viable market due to this generally high population. Furthermore, GDP and consumer spending per capita are by their definition lower than in developed markets. Still, there are certain social groups wealthy enough to choose e-grocery services, which is harder to specifically measure. For instance in Thailand, Kantar Worldpanel (2017b) states upper class families to represent 37% of online value compared to 17% of offline value.

Regarding the penetration of e-commerce, the countries can be separated into three groups:

1. High: South Korea (81%), Average of Developed Markets (77%)
2. Medium: Malaysia (62%), Thailand (54%), Vietnam (53%)
3. Low: Philippines (45%), China (40%), Indonesia (40%), India (27%)

In this and all other chapters, e-commerce penetration is defined as the number of inhabitants using this channel at least once per year.

Again, the high population in China can distort the seemingly low consumer base. However, the e-commerce penetration allows conclusions for all other countries in relation to their current e-grocery market size presented in section 4.1.1.

The overall age distribution speaks in favor of the Asian e-grocery markets (Wan 2017; Kantar Worldpanel 2017b). In all Asian emerging markets except for South Korea (57%) and Taiwan (57%), at least 80 percent of customers of online supermarkets are aged 44 or younger (Statista 2018b). This shows a beneficial age distribution especially for future growth, since younger generations are more likely to make use of e-grocery services (Hui and Wan 2009).

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