Asia is benefitting more than any other region in the world with e-commerce introducing new market dynamics to international trade. With the region’s total e-commerce market revenue estimated to exceed $900 billion by 2021, it is likely to be the global epicentre of e-commerce in the foreseeable future.
Ahead FIA's session on “Building an inclusive Food E-Commerce Ecosystem” on 9 October 2019, we speak to David Heijkoop (Senior Director of e-Commerce and Omni-Channel Practice Lead at Kantar Consulting), Christopher Y. Chan (General Counsel and Head of Government Affairs at Lazada Group(Singapore) and RedMart); and Patrik Jonasson (Asia Pacific Public Policy Director at GS1), on trends and challenges actors across the e-commerce supply chain are facing today in terms of fuelling growth and ensuring food safety and quality for cross-border transactions in Asia.
How is e-commerce as a channel developing for fast-moving consumer goods (FMCGs) in comparison to brick and mortar?
David Heijkoop (DH): E-commerce is by far the fastest growing channel for FMCG products globally, with online FMCG sales growing by 20% in 2018. In Asia, e-commerce accounts for 9% of all FMCG sales, having been positively influenced by markets such as Korea, China and Japan.
However, e-commerce for FMCGs is a small market when compared to offline channels. In most Southeast Asian markets, e-commerce still accounts for less than 5% of the market. Nevertheless, the market trend is clear – e-commerce shows a future of continuing growth with more businesses joining the market. Leading e-retailers are fuelling this growth through innovation by continuously improving customer experience and convenience through shorter delivery times, personalised assortment and curated content. Moving forward, it will be increasingly hard, although not impossible, for other channels to keep up with this market growth.
For manufacturers, the main challenge lies in managing their businesses in the omni-channel reality. Too often we see products which are not tailored to the needs of consumers in a specific channel, or do not comply with the logistical requirements that retailers have. Therefore, channel-based assortments remains a big opportunity for most manufacturers.
What are some challenges that e-tailers face that are unique to food e-commerce?
Christopher Y. Chan (CC): One of the biggest challenges for e-commerce groceries in Southeast Asia is getting consumers to trust buying food online. For instance, in a country as developed and convenient as Singapore, consumers traditionally purchase from brick and mortar stores and wet markets. They also mistakenly believe that buying offline is fresher, cheaper and healthier than online.
Under this misguided perception, RedMart focuses on offering customers fresher groceries, more variety, and more convenience than all other options. If we do not deliver on this promise, it will be challenging to maintain our customers’ trust.
With increasing consumer demand for speed and convenience, how are e-tailers and manufacturers ensuring that food safety standards are not compromised?
DH: The main challenge for e-tailers lies in managing their logistical operations, and most of them are heavily investing in this space. Lazada is a great example, with arguably the most advanced logistics setup in the Southeast Asia region. Running a tight control over the warehousing and delivery process is key to secure the compliance with food safety standards.
Manufacturers are also taking steps as well. In China, we are already seeing the ability for consumers to verify the authenticity and trace the distribution of a specific product just by scanning a QR code. All of this builds on the trust that consumers have in the channels and brands, which is crucial to propel growth.
CC: For us, our Quality Assurance Team conducts regular and frequent checks to ensure strict quality verification during the inbounding, storage, and picking processes. They pride themselves on knowing that our goods are of the highest quality and in the best possible condition. From the time we receive the products to arriving at a customer’s home, we have a robust unbroken cold chain with minimal handling. This process ensures we deliver fresh groceries at the optimum temperature and condition, and thus ensures a longer shelf life.
We also train our pickers to pick the freshest products and how to identify any potential issues that might impact a customer. Suppliers also love that we tag every product electronically the moment it enters our warehouse and even after it gets delivered to the customer. This traceability provides better customer service and in the event of a recall. We also only work with trusted and reliable suppliers and partners to mitigate any risk, improve packaging, and offer a more fabulous selection.
While it is still early days in the e-commerce grocery space, we are slowly changing consumers’ perceptions. The numbers do not lie, and we are following global trends.
Patrik Jonasson (PJ): We are seeing a variety of approaches from different e-tailers and manufacturers in ensuring food safety. However, what is necessary is a best-in-class approach on how to apply standards for food safety purposes. As a standards organisation, we are working with the food industry to develop and implement standards for identification and data sharing of products in all international supply chains to enable traceability and recall.
While it is considered an important aspect, identification and sharing of data is just a small piece of the puzzle. The lack of coherent policies and regulations on e-commerce should also be addressed. As e-commerce grows, more parcels, parties and automated systems will be involved, which will trigger a strong need for interoperability. This interoperability can be achieved by implementing standards.
How has new technologies (e.g. blockchain) impacted the food e-commerce ecosystem especially in Asia?
PJ: What will guide the developments in the next couple of years is industry alignment and regulatory developments. GS1 has been involved in a number of blockchain pilot initiatives for food safety and customs improvements, and is watching the space closely. We are firm believers that new technologies like artificial intelligence (AI) and Internet-of-Things (IoT) will become enablers of trade. However, a more pressing issue of today is the harmonisation of low-value e-commerce flow processes, which includes customs and other regulatory requirements at borders in the Asia-Pacific region.
The first building block should be figuring out how various parties across the cross-border e-commerce supply chain can work better together with the knowledge, expertise and tools that we have. Cross-border e-commerce standards should be based on and compatible with the open retail standards for end-to-end supply chain management systems which are already used by B2C e-commerce retailers for the globe trade of goods.
FIA is bringing together players across the food e-commerce chain on 9 October, with representatives from GS1, Lazada, Mondelez International, Sealed Air, NTUC Fairprice and more, to share insights and case studies, as well as discuss the roles and responsibilities of the numerous stakeholders necessary to build a cohesive framework to drive successful food e-commerce in the region.