Sales of groceries through e-commerce platforms grew 30 per cent in the 12 months to March 2017, according to “The Future of E-commerce in FMCG” report from Kantar Worldpanel, released on November 27.

E-commerce now accounts for 4.6 per cent of all fast-moving consumer goods (FMCG) sales globally. While e-commerce is growing, however, the FMCG market as a whole is sluggish, increasing just 1.3 per cent during the same period. E-commerce now contributes to a record 36 per cent of global FMCG growth and will continue to outpace growth in offline FMCG retail.“Our projections show that in 2025, online FMCG will be a $170 billion business and hold a 10 per cent market share,” said Mr. Stéphane Roger, Global Shopper and Retail Director at Kantar Worldpanel.

Global hotspots

In terms of absolute value growth, the top six contributors are all leading power economies, led by China and the US and joined by South Korea, the UK, Japan, and France. Last year, value increased 52 per cent in China, 41 per cent in South Korea, 8 per cent in the UK, 7 per cent in France, and 5 per cent in Japan and the US.

The online grocery sector is also expanding into new markets. There has been significant value growth, for example, in Thailand (104 per cent), Malaysia (88 per cent), and Vietnam (69 per cent), where e-commerce is in its early stages.

E-commerce Value Share of FMCG online value share per markets (excluding fresh produce)

In Vietnam, the e-commerce channel has evolved thanks to booming internet use and smartphone ownership, along with massive investment by key retail players, and now takes 0.5 per cent of the FMCG market in the 4 key urban cities. The percentage of e-commerce shoppers grew from 5.4 per cent to 8.8 per cent in the 4 key urban cities’ population in the last year alone, and online trip size is triple an offline basket.

(*): Vietnam Urban includes 4 key cities: Ho Chi Minh, Hanoi, Da Nang and Can Tho.

“Although the size of Vietnam e-commerce market is still small compared to other formats, it holds strong potential because the value growth of e-commerce within FMCG is up to 69 per cent, which makes Vietnam post among the highest e-commerce growth rates in the world,” said Mr. David Anjoubault, General Manager of Kantar Worldpanel Vietnam.

“It is now a critical time for investors to enter this promising market, while current retail giants should gradually move their offer online and take advantage of their brand equity with omni-channel strategies, to be successful and to defend their current position. On the whole, consumer trust and high logistics costs for delivery are major challenges that need to be addressed by businesses in order to move Vietnam’s e-commerce forward.”

2025 Forecast

Kantar Worldpanel projections show that by 2025, online FMCG will be a $170 billion-dollar business and hold a 10 per cent market share. The big global uplift will come from the US, which is predicted to rise from a 1.5 per cent e-commerce share in 2017 to 8 per cent in 2025. This can be attributed to the successful rollout of click and collect, delivery and subscription models, and the acceleration of disruptive models.

South Korea and China will continue to lead the way and Asia in general remains at the cutting edge of online adoption. Vietnam’s e-commerce, specifically, is expected to expand from a 0.5 per cent to a 2.2 per cent share in 2025, coupled with the rise of digitization.

VN Economic Times