Indonesia sees more entrants, different playbooks tapping lucrative e-grocery market

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Indonesia’s e-grocery space has been one of the beneficiary sectors of the COVID-19 pandemic that led to urban customers buying their daily essentials online due to social distancing and movement curbs. 

However, with the pandemic panic cooling off and customers considering returning to old shopping habits, it will be down to online grocers to not only step up to meet surging demand but also to focus on user retention.

According to a recent LEK Consulting study, Indonesia’s $1-billion e-grocery market could jump to $6 billion by 2025, spurred on by Covid-19 and its repercussions. However, a survey by market research firm Snapcart showed that 42% of Indonesian online grocery shoppers would go back to offline shopping once restrictions are lifted.

Online grocery startup HappyFresh believes otherwise. The company, which claimed to have seen five to ten times traffic increase early on in the pandemic and its sales reaching an all-time high in November, believes “COVID-19 will have a long-lasting impact on consumer behavior” for most retail businesses, including groceries.

But it is not prepared to leave things to chance.

The Jakarta-based company has stepped up efforts to improve its services, largely around safety, which it says has replaced convenience as the key driver of e-grocery adoption and surge.

“Most processes and features we deployed last year went into this direction; just to name a few, we’ve been providing Personal Protective Equipment (PPEs) and financial assistance plans for fleet partners, contactless delivery, added more digital payments, and imposed remote working for office staff, which continues to this day,” said HappyFresh managing director Filippo Candrini.

HappyFresh, which has expanded into Thailand and Malaysia, works with supermarkets and other retailers to enable customers to order groceries online by leveraging the company’s technology, personal shoppers and same-day delivery couriers. 

Founded in 2014, HappyFresh counts among the pioneers in Indonesia’s e-grocery space and remains one of the very few specialised players in the market. 

This does not mean HappyFresh faces no competition. A host of players from various sectors including ride-hailing, e-commerce, social commerce and agritech have swarmed into the e-grocery space, with the battle becoming more visible than ever since COVID-19 struck.

Ride-hailing unicorns jump in

One of the first to have crept into the online grocery business was ride-hailer Gojek with what appeared like a somewhat experimental feature called GoMart, as an extension of its delivery business. 

Launched in 2015, the business was discontinued in 2018, before being relaunched in 2019. After a surge in demand last year that drove its monthly GMV growth to 5x, GoMart began to recruit shopping assistants similar to HappyFresh’s personal shoppers.

While Gojek may have drawn inspiration from HappyFresh, its ride-hailing rival Grab went a step further. The Singapore-based company invested in HappyFresh through Grab Ventures in 2018 and soon after launched GrabFresh (later renamed Groceries) in partnership with the e-grocery company.

Interestingly, Grab tells DealStreetAsia it has now decided to end its partnership with HappyFresh and go solo in the e-grocery business. In a statement Grab said the closing down of Groceries started gradually from May 17 this year, as it has decided to “develop its business separately” through a similar existing feature called GrabMart. With the move, the firm seeks to “provide a more consistent experience” for its users. 

After partnering with HappyFresh for three years, Grab’s launch of GrabMart in 2020 enables it to fully cash in on the e-grocery opportunity as it prepares for a US listing. For HappyFresh, GrabMart will undoubtedly represent yet another new competitor.

“It is flattering to see other large players recently trying to emulate us. Nonetheless, we are also very aware of what other pain points customers are facing when ordering groceries online and we are working hard to overcome them in the near future,” said Candrini.

Supply chain startups swarm in

The new breed of vertical e-grocery players, however, adopt a notably different model to HappyFresh and the ride-hailing players. Over the last few years, Indonesia has seen the emergence of several online grocery platforms that employ a semi-agritech approach by sourcing their products directly from farmers.

While Patamar-backed Sayurbox has been around since 2016, several of its VC-backed peers are considered new entrants in Indonesia’s startup scene. Dropezy, for example, was founded in 2019 and has received backing from Absolute Confidence and Kenangan Fund, while Sequoia-backed grocery social commerce platform Chilibeli was also founded in the same year. AC Ventures-backed Segari is the latest entrant to make its debut only last year. 

By sourcing their fresh goods directly from farmers, these companies are able to offer more competitive prices than that of supermarkets, though they inevitably have to compromise on the speed of fulfillment. Many of the players generally provide next-day delivery service, while HappyFresh, GoMart and GrabMart champion instant delivery.

Tanihub, an agritech startup that also plays in the B2C commerce arena, says that one of the main challenges for companies that derive their products directly from farmers is maintaining customer satisfaction given the delicate nature of fresh, perishable food products.

