The Barriers to Growth for eGrocery in APAC
Wednesday, August 29th, 2018
The rise of eCommerce has undoubtedly penetrated the APAC market, and grocery stores are no exception. While there has been success in the market for grocery eCommerce, this level of growth is not the case for everyone.
The variation across APAC markets isn’t difficult to observe. South Korea leads the pack with eight percent market share of online grocery, while Japan and China follow close behind with market shares of seven percent and five percent, respectively. Other countries in Asia, however, face much lower market penetration. Hong Kong, India, and Malaysia, for example, have market penetration rates of less than two percent.
To understand this variation, it’s important to consider the various barriers in the market for e-grocery businesses—from infrastructure to labor costs and logistics but, most important, shopper sentiment, behavior, and accessibility.
Though home delivery e-grocers offer convenience, APAC shoppers (like those in many countries around the world) still face questions of uncertainty about quality and freshness of their produce. APAC shoppers also have distrust in digital payment technologies, which is inherent in the model and thus hurts the industry’s growth in areas where consumers are ambivalent about processing payments online.
Beyond sentiment and behavior, shopper accessibility is also a major barrier because most of this region’s shoppers live in rural and suburban areas. Last-mile costs typically comprise over half of the total cost of delivery, which means these businesses thrive in densely populated urban areas where transportation costs are lower. Rural and suburban areas, however, often maintain high last-mile logistics costs, which limits e-grocers’ ability to connect with this potentially lucrative customer segment.
The market for grocery eCommerce in APAC is promising. But to cross the chasm into mainstream adoption, the industry must continue to innovate with the shopper in mind.
Contributed By: Will Murray, Integer London
Image Source: IGD Research