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Online grocery shopping is a relatively new phenomenon in the Asia Pacific. We take a look at how e-grocers like Tesco, Redmart and HappyFresh cater to the busy crowd.

Today’s consumers lead busy lives and prize convenience. They look for ways to save time and effort, so many turn to the web to obtain what they need through online shopping. Grocery e-shopping is one aspect of online shopping that is slowly picking up steam. After all, if you can purchase mobile phones, clothes or books online, why not your daily necessities?

Tech-savvy professionals and young parents, wanting to avoid crowded supermarkets, long queues and carrying heavy bags, are most likely to be open to the idea of grocery e-shopping. In the Asia Pacific, Koreans are most savvy in grocery e-shopping, with 27 per cent of shoppers doing so. However, the next closest markets — Australia, New Zealand, China and Taiwan — only have a two to seven per cent penetration rate for grocery e-shopping.

Seeing e-grocery shopping’s high growth potential, both online retailers and traditional brick-and-mortar supermarkets are tapping into this segment. Singapore’s RedMart and Indonesia- and Malaysia-based HappyFresh are two online grocers in the region. United Kingdom supermarket brand Tesco, a leading e-grocer in its home country, brought grocery home shopping to Asian markets, namely South Korea, Malaysia and Thailand.

Omni-channel Order Management

Online shopping these days takes place in two main ways — through a website or a mobile application (app). Providing both channels allows e-grocers to reach out to a wider audience, which is why both RedMart and Tesco have established both web and mobile presences. HappyFresh, however, is more restricted, as it only has an app.

Tesco has an additional advantage: It leverages on its physical presence in Malaysia and Thailand with its “Click & Collect” service delivery model. This allows customers to collect their online orders from Tesco supermarkets, thus saving them shopping and queuing time. Tesco has an additional service charge for this service.

Order Fulfilment and Logistics

Order fulfilment for e-grocers is a relatively more complex affair: A typical order comprises a large number of unique items, while customers would query the variety and quality of products and demand fast delivery times.

Most e-grocers, like Tesco, hold their own inventory and employ personal shoppers who handpick the goods, packers who pack the orders, and drivers who use temperature-controlled trucks to do deliveries.

RedMart’s approach was slightly different. At first, RedMart intended to be a middleman and do cross-docking — getting “just-in-time” inventory direct from suppliers and outsourcing deliveries. However, it soon found that it was difficult to manage both supply and distribution by external parties. As such, RedMart started holding its own inventory and managing its own delivery fleet.

To increase efficiency further, Redmart switched from a manual to an automated fulfilment process — instead of having workers pick out the products and pack orders, the company leveraged on technology to streamline the process. This change halved order cycle time and improved overall service levels, while maintaining a close to 100 per cent order fulfilment accuracy.

HappyFresh fulfils orders through a decentralised logistics model — it employs trained personal shoppers who are permanently based at the partner stores and supermarkets, and riders who are on standby to transport the groceries to customers. This differs from United States-based Instacart, which employs freelance shoppers and delivery personnel who sign up for assignments à la Uber.

Retaining Customer Loyalty

One major challenge for online grocers, as with any form of online retail, is customer retention, on top of attracting new ones. “We know that one loyal customer is worth five times a newly acquired customer. Unfortunately, we had a problem where loyalty was in decline and we felt that we needed to find a way to thank our important, loyal customers,” said Vivian Yap, marketing director of Tesco Malaysia, in an interview with Marketing magazine.

When Tesco Malaysia started its online grocery store, mass-mailing was its main marketing tool. Tesco’s main strategy to win back customers was to study consumer purchasing habits. From there, it designed personalised promotions that took the form of coupons. For instance, to reward a loyal customer, Tesco gave coupons for certain product brands the individual preferred. It also adopted a targeted Customer Relationship Management (CRM) email approach to re-introduce itself to registered but non-active customers and encourage them to return to shop online. The CRM email strategy brought back about 3,000 customers, and customer retention increased by about 30 per cent.

Minimising mistakes is crucial for retaining customers, as the e-shopping crowd is highly unforgiving — any service lapse is likely to bring on backlash, as RedMart has learnt. End-February 2015, after implementing new processes at its new fulfilment centre, the bulk of RedMart’s deliveries were late. Affected customers had not been informed, and many regular and repeat customers were furious, especially since they did not get replies to their feedback via email and hotline. Despite multiple previous positive experiences with RedMart, they took to social media to voice their frustration. To defuse the situation, RedMart offered discounts to appease the angry crowd, but the damage was done.

Making Online Grocery Shopping Better

If e-grocers wish to attract more customers, they have to convince people that online grocery shopping can be a better way to shop for everyday essentials. To achieve that, one has to understand what shoppers want: A good variety of products to choose from, a straightforward ordering process, speedy and accurate deliveries, and personalised service.

As such, the basics to getting a foothold in this market would be to provide multiple channels through which to place orders, and establish efficient order fulfilment strategies and open avenues for quick feedback — settling these major factors will help smooth the way to success.

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