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DBS Group Research • October 2017DBS Asian Insights51numberSECTOR BRIEFINGAsean Grocery RetailWill online grocery retail take off in ASEAN?
DBS Asian InsightsSECTOR BRIEFING 4902Asean Grocery Retail Will online grocery retail take off in ASEAN? Produced by:Asian Insights Office • DBS Group Researchgo.dbs.com/research@dbsinsights[email protected]Goh Chien Yen Editor-in-ChiefJean Chua Managing EditorGeraldine Tan EditorMartin Tacchi Art DirectorAlfie YEO Equity Analyst, DBS Bank[email protected]Andy SIM CFA Senior Equity Analyst, DBS Bank [email protected]Namida ARTISPONG Equity Analyst[email protected]Tiesha PUTRI Equity Analyst[email protected]Regional Research Team[email protected]
DBS Asian InsightsSECTOR BRIEFING 4903040615323747Executive SummaryOnline Grocery Retail: Growing But Not Yet a ThreatWhy Some Countries Are More SuccessfulOnline Players In Singapore Remain Unprofitable As Challenges AboundAmazon Prime in SingaporeRetailers Will Continue Growing While Online Grocery Shopping Finds Its FeetMacro Fundamentals Support the Growth of MGRCompanies With Scale Are the Players In the Sweet SpotAppendix Players in the Online Grocery MarketCountry Profiles
rbanisation and modernisation in developing markets are changing the way people buy their groceries. Developing markets, as they progress, will embrace modern grocery retail (MGR) even more, as evidenced by the increase in penetration of MGR to 30% of total grocery retail sales from 21.7% a decade ago. Modern store formats are penetrating grocery retail beyond the traditional channels. We believe the rising middle class and each ASEAN government’s quest for economic development and progress will help drive the growth and penetration of MGR in these countries for a foreseeable future. By the same token, developed nations or cities in ASEAN which have seen a higher element of modern grocery retail is evolving as well. MGR in developed markets such as Singapore have seen new online channels and formats developing. MGR retailers are competing on services, pricing, selection, and efficient backend operations to drive down costs. While few people can consume meals at foodservice outlets perpetually, consumers will somehow make use of the food retail channels, whether modern or traditional, as a source of their food supply. Grocery retail is therefore not dead and in fact never will die, in our view. Consumer needs and wants are ever-changing. This therefore is the cornerstone of modern grocery retail’s evolution. Modern grocery retailers that are able to identify areas of consumer demand will be the biggest beneficiaries.The modern grocery retail market is dynamic. Consumers’ needs and demands for food are ever-changing, more so in a globalised world where physical and virtual connectivity are enabling consumers to be more demanding about food choices and at desired price points. These trends provide opportunities for retailers to meet consumers’ expectations and, in the process, get ahead of the competition. Consumer sophistication, exposure to