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Post-COVID Growth of the Online Grocery Market in Indonesia

13 Oct 2022 | Indonesia

A 2020 study reported that the online grocery boom in Southeast Asia due to the COVID-19 pandemic has increased the segment’s value to 350 million USD, despite having only a 0.3% penetration rate. At the end of the year, the value of the online grocery segment in Indonesia was valued at around 1 billion US dollars.

Following this trend, the pandemic is considered the catalyst for online grocery growth in Indonesia. The country is projected to see an increase in its e-grocery market size, from 0.3%in 2020 to 0.5% this year. By 2025, it is expected to be valued at 6 billion US dollars. In terms of growth, only the e-grocery markets of Vietnam and India grew faster than Indonesia in Asia.

What is the outlook of online grocery growth in Indonesia post-COVID 19 pandemic? Where else does potential lie in this vast segment of e-commerce in the country? We look at possible challenges and opportunities in the growth of Indonesia’s online grocery market.

Online Grocery Shopping as the Leading Modern Food Retail Channel

Online Grocery Shopping

The food retail industry in Indonesia is the largest in the Southeast Asian region, with a market value worth 140 billion US dollars. Traditional channels, such as wet markets, green grocers, and neighborhood mom-and-pop stores, are still considered the more dominant retail formats. However, as the e-commerce industry in Indonesia continues to expand, so does the option to purchase food products through online channels.

According to a report on the online grocery market in Indonesia, tech investors have driven the growth of the segment in the past two years. Segari, a leading online grocery retailer, has received 18 million US dollars in funding. HappyFresh, an on-demand online grocery app, received 65 million US dollars. TaniHub, a B2B agricultural marketplace, was able to raise 65.5 million US dollars in funding.

Opportunities for Growth in Indonesia’s Online Grocery Segment

As modern channels continue to become the leading option for food purchases in Indonesia, online grocery shopping post-COVID can yield greater revenues. Retailers can capitalize on offline market offerings to improve their services. Instant delivery of small baskets of items can help retailers act like online convenience stores for consumers. Low minimum-order requirements will also ensure that they do not turn away customers.

With sustainability becoming a major lifestyle choice among consumers, online grocery retailers in Indonesia can also look into partnering with local producers to offer farm-to-table services or meal kit options.

Competitive pricing, especially at a time when inflation is reducing consumers’ purchasing power, will help online retailers attract customers away from supermarkets. Free delivery is always an enticing offer, especially when customers get their money’s worth when they shop online.

As the online grocery sector in Indonesia continues to attract investments, retailers must assure that they offer a seamless online experience for customers while also giving them value for money in product pricing. The development of e-groceries in the country is not expected to slow down soon, and better logistics, prices, and customer experiences will help it accelerate in a post-pandemic economy.

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