Covid-19 a catalyst for growth in Indonesia's e-grocery market

18 February 2021 3 min. read

Currently valued at around $1 billion, Indonesia’s e-grocery market could jump to $6 billion by 2025 – spurred on by Covid-19 and its repercussions. A new strategic L.E.K. Consulting study breaks down the market.

The experts take a comparative approach – weighing Indonesia’s consumer market against Asian stalwarts China and South Korea, as well as other major global markets. The big picture is that Indonesia has all the makings for a thriving e-grocery landscape.

One is the consumer base. Indonesian consumers spent more than $200 billion on food & beverage between 2014 and 2019 – far more than Asian counterparts Singapore, Taiwan, Malaysia, Thailand and Philippines, among others. Equally promising is the growth in e-grocery retail over the last half a decade.

e-grocery as a share of consumer F&B spending

Only the e-grocery markets of Vietnam and India grew faster than in Indonesia, which clocked a compound annual growth rate of over 30% between 2014 and 2019. According to L.E.K. Consulting, e-groceries in Indonesia had reached a gross merchandise value of around $500 million in 2019. 

Where the segment lacks is in market penetration. Per the analysts, the critical mass required for an e-grocery boom is 5% market penetration. Both China and South Korea have reached this threshold – the former with a fine margin while the latter has raced through to a staggering 18%.

The UK is the only comparable market with e-grocery penetration of nearly 8%, while even the US falls short of the critical mass threshold at around 3%. In Indonesia, penetration still lingers below 0.5%.

Covid-19 impact on consumer behaviour

This is the key focus for Indonesia from here on, and there is certainly some momentum to work with. Covid-19 transformed the e-grocery industry from a modern supplement to the food & beverage sector to an absolute necessity for survival in some cases. Under lockdown and weary of infection, many consumers saw e-grocery as the only option for their food needs.

And it was not just food: most consumer activity transferred online last year. Per the report, online purchases were unparalleled in their market share for 2020 – far outperforming modern trade, traditional trade, gifting and specialty stores both in terms of purchase volume and spending.

Boom expected

For e-groceries, this sparked a jump to nearly $1 billion in value according to some estimates, with penetration rising from 0.2% in 2019 to the current 0.3% mark. More promising are the prospects for the next half a decade.

e-grocery forecasts for 2025

Alongside a significant usage and revenue impetus, what Covid-19 has done is build a tech-savvy culture in Indonesia, with consumers more willing than ever to make an online purchase. For L.E.K consulting, this marks an inflection point for e-groceries, setting the base for unprecedented growth in the near future.

It took China half a decade to jump from 0.4% e-grocery market penetration to over 3%. South Korea took four years to jump from 1.5% to over 3%. Per the report, Indonesia could make the jump past 3% by 2025 as it emerges stronger from the crisis – taking its total GMV to between $5-6 billion.  

According to L.E.K. Consulting partner Manas Tamotia, this is not only an expected outcome, but a highly likely scenario as well – "given higher prevalence of technology and commerce adoption today.”