UOB bank
June 2019
Modern trade has changed the way consumers shop for groceries. The modernised format of the channel offer lower prices, longer opening hours, a clean and comfortable shopping environment as well as the convenience of online delivery.
Large modern trade formats such as supermarket and hypermarket chains typically provide a “one-stop” shopping destination for the majority of consumers’ grocery needs. Hypermarkets, on top of fresh food and grocery items, also offer non-grocery products such as apparel, toys and games and consumer electronics.
Smaller modern formats such as convenience stores (CVS) typically offer extended opening hours to facilitate grocery shopping for consumers with little time. As more women receive education and enter the workforce, the prevalence of dual-income families has increased the demand for convenience and time flexibility. Furthermore, as cities urbanise, CVS operators attempt to capitalise on high footfall areas with small, well-located stores.
As internet and mobile penetration rates rise at high double-digit rates, changing consumer needs have set the stage for online grocery retailing. According to various market surveys, only one in 10 online respondents has bought fresh groceries online. In 2016, the online penetration rate was only 1% of total grocery sales in ASEAN. As consumers prefer to pick their groceries fresh, we foresee the brick-and-mortar channel to remain as the preferred option in the near future.
Whether online grocery retailing will become popular in the next two to five years will be highly dependent on the ability of existing incumbents to build scale and to refine their business model to meet evolving needs. Pure online players will also need to scale up quickly as most of them are currently still unprofitable. In this report, we examine the outlook for modern trade in Mainland China, Hong Kong, Indonesia, Malaysia, Singapore and Thailand.
UOB has rolled out a cash management and supplier financing programme to support the continued growth of modern trade players in the ASEAN region. For more information, please contact us here.
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