By now, we all have spent significant time at home due to social distancing. On average, we have spent 4 times more active time at home than we are usually used to. Most consumers have used this time to work, study, exercise and cook more at home.
Consumers have also fundamentally altered the way they shop in this new environment with contactless online shopping emerging as a preferred channel. The biggest change has been in the grocery sector where e-grocery — buying using virtual channels — increased by as much as 500 per cent during the initial lockdown period.
This growth is driven by new shoppers (20 per cent of e-grocery shoppers during lockdown were first-time buyers in the UAE) and increased basket size (shoppers have been buying at lower frequency with higher basket sizes per order).
A magnet for many
Such hypergrowth in e-grocery attracted many new entrants to cater to the increasing demand. There are four types of players that have emerged:
* Pure-play e-grocers: Online players such as Instashop, El grocer and Bulk Whiz that focus only on the eGrocery sector.
* Omni-channel grocers: Large offline players such as Lulu, Carrefour and Union Corp have entered e-grocery services.
* Horizontal marketplaces: Multi-category marketplaces such as Amazon and noon that earlier used to focus on fashion and electronics have increased their offerings in grocery.
* Hyperlocal players: Food delivery platforms such as Talabat, Carriage and Careem Now are leveraging their existing infrastructure to deliver groceries.
But delivery experiences have turned sour
However, the hypergrowth has exposed some bottlenecks to growth. Supply challenges meant high freight charges resulting in increased prices and lower selection. Another challenge was the lack of fulfilment infrastructure. Limited time for in-store pickups for online delivery and lack of delivery personnel resulted in significant delays of up to 5-10 days on online orders.
Hyperlocal players have solved the delivery delays. However, their product variety is relatively low and they have limited control over inventory resulting in only partial fulfilments.
The above meant that customer experience has been relatively poor during this time. We believe customers do understand these are unprecedented times and hence are more forgiving on the poor experience they are witnessing. However, once lockdown pressures are released, customer experience will become an important differentiator.
This is especially important as more than 40 per cent of customers are expected to continue to shop at these elevated levels on e-grocery portals. We expect sales to double this year compared to the last. This high growth will continue to attract new players and existing player to accelerate their online journey.
We believe new winners will emerge post-lockdown who will grow as much as 50 per cent faster than the overall e-grocery market. The key to outperformance will be developing critical playbooks around micro markets, customer satisfaction, sourcing and operations. Players need to continuously monitor changing customer preferences and improve their experience — continuously measuring their performances objectively.
Other markets such as China and India have already addressed such challenges. It is important local players become agile and develop playbooks quickly while not reinventing the wheel. The players who do that will emerge winners in the post Covid-19 era.
— Sandeep Ganediwalla, Managing Partner and Anuj Kumar, Engagement Manager, Redseer Consulting, Middle East