Can retail underdogs take a bigger bite of Singapore's online grocery pie?

Despite only holding less than 7% grocery market share in 2017, RedMart and FairPrice will dominate the market in few years time.

Although traditional trade still makes up about a fifth of grocery sales in Singapore, e-commerce is set to gain further momentum over the next five years with smaller players edging out BigTechs for the lion’s share of the market.

Singapore’s overall grocery market is expected to grow 14.5% annually from 2018 to $9.9b in 2023, according to projections from international food and consumer goods research IGD, ranking the country as the 23rd largest grocery market in Asia in four years time. RedMart is tipped to establish itself as the clear online market leader by 2023, the latest forecasts by IGD Asia revealed.

In 2017, Korea-based Qoo10 held the distinction as Singapore’s top e-commerce player, with 32.6% market share, according to a report from CGS-CIMB. BigTechs Amazon and Apple trail behind with 11.5% and 11.0% market share respectively. The market share of FairPrice and RedMart are only at 6.1% and 4.5% respectively.

Also read: Can Qoo10 maintain its dominance in Singapore's e-commerce market?

According to IGD, online will be the fastest-growing grocery channel in Singapore over the next five years, primarily driven by Alibaba Group through its RedMart store and FairPrice investing more in its online business .

“As local consumers travel overseas more and become exposed to international cultures and cuisines, they naturally develop a more sophisticated palate and an eclectic taste for foods. Online will be the fuel for this growth as grocery shoppers switch their habits and consumption from traditional stores,” Richard Ruddy, CRO and head of grocery at Lazada Singapore, told Singapore Business Review.

Founded in 2011, RedMart caters to Singapore’s time-strapped consumers by offering fresh food, household essentials and specialty products which can be delivered straight to the customers’ homes. In 15 March, Lazada Group announced that it would integrate RedMart onto its online platform in its bid to become a regional e-commerce powerhouse.

“We firmly believe our continued focus on providing the best and widest product assortment, competitive pricing and promotions, and superior quality in fresh, coupled with the convenience of scheduled delivery, sets us apart from our competitors,” Ruddy highlighted.

A survey conducted by Maybank Kim Eng (Maybank KE) Securities amongst Singapore’s biggest grocery players found that whilst there were cost savings of at least 8% if customers switched to buying housebrands than branded products at the same store, they could still save more by shopping at either RedMart or at Dairy Farm International’s brands Giant and Cold Storage.

Also read: NTUC FairPrice vs. Sheng Siong: which is cheaper?

The survey also found that customers could save more by purchasing non-fresh products at both FairPrice and RedMart, with a basket of non-fresh goods (excluding body wash) totalling $46.34 and $49.03, respectively, compared to Cold Storage’s $49.83 bill. That said, Maybank KE’s basket of fresh produce at RedMart came to a grand total of $31.18, significantly higher than Sheng Siong’s $27.87.

“Shoppers in modern trade tend to have higher purchasing power, make more impulse purchases and experiment with more products. Although shoppers in Singapore are willing and able to spend more on groceries, the majority of them are already shopping in modern trade,” Nick Miles, head of Asia-Pacific at IGD, highlighted.

Separately, Euromonitor International projects Singapore’s grocery retailers to hit a retail sales value less than that predicted by IGD at $8.9b by 2023, ranking FairPrice as the dominant grocery player in the near future for both online and offline as it continues to leverage on its huge local clientele and provide for the masses.

Brick-and-mortar stores are here to stay
Despite the convenience offered by online grocery shopping, Miles highlighted that major retailers are investing to enhance store experience and improve visual appearance, as even in advanced markets, shoppers still use physical stores for many missions, top-up, last-minute shopping or because they merely enjoy shopping at brick-and-mortar stores.

Deepika Chandrasekar, research analyst at Euromonitor International, echoed the sentiment, adding that retailers will only intensify efforts to enhance store offerings as local consumers become increasingly harder to please.

Also read: Sheng Siong's new-store strategy may fall flat as consumer sentiment sours: analyst

“These fun and experiential elements are not limited to exciting product categories alone; even mundane categories like grocery can be transformed with such elements. For example, hypermarket FairPrice Xtra that was revamped in end 2017, features a parenting zone with a play area to keep children occupied and also make shopping fun for the family,” she noted.

In October 2018, honestbee launched habitat by honestbee, a high-tech supermarket and dining concept which took up 60,000 sqft in 34 Boon Leat Terrace. Dubbed as “NewGen Retail” by honestbee’s former CEO and founder Joel Sng, habitat also features two “world firsts”: a cashless checkout experience called AutoCheckout and a robotic collection point called RoboCollect.

“Online grocery services are meant to complement their brick-and-mortar counterparts instead of replacing them because there cannot be an ultimate trade-off, at least in the short term,” Chandrasekar explained. “Online grocery services similarly will facilitate grocery purchases for sure but may not replace the tactile nature of handpicking groceries or testing for product quality; so, the future would be in the seamless integration of online and offline.”