In March 2020, Indonesians were forced to adapt to a strict lockdown mandate. After being relaxed and reinstated multiple times in the following 17 months, many Indonesians, especially those living in urban areas, have adapted to a lifestyle more focused on domestic necessities and changed their shopping habits to accommodate it. E-commerce has increasingly become the preferred shopping channel for many Indonesians, and it includes groceries.
What started as a niche among young professionals in urban centers, online grocery shopping is now penetrating more market demographics and has become a default way of grocery shopping for many people. A survey by DBS found that online grocery applications have risen in popularity and saw a 700% increase from the previous year as the respondents’ most preferred place to buy groceries. Separate research by Snapcard also claimed that 59% of Indonesians had tried online grocery shopping in 2020. In addition, with Gen Z entering the workforce and older generations getting used to shopping online, e-grocery is no longer a niche trend for millennials.
The impact of this can be seen in the decreasing market share of traditional grocery channels. For example, in August 2021, Hero Group closed all of its Giant supermarkets due to an overwhelming revenue drop during the COVID-19 pandemic. On the flip side, more players are crowding into the online grocery market, including e-commerce giants Shopee and Tokopedia. Meanwhile, e-grocery companies have seen accelerated growth over the years. For example, HappyFresh has recently successfully raised USD65 million of Series D funding to anticipate the sustained shift in customers’ shopping behavior. As a result, we can expect to see more and more players joining the e-grocery market in the next few years.
In line with other behavior shifts during the pandemic, these numbers demonstrate that COVID-19 has been an effective catalyst for online grocery shopping. It has successfully introduced e-grocery to a wide range of demographics and has stayed long enough for new adopters to develop the new habit. So the next question becomes: how to make it last?
As the COVID-19 vaccination rate in Indonesia continues to increase, the pandemic will eventually end. According to the Snapcart survey, 97% of online grocery buyers said they would continue to buy groceries online after the pandemic. However, only 55% of the buyers said they would buy the same amount or more groceries after the pandemic, while 42% said they would buy fewer groceries online. This is a promising statistic but should not be taken for granted. After all, the stickiness of new forced behaviors will depend on consumers’ satisfaction. Therefore, online grocery companies need to find ways to remain attractive to consumers even without the stay-at-home mandate in place.
In addition to the challenge of keeping consumers shopping online, e-grocery players will also face increasing competition from other companies. Not only that, more e-commerce powerhouses will enter the grocery market, traditional grocers may also seek to digitize their value offerings and join the online grocery arena. Therefore, online grocery companies must have a clear competitive strategy moving forward to win the market and retain it.
Market research is critical in developing a winning strategy
Understanding the market is an essential foundation for a winning competitive strategy. Fortunately, the ongoing mobility restriction mandate has provided an excellent opportunity to gain a deep understanding of customers’ preferences. The past 17 months, along with the upcoming few months of mobility restriction, have allowed players to observe consumer behavior across the purchasing journey and experiment on various variables. A deep understanding of consumer preferences requires these data to be collected, analyzed, and used as an insight to improve the company’s offerings.
These insights can be leveraged into various aspects of the company’s competitive strategy. First and foremost, they can be used to develop and improve the application’s user experience. As consumers have more choices on where to get their groceries, poor user experience is no longer tolerable. A good insight into how customers use an online grocery application at each point of the journey and understanding what put them off of the application are key inputs for user experience improvements. Further, the mobility restriction mandate can be a prime period for companies to test and experiment with different user experience variables.
Second, with more and more players saturating the market, it will be essential for companies to introduce their distinctive value proposition early and vigorously. Based on the insights, online grocery players can create a distinctive value offering to capture market share strategically. This unique value offering can be in terms of price, delivery time, freshness, sustainability, or others. Whatever it is, it needs to be clearly defined and consistently communicated to the customers. In developing this distinctive value proposition, players can use this period of pandemic restrictions to test consumers’ receptiveness to different messaging strategies.
Third, online grocery companies can leverage their competitive advantage in data access to strategically nurture customer loyalty. While traditional grocers are usually limited to discounts and point collections, online grocery companies can be more creative with cultivating relationships with their customers. Personalization and gamification are examples of how online grocery companies can build relationships with their customers. Insights from consumer behavior data and market research can predict the behaviors of individual customers and offer them the right strategy to encourage loyalty.
In sum, consumer behavior insight can be the key for e-grocery companies to make the new habit of online grocery shopping stick, even after the stay-at-home mandate is lifted. Online grocery companies can take advantage of this period of mobility restriction to learn and improve their user experience, specialized value proposition, and loyalty programs. The learnings from this period and insights from consumer behavior data can be potent ingredients in developing a winning competitive strategy.
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