“In B2C, we answer complaints of broken products with full replacement without charging the customer with extra cost. We expect that a high level of customer satisfaction will help improve people’s perception toward online shopping, especially on TaniHub, and maintaining it will be crucial during these uncertain times,” said Tanihub Group CEO Pamitra Wineka.

For MDI Ventures-backed Tanihub, which offers integrated business-to-business e-commerce, logistics, and financing platform for the agricultural sector, its B2B commerce remains the biggest generator of revenue. However, the company says it has seen over 200,000 new B2C customers last year which has boosted its sales and helped it achieve profitability.

“We have the biggest set of farmers. The more farmers and buyers we onboard, the more efficient we can actually be and that’s how we make our profitability,” he said.

E-commerce making inroads

The emergence of these supply chain players, who have built their own cold storage warehouses, has caught the attention of e-commerce giants eager to expand to the fast-growing fresh food category.

Online marketplace Bukalapak, for example, formed a partnership with HappyFresh in June of last year to help fulfill the rising demand for staples on its e-commerce platform.

Similarly, Lazada teamed up with Chilibeli to help it reach more customers and access a supply of quality fresh products. Tokopedia, meanwhile, has been able to take advantage of its investment in Sayurbox in 2019 to offer an array of vegetables and fruits on its newly-launched online grocery service TokoMart.

Among the first to expand into the e-grocery segment, including offering fresh foodstuff, is BliBli, an e-commerce marketplace backed by Indonesian conglomerate Djarum.

The company launched BliBliMart in 2019, and now claims to be the “most complete online grocery shop and supermarket” in the country. Having experienced 2.5x growth year-on-year since its launch, the company said the pandemic has cemented the groceries as the category generating the majority of orders for Blibli as a whole.

The survey by Snapcart, which asked over 3,000 respondents in May last year, shows that e-commerce platforms, particularly Shopee, Tokopedia and Lazada, ranked in the top five in terms of penetration and repeat usage, with the likes of HappyFresh, GoMart and GrabMart ranking well below.

Tapping the hinterland

For all the differences in their business model and playbook, Indonesia’s e-grocery players have one thing in common: Their focus is on the country’s tier 1 cities where digital adoption and internet penetration are high. 

Rural areas of the archipelago have deliberately been avoided by online grocery players due to various reasons, despite it being home to 80% of the country’s population.

One player that is swimming against the tide is Super, which aims to provide a more convenient grocery shopping experience for consumers in rural areas of Indonesia through a social commerce model.

The firm, which started in East Java province and focused on tier II and III cities, and rural areas, operates a hyperlocal logistics platform to deliver consumer goods to its thousands of agents, who would then distribute goods to their communities each month. The company currently focuses on distributing FMCG goods but does not rule out a horizontal expansion in the future.

Super CEO Steven Wongsoredjo says winning the rural market requires a completely different strategy to that employed by companies tapping urban cities, which explains why very few players have sought to expand beyond tier 1 cities.

“The way people think and talk in the regions are very different to people in the big cities. Making big decisions in tall buildings in Jakarta on matters in the rural areas are not going to be as targeted as if you’re making decisions from a headquarter from the rural areas,” said Wongsoredjo, whose company only has less than 5% of its team working from Jakarta.

Among the characteristics of rural customers, Super has found, is that they prefer personal interactions when transacting rather than doing it through an app, and also prefer hyperlocal brands and products, as they are “more forgiving on quality but less forgiving on pricing”. 

“That’s also why we have a group-buy model: to ensure that by doing bulk orders, it will make the supply chain more efficient,” said Wongsoredjo, whose company recently closed a $28 million round led by Softbank.

It must be noted, however, that Super has chosen to steer clear of distributing perishable goods like fruit and vegetables, as it realizes the supply chain for such fresh products is “difficult to manage”. Instead, it is doubling down on the FMCG category by embarking on a white-labeling strategy through its ‘SuperEats’ brand, which it expects will generate a greater level of profitability.

According to venture capital firm Insignia Ventures Partners, an investor in Sayurbox and Super, the different value propositions to different customer segments with different supply sources demonstrated by the players in the space shows just how much space there is in the market for what would be considered e-grocery.

It would be difficult, it adds, for any single player to capture all the supply sources, product mixes, and customer segments.

“A better approach is to be the best player for a specific value proposition and only then see where it is strategic to expand to next,” said Insignia’s Yinglan Tan and Paulo Joquino.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.