Deal Street Asia: Grocery, Food Startups Gain as Online Demand Soars Amid Pandemic

DEALSTREETASIA.COM — In the wake of the novel COVID-19 outbreak, online transactions have witnessed significant growth over the past few months – especially in the month of Ramadan – in Southeast Asia.

The region recorded a 54 per cent jump in online sales year-on-year between January 13 and April 5, according to data available with France-based internet advertising agency Criteo.

The development comes at a time when most countries in the region announced lockdown measures, requiring people to stay at home.

According to mobile app data and insights platform App Annie, Indonesia, Vietnam, and Singapore recorded a hike in weekly e-commerce downloads in March, with each of these countries experiencing a 10 per cent increase in one month alone.

Thailand, meanwhile, took the cake, recording a 60 per cent increase in weekly downloads of shopping apps during the week of March 22.

However, the weekly downloads in the Philippines fell 25 per cent in the week after the government actively implemented the lockdown on March 17.

Apart from the apps downloaded, the region also recorded a hike in transactions, signaling a shift in consumer buying behavior.

According to Criteo, going forward, online retail sales throughout this year in Southeast Asia are projected to increase from 2019. It also took into consideration the fasting month of Ramadhan (starting April 24), especially in Indonesia and Malaysia where people tend to shop more during the holy month.

The digital economy in Southeast Asia holds significant promise in the years to come. According to a joint study conducted by the tech giant Google and Singapore state-owned investment firm Temasek Holdings, the e-commerce sector in the region is projected to reach $100 billion by 2025 from $23 billion in 2018.

A shift in buying patterns?

In a recent study conducted by global business firm McKinsey & Co, categories that are likely to witness traction going forward are grocery, snacks, household supplies, besides home entertainment. However, there will be a decline in segments such as tours and adventures, hotels, flights, and even travel by car.

The research is based on a survey conducted in Indonesia on April 25–26.

Vaibhav Dabhade, CEO of Anchanto, a B2B SaaS company for omnichannel, warehouse and retail management told DealStreetAsia that there has been a sharp shift in buying behavior across various categories, with exceptional demand being witnessed across daily essentials such as

groceries, health supplements (vitamins), and electronic items (headphones and laptops, among others).

“There has been a sharp decline in some of the other categories in travel accessories such as cameras, suitcases and camping equipment, party and event supplies, sunglasses & eyewear, luxury accessories, and other outdoor equipment & gears,” he added.

E-commerce firms such as Tokopedia, Bukalapak, and Shopee agreed that there will be an increase in the offtake of food and beverages, healthcare-related products, and remote-working products during the pandemic.

Mandiri Capital managing director Joshua Agusta reasoned that the overall gross merchandise value (GMV) in e-commerce is increasing as more people are working from home and making more purchases online.

“In terms of product mix, I believe that fresh produce & groceries are the biggest growth driver, followed by home care, personal care, and child care products,” Agusta said.

Meanwhile, for Djarum-backed e-commerce firm Blibli, transactions have gone up over two times between February and April.

“We saw a significant increase in the number of sellers or around 90 per cent since the pandemic occurred. Sellers are seeking an online channel as shopping malls are temporarily closed,” Blibli executive vice president of consumer goods Fransisca K Nugraha told reporters at the webinar last week.

Surge during Ramadan

Despite the pandemic, the festive month of Ramadan saw a surge in sales with ‘digitally savvy’ consumers keeping up with their age-old traditions of buying new products and clothes during the period.

For the local unit of Singapore-headquartered e-commerce firm Shopee, online transactions are projected to jump three or four times during Ramadhan. Last year, it claimed to have booked a 300 per cent transaction during the Ramadhan period compared to the year before.

Shopee is not the only one expecting growth during this period.

E-commerce unicorns Tokopedia and Bukalapak have also recorded an increase in the number of first-time sellers and users on their platforms.

Tokopedia saw a 250 per cent hike on sale of personal health category products – the highest among all, its VP of corporate communication Nuraini Razak said, without disclosing a total growth in its transactions. Apart from healthcare products, the firm also witnessed an increase in the sale of household products and food and beverages.

Meanwhile, Bukalapak recorded 20 per cent growth in transactions in March this year compared to the previous month. In March, the sale of its staple products grew 3.5 times, while food and beverages rose two times compared to the month before.

“This pandemic is bringing new customers who have never been exposed to online shopping/transactions before, hence for certain sectors, customers/user base growth are imminent, with sectors like education, grocery shopping, online content, productivity apps are experiencing growth momentum during this pandemic,” Mandiri’s Agusta said.

Startups reaping bounty?

Even as COVID-19 has cast its spell on a large number of businesses across sectors, there are a few startups such as Grab-affiliated grocery delivery firm HappyFresh, fresh produce e- commerce firm SayurBox and agritech firm TaniHub that are tiding through.

HappyFresh managing director Filippo Candrini told DealStreetAsia that the team noticed the first spike of demand on March 2 when the first few COVID-19 positive cases were confirmed. Since the outbreak started, there has been a surge in traffic by 5-10 times, he said.

“We are also registering a higher purchase amount and frequency, due to schools closing down temporarily, companies implementing work-from-home policies and the public practicing social distancing, spending more time at home as a result,” he added.

Given the unprecedented demand, he said the team is working round the clock with the contours of the business changing over the past few months.

SayurBox claims to have booked five times the growth for fresh produce products during the pandemic. Going forward, the startup is looking to ramp up recruitment of farmers across the archipelago to meet the consumers’ demand.

Backed by VC firm Insignia Ventures, Tokopedia, social impact investor Patamar Capital, and East Ventures, SayurBox recently had to postpone its operation for a week due to overflowing orders from customers in Greater Jakarta area.

Other players in the ecosystem include TaniHub and East Ventures-backed startup KedaiSayur that also saw significant growth in sales starting March.

Bumpy road ahead

“In the short term, businesses would be positive…we recorded a hike, especially in healthcare- related products, which jumped 100 per cent. However, we might predict a decrease in overall transactions in April or May as the fulfillment would be affected,” said B2B e-procurement platform Mbiz CEO Rizal Paramatra.

As growth in businesses is slowing down due to the adverse impact of COVID-19, the firm is likely to revise its targets going forward.

“[Before the pandemic] We expected to reach positive EBITDA by the end of 2020, but instead we might postpone these targets into the first quarter of 2021,” he said, adding that its proposed $20-million Series B fundraising might also be put on hold.

Echoing the same sentiment, Lippo-backed VC firm Venturra Discovery partner Raditya Pramana added that the pandemic will affect startups’ ability to raise funds.

“They are in growth mode. Some of these startups are still burning [money] to acquire customers. It is how they implement the strategy to control the burn. We will see a lot of cost- cutting from the company’s expenses, especially its marketing budget. However, if the company can survive, they will come out stronger after the pandemic ends,” he added.

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