Online grocery shopping to gain from COVID-19 crisis
Foodservice disruptions appeared in China and almost all over the world due to lockdowns imposed by governments to contain the spread of coronavirus in communities is going to reshape buying habits for consumers, says a recent Citi Bank report. Using the example of China's lockdown, the analysts are predicting a higher rate of growth for e-commerce, especially in the online grocery segment.
"We think the spread of live commerce has raised the upper limit for the rate of e-commerce adoption. In 2019, the rate of e-commerce adoption in the Chinese retail market was ~20%. Currently, the weighting of online sales is low for services across the board, and among goods, relatively low for big-ticket items and daily necessities. However, since the start of the COVID-19 outbreak, ~160,000 restaurants have begun to use the online sales channel. In February, the number of restaurants conducting live-streams was up 2.2x year-over-year,", said the report.
E-commerce is expected to benefit from expanding the average age of the users to middle-age and older segment of the population, as travel restrictions, the closure of restaurants and other restrictive measures have changed the buying habits in China and may do so for the rest of the countries confronted with the same crisis.
Another change involves how products are sold online. Since the Chinese New Year holidays, live commerce has expanded rapidly. Live commerce is a new type of online marketing that blends live-streaming and e-commerce, in which celebrities and influencers (also known as key opinion leaders, or KOL) live-stream about certain products, which viewers can ask questions about, comment on, and buy.
The Chinese live commerce market was worth nearly RMB450 billion (~$63 billion) in 2019. iiMedia Research estimates that the market will roughly double in size in 2020, to RMB960 billion(~$135 billion).
During an economic crisis, the food retailing sector is generally considered to be a safe harbor as even in the worst of times, people still need to go food shopping. But how they do that has changed recently with more and more consumers using food delivery services to get their weekly shopping instead of going down to the local supermarket. According to the Citi Bank report, there are still questions about how social distancing is going to influence the growth of online grocery channel. "The COVID-19 crisis is exacerbating the level of demand for online grocery due to social distancing but is this shift to online grocery set to accelerate due to the crisis?
To the extent that grocers can meet the elevated levels of demand, we expect more customers to try online grocery and for some to carry on post the COVID-19 crisis, thereby accelerating what we see as an inexorable growth in online grocery penetration. The crisis may also prove to be a tipping point for potential retail partners presently considering their options. Tellingly, a Kantar survey conducted on February 15th of Chinese shoppers measuring the impact of COVID-19 found that 42% of respondents said they would use online more in the future while only 8% said they would reduce their use after the crisis. The same survey also suggested Chinese consumers will pay more to buy from socially responsible brands in the future and pay greater attention to sustainability," it is said in the report.
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